Feb. 13, 2019

New energy market: implications for business in 2019

In 2019, a new electric power market starts operating in Ukraine.

Have you ever negotiated with an energy company regarding the price and terms of their services, or been choosing between several options, as if choosing a data plan for your phone, or been buying from several suppliers at once, or paying 25% more?

This can become a reality for you after the market reform.

How the old system worked

Electric power producers used to sell to the wholesale supplier - the Energorynok state enterprise, which then would resell it to regional power companies - “oblenergo” enterprises and other retail suppliers - and those provided electricity to consumers at prices set by the state regulator.

As a result, consumers were unable to choose their supplier and terms of service. The oblenergos had no incentive to improve the quality of their work and service, or to stay competitive. Their sole motivation was to see the government constantly raise the prices.

What’s going to change in 2019

  • Monopolist regional suppliers (oblenergos) will be divided into two companies. One (supplier) will be selling electricity and fighting for customers, while the other (network operator) will be responsible for managing the network, so that any supplier would be able to get their electric power to consumers. The law is strict that these companies must be independent from one another.
  • Electricity producers will be able to sell:
  1. EITHER in wholesale market segments: real-rime and day-ahead.
  2. OR directly to consumers/traders under bilateral agreements.

In their turn, independent suppliers:

  1. will be buying energy from producers.
  2. will be reselling energy to consumers at free market prices on specific terms.

Consumers will be able to purchase energy:

  • At free market prices - from any supplier or producer;
  • At fixed prices - from the universal service provider (option for households and small non-household customers of up to 50 kW);
  • 25% more expensive than the market price - from the backup supplier Ukrinterenergo, if there’s a problem with your main supplier or if consumers fail to choose a new supplier in time.

In addition, consumer groups, such as housing cooperatives or regional associations of industrialists and entrepreneurs, will be able to create their own suppliers (traders) for wholesale acquisition of electricity and independence from other players.

IT SHOULD BE NOTED that in these circumstances consumers have to contend with lack of information regarding the market, their roles and opportunities. To address this problem, ILF and the All-Ukrainian Sustainable Development and Investments Agency are launching the Energy Literacy Project.

Regarding the Energy Literacy project

Our goal is to explain to consumers the importance of knowing your rights, responsibilities and opportunities in the new market. The new market will help consumers be more flexible and become full-fledged participants of the process, being able to choose the optimal conditions and models for buying electricity and to define their role in the market.

At the same time, lack of information and being unprepared for new conditions can be a real problem.

With the emergence of competitive mechanisms, state regulation of the market aimed at protecting the consumer should decrease, meaning that now it will be up to consumers themselves to protect their interests by making use of the law-provided tools. Those too late for the party or unable to work under such conditions effectively may not only lose the chance to save money but also encounter unscrupulous counterparties and end up paying 25%+ more for electricity compared to other consumers.

We are going to provide consumers with essential information that will prepare them for the new market launch and will show them where to find answers and how to avoid scams.

Follow this link to check out the first webinar on this subject for directors and managers responsible for finances and energy supply in the company: https://ilf.space/buy.electricity