Dispelling myths or admitting the incompetence?

During a recent press conference, Minister of Energy and Coal Industry of Ukraine, Ihor Nasalyk, was supposed to “dispel” the myths, which he believed were occupying the energy field of Ukraine.
The key point of the Minister was the statement that Ukraine did not actually purchase coal using the Rotterdam+ formula. Ihor Nasalyk noted that any statements that the coal transported from the ATO zone was purchased at the cost calculated in accordance with the Rotterdam formula were manipulative and not true to the fact.
Dear Mr. Minister, I would like to inform you that the coal is not purchased by the Rotterdam+ formula because this formula does not apply to the purchase of coal at all. How unfortunate it is that the minister himself does not really know what Rotterdam+ is!
The so-called Rotterdam+ is a technique of formation of price for the fuel component (coal) in generation of electricity by thermal power plants.
This mechanism was approved by the National Commission for State Regulation in Energy and Utilities on March 3, 2016 and published on March 23, 2016.
According to this mechanism, the price of coal – which is factored into the price for electricity set by heat and power plants – is calculated as if the coal were purchased at the Rotterdam stock exchange, transported to Ukraine, unloaded in the port warehouses and then transported by rail to the power station’s depots.
The price of purchase of coal is determined on the basis of the average prices at the European market in the 12 months preceding the month of the setting the anticipated wholesale market price; therefore, it is irrelevant to compare it with the price at the Rotterdam stock exchange at a particular date.
The fuel component in the production of electricity at thermal power plants is more than 80%.
Thus, thermal power plants factored into their tariffs the coal price in accordance with the Rotterdam+ formula. And all consumers had to pay for this and still continue paying. Moreover, the Rotterdam+ formula applies to both the power plants burning anthracite (deficit) coal group, and for the plants burning the gas (surplus) coal group.
Why was the Rotterdam+ formula introduced?
According to developers (the National Commission for State Regulation in Energy and Utilities), the Rotterdam+ was introduced in order to ensure our autonomy from the ATO zone in performing the coal accumulation plan and, consequently, to avoid any problems with the accumulation of coal.
That is, since April 2016, the electricity consumers have been paying through the electricity bills for the price of coal (as the main component of the cost of electricity), calculated on the basis of the Rotterdam+ formula in order to be independent from the coal supplies from the ATO zone.
What was supposed to happen (what have the consumers paid for):
1. Thermal power stations were supposed to sign contracts with foreign contractors for the supply of anthracite coal (diversification of supplies as part of our energy independence).
2. Thermal power stations were supposed to readjust their boilers in such a way that they could start burning gas coal, which is produced in Ukraine, instead of the anthracite coal only.
3. The price of coal extracted from the state mines was supposed to be equal with the price of coal calculated on the basis of the Rotterdam+ formula. That would reduce the need for state support of the coal industry.
What actually happened:
1. Thermal power stations are purchasing coal from the occupied territories at the price ranging from 600 to 1,100 hryvnias per ton; however, the price factored into the tariffs is 1,800-2,000 hryvnias per ton.
2. Plants aren’t really readjusted.
3. In 2016, coal from the state mines was bought at the price of about 1,300 hryvnias per ton, instead of the price of the Rotterdam+ formula
In addition, the mines are one of the largest debtors for electricity and they pay for it in accordance with the “Rotterdam” tariff, though the state coal is supplied to the power stations at the price of 1,300 hryvnias per ton.
4. Rotterdam+ has in no way contributed to balancing the activities of the state-owned mines and reduction of the size of state support.
To make right conclusions
If the Prime Minister recognizes there is no alternative to the supply of anthracite coal from the ATO zone, we will have to be consistent and do the following steps:
1. Cancel the Rotterdam+, which has failed to fulfill its function and give back to the consumers those 15 billion hryvnias of which the Minister spoke as of the sum we have saved.
2. Dismiss the people who approved the Rotterdam+ reasoning this decision by the fact that it could ensure our independence from the ATO zone in the process of coal accumulation.
3. Find those guilty who will bear the political responsibility for the inability to ensure the energy security of the country as a whole and the autonomy from the ATO zone (as part of energy security) in particular.

Lev Pidlisetskyj
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