Viktoriia Voitsitska: “The fraudulent scheme “Rotterdam++” must be cancelled”!

We have filed a lawsuit. The fraudulent scheme “Rotterdam++” must be cancelled!

Our demand is to cancel the unreasonable increase in electricity tariffs for businesses, state and municipal enterprises, schools, hospitals, kindergartens, water utilities, electric transport.

Background and the decision of the National Commission for State Regulation in Energy and Utilities.

On December 7, 2017 a law that granted the President the right to appoint temporary members of the NCSREU was adopted. On December 23, the President appointed two temporary members. Thus, there were 4 members, that is, there was a quorum for making decisions.

As early as December 28, 2017, the Commission (a preliminary composition headed by Dmytro Vovk) decided to raise the price for electricity (wholesale market price) in 2018 by 16.2% – up to 1,586.7 hryvnias per MWh. A 2-stage increase was approved: by 9.5% from January 1 and by another 6.1% from April 1.

The main factor of the increase was the formula Rotterdam+. The price of coal in tariffs was increased by 20 dollars (600 UAH) and amounted to 2,535 UAH per ton. This is 130% more than the price of coal, which was included in tariffs in early 2016 (1,100 hryvnias), and which the then chairman of the Commission Vovk considered to be more than sufficient.

Thus, the tariff for thermal generation in 2018 increased by another 26% and this was supplemented by additional 12.5 billion hryvnias. Over two years, the tariff for thermal generation has grown by 130%.

Akhmetov’s DTEK company has received additional 10 billion hryvnias. The DTEK group controls 80% of the Ukrainian TPP stations, as well as more than 85% of the Ukrainian coal production (19.5 million tonnes out of 23 million).

To date, the price of coal in Ukrainian tariffs is the highest in the world and is 20% higher than the price in Rotterdam (although the coal quality is better there than in Ukraine).

There was also an unreasonable increase in the tariff of Ukrhidroenergo, whose investment program execution level in 2017 was less than 60%.

Consequences of the decision of the NCSREU

This increase resulted in a significant increase in tariffs for residential consumers (businesses, budgetary institutions). This entailed macroeconomic consequences – inflationary processes. In order to curb inflation, the National Bank had to raise the accounting rate: on January 26 it was raised from 14.5% to 16%, and on March 2, to 17%. This led to a rise in the cost of all loans.

This had direct consequences for both the population and the economy:

– on January 1, the tariff for cold water was raised in 60 cities of Ukraine (electricity makes up 40% of the prime cost). In Kyiv, on July 1, the tariff for cold water will grow again.

– electric transport tickets (underground/tram/trolleybus) became more expensive in Lviv, Lutsk, Poltava, Sumy, Slavyansk, Kharkiv, Kyiv and other cities of Ukraine. Electricity comprises more than 20% of the prime cost of electric transport.

– growth of prices for all other goods, because electricity makes up 5%-20% of the prime cost of most goods and services.

– decrease in the competitiveness of Ukrainian exporters in foreign markets, because tariffs for business in Russia and Kazakhstan – our main competitors – are 1.5-2 times lower. Moreover, electricity tariffs for business are already lower in many European countries.

Grounds for legal actions.

  1. In our opinion, the increase in tariffs for electricity through the formula Rotterdam+ is wrong in its essence. This is a blatantly unfair redistribution of money that is collected from all Ukrainian consumers and given to a small group of beneficiaries of this formula (Akhmetov’s DTEK owns 80% of all TPPs and 85% of Ukrainian coal production).
  2. The decision to raise the price was adopted with a gross violation of the Law of Ukraine “On NCSREU” and the Decree of the National Security and Defence Council of Ukraine No. 289 dated 03.03.2016 (Procedure for establishing the wholesale market price). The terms and procedures were violated, the draft decision was not publicly discussed as stipulated by law. There were actual errors in the calculations and other significant violations.

What we want to achieve.

  1. To cancel the unreasonable increase in electricity tariffs, which was due to the Rotterdam+ formula.
  2. To return about 15 billion hryvnias per year to the Ukrainian economy, which can be used to reduce tariffs for end consumers, to improve the power grids, to improve the financial state of the state-owned “Energoatom”, and to develop green energy.
  3. To cancel the unreasonable increase of electricity tariffs for business, state and municipal enterprises, schools, hospitals, kindergartens, water utilities, electric transport. This will make it possible for the corresponding enterprises not to raise their prices so much but to invest the released funds in their development, better efficiency and quality of their services, instead of overpaying for electricity.
  4. We want Akhmetov’s DTEK to sell electricity in Ukrainian at no more expensive prices than the ones for export. After all, today, DTEK sells electricity to Hungary at a price of 40-45 euros per kilowatt-hour. While in Ukraine this price is 30%-40% more expensive – 60 euros per MWh. This is a clear manifestation of abusing the monopolistic position.
  5. We want the tariff regulator and other bodies to make fair, objective and justified decisions and act within the framework of the legislation.

MP Viktoriia Voitsitska from the Samopomich parliamentary faction

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