Electricity prices rise won’t solve the overall challenges the energy sector faces—the government still needed very major reform

Top systematic problems currently facing the energy industry should not be resolved by rising electricity bills hitting residents’ mailboxes, as a comprehensive market reform is needed.

Oleksandr Kharchenko, Director at the Energy Industry Research Center expressed his opinion, at a briefing at the Media Center Ukraine – Ukrinform. 

“Unfortunately, Ukraine is gripped by a large-scale financial crisis (that disrupts the electricity market – Ed.), and we are talking about tens of billions of hryvnias for energy commodities without taking into account the gas market, that’s the electricity market solely. So, let’s be honest, the Ukrainian energy sector is simply out of any sources of money to rebuild, restore, or repair its system ahead of the next heating season. And household bills play such a small role in this story, they are such an insignificant part of the overall problem that it is simply absurd to say that a typical power bill is set to be raised,” the expert explained.

Mr. Kharchenko noted that the residential electricity bills account for only 10% of the total debt, so the matter of energy financing and funding should be addressed systematically and in other ways.

In particular, the expert stressed the top priorities the electricity market reform should include.

“First of all, it (the market reform – ed.) should designate a public official primarily responsible for those customers accruing extremely large unpaid balances. Because today there is no such person in charge, it’s a de jure position without any actual responsibilities. There are, for example, several companies that are socially key players avoiding paying for electricity services. Utilities may not refuse service to them as they have no money at all. The water utilities business electricity rates fail to cover basic electricity services consumption, they can’t afford it. Someone has to come up with a solution to this problem: either city councils should pay extra for them, or the national budget, or electricity tariff adjustment so that they can pay. This is just one problem to name, and it costs the country hundreds of millions of hryvnias every month,” explained Kharchenko.

Therefore, Kharchenko is convinced that the problems of water utilities, district heating companies, and state-owned mines with arrears to power companies, should be addressed comprehensively.

“Unless handling all these problems comprehensively and, the hope for investors to come and save Ukraine and invest in Ukraine’s energy sector restoration is a vain hope,” the expert added.

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