Energy Regulator Reform Draft Law Voted By Ukraine’s Rada – A New Stage in Ensuring Ukraine’s Energy Independence and Cutting Corruption

On 22 September 2016, Ukraine’s Verkhovna Rada voted the law on the National Commission on Energy, Housing and Utilities Services Regulation (NEURC) in the second and final reading. A total of 250 lawmakers supported the bill.

The law foresees that the selection of members of the Commission should run under strict rules and the special Nomination Committee is to be comprised of politically neutral experts. The establishment of an independent energy regulator has been a strong demand by Ukraine’s international donors and civil society. This marks yet another significant step in Ukraine’s reform effort, especially in modernizing its energy market, cutting its energy dependence and reducing corruption.

 

KEY FACTS

Energy regulator reform has a critical impact on the Ukrainian energy market which is worth about 240 billion hryvnias annually or $ 9.2 bn. USD.

The recently passed bill seeks to regulate the commission’s activity, allowing it more effective control over energy markets while ensuring proper consumer protection by preventing violations on the part of service providers.

Specifically, the bill brings about a number of changes:

  • Renders decisions on energy and utilities prices more transparent and inclusive.
  • Improves the neutrality of National Committee members and prevents interference from politicians by allowing the nomination procedure to be optionally monitored by the EU and other international organizations.
  • Guarantees the energy regulator’s political, functional, and financial independence by increasing staff remuneration and by introducing a competitive process with respect to employment.
  • Improves customer protection based on the European regulatory model.
  • Sets clear professional requirements for the commission’s leadership.
  • President can choose only among candidates who have been shortlisted by a selection panel with representatives from several institutions.

 

CONSEQUENCES

Among others, energy regulation has been raised by the new head of the European Union delegation to Ukraine as a prerequisite for the release of the second batch of 600 million Euros under the EU’s macro financial assistance to Ukraine.

After the provisions of the energy regulator law come into force, the new energy commission will be effectively shielded against any attempts by politicians and large energy business to intervene. It will dispose of a mechanism of legal prosecution, guarantees of financial independence, adequate staff remuneration, as well as much stricter rules regarding the transparency of its decisions.

Furthermore, a timely and effective energy sector reform is one of the key preconditions for Ukraine’s total energy independence from Russia, which has already been reduced from 75% in 2014 to 37% this year.

The establishment of a genuinely independent regulatory authority on the energy market would imply that Ukraine has fulfilled a very important part of its international obligations – carrying out a comprehensive energy reform that is in line with Ukraine’s obligations under the Association Agreement and Energy Community Treaty.

 

Following Anders Fogh Rasmussen’s appointment as external adviser to the President of Ukraine, Petro Poroshenko, Rasmussen Global has initiated an ambitious project on Ukraine. The overall aim is to keep Ukraine on the international agenda while at the same time keeping reform on Kyiv’s agenda. It does so by providing strategic advice to the President and his government, all-the-while engaging with key decision and opinion makers in Western capitals to shape a better understanding of the reform efforts and challenges in Ukraine.

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