OREANDA-NEWS. February 24, 2009. The amendments to the law of Ukraine ‘On Electric Power Industry’ adopted in January after the first reading and introducing the competitive elements in the sphere of electricity export will result in the change of the market situation. Such conclusion was made by the professional periodical ‘Energobusiness’ in its ‘Playing the ‘Monopoly’ Game’ article.

The periodical refers to the history of Ukrainian electricity export and the monopolistic Ukrinterenergo state export company.

In the 90s, a group of traders was established to purchase the Ukrainian electricity through the long-term contracts at extremely low prices.

Late 2003, the Ukrainian party raised an issue of revising the existing contracts concluded with System Consulng Zrt. and valid till 2015. And the group did revise them. The quotas for Burshtyn Island electricity purchase were competed between the large European buyers, including Electricite de France. But small Ukrinterenergo decided not to mess with such serious structures: it preferred to deal with the fellow-countryman, Vasiliy Bechvarzh, the born Ukrainian, and his Korlea Invest Company.

The value of foreign contracts was kept confidential, but according to unofficial data, the price of the Ukrainian electricity at the western markets totaled 2–2.3 cents per 1 кWh, whereas the average European price remained at the level of 7-8 cents.

After 2004, the management of Ukrinterenergo was replaced with every change of the government, but each new director of this company was loyal to Vitaliy Gaiduk. That is why the profitability of export did not change, though the prices in the region grew quickly with the European energy sector liberalization and the difference between the prices and the production cost of Ukrainian electricity was swiftly increasing.

Late February 2006, Ivan Plachkov, the Minister of Fuel and Energy of Ukraine, presented the fuel and energy sector of Ukraine to the representatives of European Commission and European Parliament in Brussels, where he stated, “Officially Ukrinterenergo is unprofitable”. At the same time the periodical refers to the data of the Ministry of Fuel and Energy concerning the total losses in the amount of UAH 270 m incurred by Ukrinterenergo.

It is impossible to obtain financial information from the company itself, as this information presents the state secret rather than the commercial one.

Now Hungary has blocked the access of Ukraine to the Hungarian networks, Energobusiness emphasizes. Early February MAVIR held the unilateral auction for the right of access to a part of the Ukrainian-Hungarian section, through which the Ukrainian electricity was supplied to Hungary. In particular, 104 МW of the total section capacity 455 МW were sold with the right of electricity supplies within remaining time of the month.

The present blocking of electricity cross-flows from the Ukrainian grid to the Hungarian one looks like a hint to Ukraine not to change an agent unilaterally.

Our reference. On 13.01.2009 Verkhovnaya Rada, after the first reading, adopted the draft law “On changes to the law of Ukraine ‘On Electric Power Industry’ #1371. 285 deputies voted for this draft law, whereas 226 votes were necessary. The draft law provides for holding the auctions for the export electricity volumes. The explanatory note to the draft law says the national energy market needs de-monopolization of electricity export, regulation of the pricing issues when performing the corresponding operations, as well as the increase in their transparency and efficiency.