New life of the energy market of Ukraine

3.08.2022
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The new market model was launched on July 1, 2019 in Ukraine. The rules under which the market started functioning have already proved effective in many countries of Europe, Scandinavia and the Baltic States.

Implementation of the basic operating principles began on January 1, 2019. The reform affected commercial enterprises. It is not so easy to find instructions on how to operate in the new energy market. It was the lack of information that caused customers ‘ concerns. The old model of the market was known to everyone. But now everything has become much more complicated. A wholesale market has started operating in Ukraine, new manufacturers and suppliers have appeared, and pricing has changed.

Old model of the Ukrainian market

Since 1996, the market of our country has been a monopoly, manufacturing companies sold electric energy to the state organization “Energorynok” at the price set by NCEREC. After that, regional power companies that served as suppliers purchased this type of resource from the Energy Market and sold it to their consumers. Industrial enterprises paid for electricity at one price, while the general population paid for it at another. The burden of subsidizing completely fell on the industry of Ukraine.

The regional power monopoly, which simultaneously owned power lines and supplied energy to customers, prevented competition in the energy market and improved the level of service. Until 2019, more than 200 companies have received a license for the supply of electric energy.

Why was there a need for reform in the energy market?

Since there was no competition in the market, it did not develop at all. Reform of the energy market is one of the obligations that Ukraine had to fulfill before the European Union. Financial assistance in the amount of 500 million euros was allocated for this event.

New market structure

The new energy market of Ukraine will have completely different rules.

  • SE Energorynok lost its monopoly. It has been replaced by two new entities, one of which is a market operator that ensures the functioning and conclusion of transactions related to the purchase and sale of energy on the intraday and day-ahead markets. The other is the Guaranteed Buyer State Enterprise, which will purchase energy produced by alternative sources.
  • Regional power companies have become operators of distribution systems. It is worth noting that the former regional power companies have formed new energy suppliers. The measures taken helped create competitive conditions for creating and developing a business.
  • A wholesale market was formed. It consists of 4 parts, each of which has its own purpose and functions.
  • Becoming an energy provider is quite simple. To do this, the company must obtain the appropriate license.

The market for bilateral contracts is intended for the purchase of electricity under long-term contracts. These agreements are concluded between producers and buyers of electric energy.

On the “one day ahead” market, you can buy or sell electricity for the next day. All transactions must be approved by the operator.

The intraday market regulates trading operations, as well as the signing of contracts and agreements in the previous market.

A balancing market is necessary for purchasing the missing volumes of electric energy, that is, for balancing the energy produced and consumed.

What are the disadvantages of the new energy market model?

Since the second quarter of 2020, the number of providers on the market has increased dramatically. The indicator increased to 500. Companies provide their services in a highly competitive environment, they have to” fight ” literally for every consumer. You can only attract more customers by improving the service level.

Suppliers must take into account all the nuances, including the payment of bills and unbalanced customers. According to the new model of the Ukrainian electricity market, the customer is completely right. The only exceptions are those cases when the consumer has violated the terms of the contract, for example, has not paid off the debt before the specified deadline. Energy providers, on the contrary, carry out their activities in harsh conditions, not to mention the fact that they always face punishment.

Currently, most of the questions and perplexities arise among consumers due to unbalance. If the company needs an additional amount of electric energy, the supplier will have to enter the balancing market and purchase the required amount, while the cost of electric energy will be higher than stipulated in the agreement. If the company actually used less electrical energy than planned, the provider will sell the unspent resources on the balancing market.

Such situations can lead to material losses for the company. Suppliers of this type of resource that have been working in the balancing market for a long time will be able to provide their customers with more favorable and loyal conditions.

How to prevent an “imbalance” and who can help in this matter?

To minimize losses due to an imbalance, it is necessary, first of all, to reduce it within the group itself. For example, ENERGY LINE INVEST covers a high percentage of the imbalance between customers. You can also reduce the out-of-group imbalance.

Each buyer of electricity is assigned to a specific employee who provides support during the entire term of the contract. If a consumer has any legal issues or wants to transfer from another supplier to the above-mentioned company, they can get qualified legal assistance from ENERGY LINE INVEST

This company provides its customers with access to their personal account, where they can fully control and make changes to the volume of electricity consumption in the current period, as well as upload invoices and documentation. This approach makes it possible to effectively and timely correct the necessary information, as well as provides access to data at any time.

The new market model has some difficulties, but a customer who learns how to work in these conditions will be able to evaluate the energy supplier, as well as choose the most favorable terms of cooperation for themselves.

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