Due to the difficult situation in the energy sector caused by Russian missile terrorism, Ukraine may increase electricity tariffs for the population. When and how tariffs can rise – Focus understood.
In Ukraine, during the war, the demand for electricity changed significantly, as Focus writes in its new review “Black Hole. How much money Russian energy terrorism pulled out of Ukraine.”
Victor Shulyk, director of the project management department of the IBI-Rating rating agency, in a commentary to Focus, recalls that in 2020 the structure of the final consumption of energy resources in Ukraine was as follows:
industry: 33.4%; households: 28.5%; transport: 16.8%; service sector: 10.2%; other: 11.1%.
During the war the proportions changed. According to Maxim Bilyavsky, an energy expert, during the full-scale war, the demand for electricity in Ukraine fell by about 35%, and in the structure of consumption, the largest share began to belong to households that receive electricity at a reduced price.
Recall that during the war, citizens of Ukraine pay for electricity from UAH 1.44 to UAH 1.68 per kWh, depending on the volume of consumption. While for most businesses, kWh costs about UAH 5-7 and more.
Belyavsky explains that feed-in tariffs for the population increase the financial burden on the energy sector, which should be covered by higher prices for industrial enterprises. In addition, the interlocutor emphasizes that with the current balance of generation, current electricity prices do not cover all the needs for repairs. Thus, technical problems in the energy sector caused by hostile shelling entail a financial chasm that creates additional risks for exploitation.
During the war, the population, not industry, became the main consumer of electricity in Ukraine
Photo: From open sources
In this context, Maxim Belyavsky focuses on three steps that are important for the further survival of the energy system:
achieving financial liquidity of energy markets and eliminating artificial distortions that existed before the start of a full-scale invasion; increasing the culture of consumption and reducing the energy intensity of industrial enterprises; Technical decentralization, diversification and digitalization of energy industry facilities.
In the first paragraph, Focus’ interlocutor obviously implies the need to increase tariffs for the population, which energy experts have been talking about for several years on the eve of the war. That is, back in 2021, according to experts, in 2022-2023 the fair cost of electricity for citizens should have been 3.5-4 UAH/kWh. And now, taking into account inflation and the destruction of energy infrastructure, the market price could be even higher.
For the sake of supporting the population suffering from war and declining incomes, the authorities for the duration of martial law refused to raise tariffs for utilities and electricity for citizens. However, right now there is a window of opportunity to revise electricity tariffs for the population, which were frozen until March 31, 2023.
The media is already considering possible scenarios. In particular, citizens are being scared by a four-fold increase in electricity tariffs – that is, up to 5.76-6.72 kWh.
As Oleg Popenko, chairman of the board of the Union of Utilities Consumers, explained in his Telegram channel, the estimated cost of electricity is four times more than the price for a residential consumer. But, according to the expert, electricity tariffs can be increased somewhere by 30-40% to UAH 2.3-2.5 per kWh, and perhaps even graduated tariffs will be introduced depending on consumption volumes.
Earlier, Focus wrote that the head of the National Commission for State Regulation in the Energy and Public Utilities (NKREKU) Konstantin Ushchapovsky explained that the calculation of electricity tariffs will be made taking into account the destruction in the energy sector. In his opinion, due to Russian strikes on the facilities of Ukrenergo and Energoatom, it will be problematic, as before, to cover the difference in the cost of electricity, and the state is forced to look for a way out of this situation.
Also, referring to the adviser to the Prime Minister of Ukraine, Yuriy Boyko, Focus reported that the Ukrainian government has developed ten options for changing electricity tariffs, but there is still no final decision due to fears of discontent among consumers. On the other hand, looking at the heroic efforts of power engineers who quickly restore power supply in difficult conditions, most citizens can treat the increase in tariffs with understanding, because the survival of the energy sector affected by terrorist attacks and the quality of services depend on it.
Power engineers who stubbornly restore the destroyed power grids are perceived by citizens as heroes. Perhaps, therefore, they will treat the increase in tariffs with understanding.
It is noteworthy that some analysts, when predicting the level of inflation in Ukraine for 2023, are already considering an increase in tariffs for the population as a baseline scenario. In particular, the director of the analytical department and chief economist of the Dragon Capital investment company, in a commentary by Focus, spoke about the expectation of an increase in utility tariffs by 20% this year.
