The final cost of gas for the population of Ukraine has increased fourfold during the period 2013-2016, with losses of gas in distribution networks four times higher than in EU countries, and more than 50% of the resource sold at uncompetitive terms, according to the Better Regulation Delivery Office (BRDO) created under the EU4Business FORBIZ project.
The issues of regulation of the industry were discussed by representatives of the government, business, the public and experts on 22 September at a round table on ‘Liberalisation of the Natural Gas Supply Market: Challenges and Opportunities’ organised in the framework of the Public Dialogue #PRODialog under the FORBIZ project.
‘Most regulations are irrelevant’
"Every fourth legislative act on the $8 billion market is illegal or irrelevant. In 87% of cases, state regulation in the industry does not achieve its goals. A striking example is the method of calculation of gas consumption in the absence of hot water supply, which is not based on any legislative norm. If you have turned off the hot water and the gas meter is not installed in the apartment, then the cost of services is automatically increased by 1.5 times," said the head of the energy sector of the BRDO, Alexei Orzhel, presenting the results of the system review of the quality of regulation of the natural gas retail market in terms of efficiency, corruption risks and adequacy.
A separate problem in the market is the accounting of gas distribution networks, most of which have not yet been audited. This means that the state does not even have full information about its own networks in the regions.
What needs to be done
According to experts from the BRDO, the following measures are needed to solve the problems in the market:
- Establish transparent gas prices, expand the tariff menu, monetize allowances and subsidies.
- Introduce incentive rates. The size of the subscription fees should depend on the quality of services, the cost of privatization and the invested capital.
- Be prepared to revoke licences for inefficient gas distribution and gas supply companies. Despite numerous violations, no licence has been cancelled.
- Revoke special accounts that distort competition.
- Make connection to networks easier.
- Improve the activities of the regulator through the establishment of target performance indicators; approval of the methodology of fine calculation and the application of other sanctions; granting authority in the field of technical regulation of the gas market.
The results of the round table discussion will form the basis for drawing up legislative changes in the natural gas market.
Funded by the European Union under the EU4Business initiative, the FORBIZ project supports Ukraine’s reform agenda and its economic recovery by proposing a systemic, smart change to a more business-friendly environment with a particular focus on SMEs. The project seeks to steer a shift in policy towards greater recognition of SMEs and the vital role they play in economic recovery, while addressing the challenge of reducing regulatory burden and lessening risk for businesses.
BRDO website http://brdo.com.ua
