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    Ukraine Unbundling 'Too Weak, Yet Too Hasty' - ECS



The Energy Community Secretariat (ECS) has requested “substantial changes” to the Naftogaz unbundling plan submitted recently by Ukraine’s energy ministry.

by: Mark Smedley

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Ukraine Unbundling 'Too Weak, Yet Too Hasty' - ECS

The Energy Community Secretariat (ECS) has requested “substantial changes” to the unbundling plan for state-owned Naftogaz that was recently submitted by Ukraine’s energy ministry. Balkan countries and Ukraine are associated with the EU-28 member states through the Energy Community, which aims to integrate the former energy markets more closely with the EU.

In its conditional approval sent to Kiev on May 6 and publicly disclosed May 9, ECS asked the ministry to amend its plan to fully meet requirements in the Third Energy Package (TEP) relating to unbundling and independence of the transmission system operator (TSO). It urged the ministry to submit the amended unbundling plan for adoption to Ukraine’s ministerial cabinet without any delay so as to ensure that a firm roadmap for the unbundling process takes effect not later than June 1 2016. Yet ECS also wants some aspects of the unbundling slowed down – describing them as “hasty.”

In early April, Naftogaz circulated its own far-ranging plan calling for full unbundling of Ukrtransgaz as an independently-owned TSO – in line with the TEP -- but urged the rest of the company be left as it is, with no further assets to be spun off.

ECS admits that Ukraine’s model envisages that the TSO Ukrtransgaz together with the underground gas storage system come under the energy ministry’s control, while a holding company is set up under the economy ministry to manage state-owned gas, oil and power production and supply firms.

But ECS director Janez Kopac now has said: “There is no need for a hasty separation of Naftogaz as a trading company from upstream and even oil-related activities. The restructuring of state-owned companies must be thoroughly analysed and not be part of the TSO unbundling process. Instead of a transfer of management of Ukrtransgaz to the energy ministry, the [ECS] asks for the establishment of a new company under the competence of the ministry to which all gas transmission infrastructure will be transferred step-by-step. This should be done at the latest immediately after the finalisation of the arbitration case between Naftogaz and Gazprom in Stockholm.”

“In parallel, the ministry will have to transfer the management competences for all electricity or gas supply companies like nuclear and hydropower plants and CHP [combined heat and power] generation to another state body. A timely unbundling process is of crucial importance for keeping the trust in Ukraine as a gas transit country,” remarked Kopac, a former Slovenian energy official.

Approval by the Vienna-based ECS of the selected unbundling model is required before Kiev’s formal adoption of the plan can take place, according to Ukraine’s Gas Sector Reform Implementation Plan agreed with the World Bank and the Energy Community Secretariat in March 2015.

The ECS says the next step will then be the certification of the unbundled transmission system operator by the national regulatory authority, which is subject to whether the ECS deems it TEP-compliant.


Mark Smedley