Ukraine may lose right to import electricity from the EU due to violations

The Energy Community warns Ukraine that there is a threat of Ukrenergo, a Ukrainian national power company, losing its certificates of compliance with European standards, which means a ban on electricity imports from Europe.

According to a letter with the headline "Regarding Ukrenergo's compliance with unbundling requirements" (that is not public) to the government (represented by the National Energy and Utilities Regulatory Commission (NEURC), which is the responsible authority in this case) was sent 

As stated by Oleksandr Kharchenko, an energy expert and director of the Energy Research Centre, the Energy Community warns of the threat of Ukrenergo losing its certification, which confirms the grid operator's ability to operate in accordance with European standards. In particular, the issue is the lack of full corporate governance in the company after two independent members of Ukrenergo's supervisory board resigned, claiming political pressure and excessive concentration of control over state-owned energy companies by the Ministry of Energy, which contradicts European rules.

The certification is mandatory for Ukraine's power system to operate in sync with the European power system (ENTSO-E). Ukrenergo received it several months before the full-scale war.

"If this (revocation of certification – ed.) happens, then almost simultaneously Ukraine is likely to lose the ability to import electricity, and at the same time, this situation will cause great damage to the process of integration of the Ukrainian electricity market into Europe... We should thank the Ministry of Energy and the Minister in person for this risk," Kharchenko wrote in his column on Ekonomichna Pravda.

He emphasised that this situation arose before the onset of winter, which will be difficult even with imports from the EU due to Russian strikes on the energy system.

"The position of the Energy Community is that the Supervisory Board of Ukrenergo cannot make decisions due to the lack of independent members, who should be in the majority. The competition for the election of new independent members has already been announced, but the Secretariat has set a strict time frame to sign contracts with new members by 9 December and bring the Supervisory Board of Ukrenergo back to work," says Kharchenko.

In addition, the EU Secretariat is demanding that Ukrenergo's charter be brought in line with European rules in order to "protect Ukrenergo's business activities from government interference".

In addition, the Secretariat explicitly states that, according to the Energy Community rules, the Ministry of Energy cannot be both a policy maker and a shareholder in a company, as this is a direct conflict of interest. The Ministry of Energy is reminded of its long-standing commitment to create a separate unit that would independently coordinate fuel and energy operators, including managing the state's corporate rights in Ukrenergo.

"If the necessary changes are not adopted by 9 December, an independent supervisory board of Ukrenergo is not elected, and Ukrenergo does not comply with the unbundling requirements, the EU Secretariat proposes that the NEURC reopen the certification procedure for Ukrenergo," the letter concludes.

"Translated from the bureaucratic European language, the final sentence of the letter reads: "either the Ukrainian side will put everything in order by 9 December, or the certification will be withdrawn". If the certification is withdrawn, this will mean that Ukrenergo will no longer be able to be part of ENTSO-E, with all the consequences... Without imports and connection to the European system, we will be in trouble, to put it mildly. However, we still have time to improve the situation," concludes Oleksandr Kharchenko.

Earlier, it was reported that the EU plans to increase the capacity of electricity exports to Ukraine as part of a plan to "soften" the passage of winter in the face of Russian bombardment of the energy system. 

This should cover about 12% of Ukraine's needs. Therefore, the possible withdrawal of certification means that Ukraine may lose access to these volumes.