Ukrainian Parliament Approves Law for Integration of Energy Markets with Europe

The Ukrainian Parliament, known as the Verkhovna Rada, has officially approved bill No. 12087-d, which seeks to unify the electricity markets of Ukraine and Europe. The vote took place during a parliamentary session on Tuesday, where 245 deputies supported the legislation. The bill is spearheaded by a coalition of lawmakers, including Andriy Zupanin, Andriy Gerus, Maksym Khlyapuk, and others.

Andriy Grus, the head of the Verkhovna Rada's Committee on Energy and Utilities, emphasized that the law is designed to achieve full synchronization of Ukraine's energy system with that of Europe. "When Ukraine has a surplus of electricity, we will be able to export it seamlessly, and in case of a deficit, we can import it. In Europe, negative electricity prices exist, which has never been the case in Ukraine. With this law, we aim to allow cheap electricity from Europe to flow into Ukraine," he commented before the vote.

Deputy Committee Chair Andriy Zupanin also highlighted that the newly adopted law will not affect electricity prices for consumers. He stated that its primary goal is to gradually implement uniform rules across the markets. "This law will bring Ukraine EUR 500 million under the Ukraine Facility," Zupanin added.

During the committee meeting, Zupanin described the bill as visionary, noting that after its adoption, it would take between 12 to 18 months for actual market integration to occur. He also pointed to potential integration dates, suggesting January 1, 2028, or January 1, 2029, as possibilities, since a series of subordinate acts will need to be passed.

Zupanin further explained that the law abolishes price caps in the electricity market. "In the EU markets, price caps are more technical in nature and do not serve the function of price limitation as they do in Ukraine. Our EU partners' fundamental position was that price caps must be lifted before market integration. This will be a gesture showing Ukraine's willingness to engage with European markets. Therefore, price caps will be removed starting May 1, 2027," he clarified.

At the same time, Zupanin specified that the national energy regulator, the National Commission for State Regulation of Energy and Public Utilities (NERC), could revisit the idea of price caps in case of an emergency in the energy sector. However, this would not follow the current procedure but would allow for a rapid response to critical situations in the energy sector.

Another significant provision introduced by this law is the retention of competitions for new generating capacity only until May 1, 2028. "Our European partners consider such competitions a hidden form of state support for businesses. Therefore, until May 1, 2027, Ukrenergo will be able to conduct such competitions, and after that, there will be a transitional period during which competitions will only be possible in energy-deficient regions," Zupanin noted.

Additionally, the law maintains a provision for a decade regarding the balancing tariff for energy storage installations, which will only pay it based on the difference between the electricity injected and withdrawn. This applies to investors who have contracts or technical conditions for them established by May 1, 2027. Otherwise, the issue of payment for the transmission tariff for energy storage installations will remain at the discretion of NERC.

Andriy Gerus, the head of the energy committee, commented on the bill, noting that a positive aspect is that the law's provisions will come into effect gradually, ensuring predictability for the market.

It is worth recalling that on July 22, the Verkhovna Rada adopted the foundational version of bill No. 12087-d, titled 'On Amendments to Certain Laws of Ukraine Regarding the Implementation of European Law Norms for Energy Market Integration, Enhancing Supply Security, and Competitiveness in the Energy Sector.' The Ministry of Energy reported that the legislative proposal was developed based on nine acts of EU energy legislation and aims to create the necessary legislative framework for the full integration of Ukraine's electricity market into the unified European market on the principle of reciprocity.

The document also envisions the integration of short-term (spot) electricity markets between Ukraine and the EU, which means increased market liquidity, simplified trading conditions for electricity with the EU, efficient use of the capacity of cross-border interconnections, enhanced flexibility of the energy system, and access to EU reserves.

Furthermore, the bill includes additional mechanisms to protect consumer rights and strengthen their role in the market by increasing the transparency of supply conditions and implementing tools for comparing supplier offers, as well as creating conditions for consumer participation in other market segments, including the ancillary services market.

The ministry indicated that the adoption of this document would ultimately ensure the synchronization of electricity markets by early 2027.