DTEK, regulator accuse each other as power price collapses on day-ahead market

The electricity
price on the day-ahead segment of the wholesale market decreased to UAH
1035/MWh on July 2 and reached a new low of UAH 426/MWh on July 4, down from
June average of UAH 1425/MWh, according to data from the market operator. The
power sector regulator (the NERC), reported that the collapse was caused by a
40% decline of power purchases in the day-ahead segment on July 2. This was
caused by a 74% decline of demand from D.Trading (subsidiary of DTEK Group)
which increased power purchases in another market segment, the bilateral
contract market, from its related parties. The significant market power of the
mentioned trader “threatens the market’s efficient, competitive and stable
operation,” the NERC reported on July 2. It also promised to initiate legal
changes to oblige selling electricity under the bilateral contracts exclusively
on electronic auctions.

The regulator
initiated an extraordinary meeting on July 4 to address the issues, where
he decided to set a price floor on the
day-ahead market at UAH 734.9/MWh till July 8, limit the sale of electricity to
related parties on bilateral contracts to 50% of monthly volumes, and force
power transmission and distribution companies purchasing on the day-ahead
market all the electricity for their own needs. It also initiated a study of
possible violations of market rules on July 2-4.

In its turn,
D.Trading called the regulator’s decisions “inappropriate” as they were adopted
without professional discussion and contradict European rules, liga.net
reported on July 5. The company accused the regulator of creating an
environment that allows for manipulations on the market and asked top Ukrainian officials to pay
attention to the regulator’s activities on the electricity market over the last
1.5 years.

Alexander
Paraschiy: All the
disputes show that Ukraine’s new model of the electricity market, after
functioning for two years, remains inefficient and unbalanced. This does not
enable forecasting wholesale electricity prices and the profitability of power
generation companies like DTEK Energy (DTEKUA) of Centrenergo (CEEN UK).
Meanwhile, it adds risks to the functioning of such large market players as
DTEK, which is blamed from time to time, not without reason, for either jumps
or collapses of market prices. It might take some more years for the market to
find an equilibrium, bringing short-term risks to top market players. This prevents the prices of
DTEKUA bonds from recovering from the level of 65% of par.