Cabinet approves draft law on direct electricity contracts

The Cabinet of Ministers passed a draft law yesterday that foresees direct agreements between producers and industrial consumers of electricity. The document provides for a three-stage implementation process: switch to 10-15% of total volumes via direct agreements in 2010, 50% by 2012 and 100% by 2014. At present, all Ukrainian electricity is sold via the government-run wholesale energy market operator Energorynok. Yegor Samusenko: The proposed draft  law is the first action to reform Ukraine’s electricity market, which has been talked about since autumn 2008, when the start of the reforms was officially announced. Direct electricity contracts between producers and industrial consumers would allow GenCos to earn more since currently the difference between the industrial consumer tariff and wholesale electricity price is used to cross-subsidize the low household tariffs. We are cautious about quick passage of this draft law and expect the first direct electricity contracts to be concluded no earlier than 2H10.