Ukraine regulator fails to gather to approve 2018 power prices

The meeting of Ukraine’s energy and utility regulator,
the NERC, failed to convene on Nov. 23 due to a lack of quorum. The regulator
had been planning to adopt a forecasted wholesale electricity price for 2018,
which is vital for thermal power plants, the majority of which are operated by
DTEK Energy (DTEKUA). Recall, we estimated that the regulator will allow
thermal power plants to enjoy about an 18% yoy electricity price hike next
year. The next meeting is scheduled for Nov. 24.

Alexander Paraschiy: It will be
negative for DTEK if the regulator won’t be able to approve the forecasted
wholesale price (increasing the rates of thermal power plants) for 2018 by Dec.
21. The regulator is short of time, and now there is material risk that it
won’t be able to gather for any decision by the end of this year.

In particular, the quorum for NERC meetings is four
commissioners (out of seven seats total), while as of today there are four
valid commissioners of which one has not been signing up for the regulator’s
meetings since last week. Meanwhile, the tenure of two commissioners expires at
the end of this week. In this way, starting next week, the NERC will have only
two commissioners and no power to adopt any regulation.

To make matters worse, the procedure of appointing new
commissioners takes at least 75 days by law, meaning that (all things being
equal) the regulator won’t be able to approve any new regulations until
mid-February 2018. Any earlier moves, therefore, will require unorthodox
solutions, including amended legislation or severe procedural breaches.