06.03.2025
Energy Club is preparing an appeal to the head of the National Commission for State Regulation of Energy and Utilities, Yuriy Vlasenko, requesting support in resolving issues faced by electricity suppliers.
Specifically, on February 9, 2025, amendments to the Law of Ukraine “On the Electricity Market” came into force. Now, according to the Law of Ukraine “On Amendments to Certain Laws of Ukraine in the Fields of Energy and Heat Supply Regarding the Improvement of Certain Provisions Related to Business Activities and Martial Law in Ukraine,” electricity suppliers risk acquiring “Pre-Default” and “Default” status if they delay payment for services to the transmission system operator, PJSC “NEC Ukrenergo.”
Energy Club’s appeal to the National Commission was prompted by a request from LLC “Energy Partnership” for support. The company points to difficulties in collecting debts from state enterprises and the lack of clear procedures for suppliers to acquire and terminate the aforementioned status, which creates risks for energy supply stability.
Dmytro Morhun, lawyer and legal advisor to the electricity supplier LLC “Energy Partnership” and managing partner of the ANTEVERIS Law Association, explains the essence of the problem, hidden risks, why receiving payments from critically important consumers is almost impossible, the consequences for consumers, including the population, and ways to overcome the problem.
Dmytro Morhun, lawyer and legal advisor to the electricity supplier LLC “Energy Partnership” and managing partner of the ANTEVERIS Law Association
— Dmytro, please tell us more about the problem faced by LLC “Energy Partnership” and other electricity suppliers in connection with the amendments to the Law of Ukraine “On the Electricity Market”?
— The amendments to the Law of Ukraine “On the Electricity Market” obligate the state regulator — the National Commission — to adopt regulations that will determine that suppliers who do not pay for NEC “Ukrenergo” services will acquire “Pre-Default” and “Default” status. As a result, electricity supply companies face significant problems. Almost all have debt, especially those working with budgetary organizations, which include: critical infrastructure facilities, defense and state security objects, energy supply facilities, healthcare institutions, local self-government bodies and providers of public (administrative) services, law enforcement structures, justice administration, and detention facilities. These include military units, municipal enterprises, factories producing goods for the Ministry of Defense, etc.
Suppliers who ensure uninterrupted electricity supply to these consumers constantly face debt from them, as these enterprises unfortunately fail to fulfill their obligations on time. The reasons vary, but it’s important to note that legal structures cannot address this issue, as debt collection from these facilities is currently impossible under the Cabinet of Ministers of Ukraine’s Directive No. 198-r of March 2, 2022 “On Ensuring Public Settlements During Martial Law,” and according to the Law “On Amendments to Section XIII ‘Final and Transitional Provisions’ of the Law ‘On Enforcement Proceedings’.” For the duration of martial law in Ukraine, the enforcement service does not carry out collections based on court decisions. Therefore, relations between suppliers and such enterprises — critical infrastructure facilities — are built purely on friendly partnership principles, with debts being repaid based on possibility and agreements.
The amendments to the law promote and initiate financial discipline among energy market participants, which must be strictly adhered to. In this case, the responsibility falls specifically on electricity suppliers. This creates a precedent: if a supplier does not settle their debt to “Ukrenergo” on time, they acquire “Pre-Default” or “Default” status. While this may work with private consumers (today they have debt, it’s collected, and tomorrow they can contract with another supplier), it’s complicated for budget consumers. They operate according to the Law of Ukraine “On Public Procurement,” purchasing electricity through the Prozorro system, and selecting a supplier can take a month or more. If a budget consumer acquires “Pre-Default” or “Default” status, they are automatically transferred to the “Supplier of Last Resort” — a company obligated to supply electricity for 90 days to consumers who have lost their main supplier for objective reasons. This involves different tariffs, conditions, and expenses, but the debtor still won’t pay. This harms both “Ukrenergo” and the budget. We’re talking about tens of millions of hryvnias in debt. Financing should work in a cycle among market participants.
— How will the market change if suppliers understand that no one will cover their financial risks?
— This shouldn’t happen because, according to current legislation, the market is based on principles of equality. The regulator needs to properly understand the problem: if default equalizes all electricity suppliers without considering that many constantly settle debts with “Ukrenergo” because they work with budget organizations, tomorrow will bring a series of bankruptcies, consumers will suffer, and “Ukrenergo” won’t achieve the expected effect. Even if a supplier goes to court and obtains a debt collection decision, it cannot be executed since the State Enforcement Service’s debt collection powers are blocked by the Cabinet of Ministers’ directive.
We’ve had discussions with “Ukrenergo” and the National Commission; they understand all this and are looking for financial instruments to apply. But so far, there’s no solution.
— What could fix the situation?
— Encouraging consumers to maintain financial discipline. But so far, no one is normatively involving them in this. The prosecutor’s office won’t protect the interests of a supplier’s business that has debts from the state. As a lawyer, I can say that the actions of officials — enterprise managers — contain elements of abuse of power, as the debt prevents suppliers from settling their obligations to “Ukrenergo.”
We can’t change the law, but we’ve approached Energy Club and proposed appealing to the regulator to suggest excluding from the “Pre-Default” and “Default” status list those suppliers who work with budget consumers. There’s no other way.
— Why did you approach Energy Club specifically?
— There aren’t many public associations in our country that unite, lobby for, and protect the rights of energy market participants. Energy Club has a good reputation and serves as a bridge between business and the state. While protecting the interests of its members and the energy sector as a whole, Energy Club reviews appeals, conducts consultations with other club members, and organizes meetings with company representatives, regulators (NEC “Ukrenergo”), and stakeholders to discuss solutions to problems.
— If the situation doesn’t change, what might be the consequences for the population? Will they suffer?
— It won’t be felt immediately, but prices for everything will gradually increase. Because if manufacturing enterprises and service providers turn to the Supplier of Last Resort, the increase in energy tariffs will cause an increase in the cost of products and services. If we’re talking about defense complex enterprises, then by paying more or accumulating debt obligations, the state will increase its burden on internal debt to state enterprises and “Ukrenergo” itself. According to economic laws, everything must be covered through internal demand. And internal demand means, of course, prices for all services and goods, inflationary risks.
— Energy Club’s appeal has already been drafted and sent to the National Commission. How do you see the resolution of this problem and how quickly should it happen so that we don’t feel the consequences of legislative changes?
— First, the state regulator must respond to the appeal and exclude from the list of electricity suppliers acquiring “Pre-Default” and “Default” status those that supply electricity to the above-mentioned categories of consumers. We can consider suppliers’ portfolios in terms of what debts they have. But we can’t simply adopt the same requirements for all completely different suppliers, especially those that supply electricity to critical infrastructure facilities and state enterprises, which in turn must also settle on time, adhering to financial discipline. This is the first step — the regulator must adopt procedures taking into account the specifics of suppliers’ operations. The second step is the state’s energy-economic policy. All these issues need to be raised at the level of Verkhovna Rada committees and lobbied for legislative changes because conditions must be created for consumers to maintain financial discipline, understanding their responsibility. The consumer is the first link that creates problems in electricity payments. A comprehensive approach is needed, and I think energy industry experts clearly understand the causes of this situation and the need for legislative changes.
It’s worth noting that the risk of acquiring “Pre-Default” and “Default” status is a problem for many electricity suppliers. Currently, Energy Club is actively collecting signatures from member companies for the appeal to the National Commission to demonstrate the relevance of this problem for the entire energy sector. Tomorrow, the finalized appeal with signatures will be sent to the regulator.
Resolving this issue requires a comprehensive approach and consideration of the specifics of suppliers that provide electricity to critical infrastructure facilities and state enterprises. Only through joint efforts of suppliers, regulators, and legislators can a balance be found between ensuring financial discipline in the electricity market and maintaining uninterrupted electricity supply to important facilities during wartime.
