Last week Kyiv hosted an international conference, The Experience of Energy Market Reform. It is very symbolic that First Vice Premier Oleh Dubyna and Minister for Fuel and Energy Stanislav Stashevsky were on the list of speakers but stayed away in Zaporizhzhia where a new scandal is imminent, only sending their greetings to the conference participants.
In contrast, US Ambassador Carlos Pascual, so far not being sent to the regions to “put out energy sector fires” (Anatoly Shydlovsky, executive secretary of the Ukrainian Academy of Sciences, has recently praised the diplomat in public for his high professionalism in dealing with Ukrainian energy problems), did find the time to prepare a substantive speech. This is justifiable from all perspectives: the arrival in Ukraine of America’s AES Corp., the first large foreign investor in the sector, to which the embassy without doubt has also made a contribution, immediately raised very serious problems owing to the unregulated, if not wild, nature of the Ukrainian energy market.
The US ambassador also said he thought it advisable to set up an international consortium to manage and load with oil the Odesa- Brody pipeline. “The challenge for Ukraine will be to fill the pipeline, assure the necessary financing and attract commitments from oil companies to provide long-term supply”, he said. In particular, the ambassador believes such an international consortium could attract loans for the pipeline loading at a lower interest rate than a state-run Ukrainian company would. According to Mr. Pascual, the consortium would only manage the pipeline, which would remain state property.
Addressing the conference, Oleksiy Kucherenko, first deputy chairman of the parliamentary fuel and energy committee, noted that today’s energy sector lacks the conditions necessary in order for market relations to work. According to him, what obstructs such relations is the low level of payments for energy resources, tremendous arrears, absence of accounting and monitoring instruments, and imperfect laws and bylaws related to the wholesale market of electrical power. In the people’s deputy’s opinion, it is impossible to build an effective and viable market in this country under these conditions, no matter which pattern will be chosen to reform the energy sector, particularly the wholesale electricity market. Mr. Kucherenko thinks efforts should now be concentrated on creating the conditions under which the market could work and temporarily put off the implementation of reforms, the more so that, in his opinion, “there is so far nothing to implement.” As Mr. Kucherenko said, we still lack a unitary, well thought out, and coordinated concept of energy sector reform. The experience of other countries shows that this concept can only be framed on the basis of thorough economic research and political consensus. The people’s deputy is convinced that “such a concept should take into account and balance the economic interests of various strata of the population,” while reform under the conditions of “a tough and uncompromising confrontation of different approaches and standpoints” has a negative effect on the sector as a whole and on “the vision of and support for reforms by society.” Mr. Kucherenko emphasized that those who debate on the directions of reform do not even raise the question of the likely consequences of the proposed transformations. “Nor,” he said, “is it known who will be responsible for drafting and implementing reforms in the energy sector.”
The arguments of the pivotal parliamentary committee’s deputy head were not quite consonant with the reasoning of Yuri Prodan, a direct participant in all the previous energy reforms, former manager of the Enerhorynok state enterprise, now chairman of the National Electrical Energy Regulatory Commission. He claimed that experience had confirmed “viability” of the wholesale energy market’s current model, called for legislative recognition of this model, and admitted that only from 2005 on will Ukraine be able to set up a market of bilateral (i.e., direct — Author) contracts between electricity producers and suppliers, which the have been insisting upon with reason.
While energy theoreticians are trying to reach a consensus on the directions of reform, very few consider that the technical re-equipment and reconstruction of power plants is a no less pressing problem for the Ukrainian energy sector, now on the verge of ruin. For it is not at all necessary to rely only on foreign experience and support: something can also be done on the basis of our own, still surviving, scientific research. For instance, the Ministry for Fuel and Energy recently sent a letter to the Ministry of Education and Science, saying that the ministry had considered proposals of the Research and Development Company and the Thermal Energy Department of the Kyiv Polytechnic National Technical University over the technology of low-reaction coal pulverization by means of jet-type anti-flow mills and thinks it necessary to support and include this with a state order in 2002. This is the intermediate and by far from practical result of many years of tribulations by Dr. Oleksandr Chechyk who has so far received only verbal assistance from the Ministry of Fuel and Energy. Even that has been thanks exclusively to the help of Serhiy Tulub, deputy secretary of the National Security and Defense Council. “But money, pennies actually, will be allocated only a year later because nobody is directly interested in this,” the author of this design, which allows minimizing the use of the expensive imported gas at thermal power plants to generate electricity, told The Day .
