On December 12 newly elected MPs will meet in the parliament to officially open the new parliamentary season. Experts point out that despite a different way of “election” the main composition has not changed dramatically, that is why we can expect the new MPs to continue lobbying interests of the main business groups. One of the most spectacular battles will be the one for the energy sector of the country. What top-initiatives should we expect from the MPs of the new convocation?
According to the director of energy programs of the Nomos Center Mykhailo Honchar the newly elected parliament will not show excessive initiative. If there will be legislative initiatives, they will be mostly suggested by the president and the parliament will be used as a platform for legitimizing the necessary initiatives.
Dmytro Marunych, director of the Institute for Energy Research, adds in his comment for The Day: “Deputies will continue the course outlined by the previous parliament because the main parliamentary players have not changed and all the groups of influence, that were present there before, remain in it now.” Just like Honchar, Marunych believes that there will be very little legislative work of the deputies in the energy sector this time. However, the experts note that we should look not at the number of the adopted laws, but at their essence.
NEW LAWS – OLD SYSTEM
Marunych expects that first legislative achievements might be the adoption on second reading the bill “On the Basis of the Functioning of the Electrical Power Market.” “This law basically declares energy market reform following the model of European market, but, in fact, its present edition retains the old system of cross-subsidization in the sector. Thus, those principles that work at the present moment will remain in this law,” explained the expert. He notes that the main danger of this bill is that it increases the tax burden on large public companies like “Energoatom” and, at the same time, provides certain advantages to vertically integrated holdings.
Vitalii Kovach, director of the Association of Renewable Energy “Alternatyva,” told The Day that if this document is adopted in the current form, on the one hand, large monopolists will disappear from the market of energy power but, on the other hand, a situation may arise when large consumers will be tied to specific manufacturers. “Today, there is a monopolist, but because it represents the state it does not twist arms of consumers. When the market of energy power will be transferred to private rails, private energy distribution company will not bother to please everyone. Nobody will be paying 20 kopeks per kilowatt of electricity. The price will at least double,” predicted Kovach.
GAS MARKET. RESET
All the necessary legal documents have been already approved to run the natural gas market. According to Marunych, at this point the only issue that is still open is providing subsidies from the budget for utility companies that consume gas at one price and supply their customers with services at a rate calculated from a lower price. Perhaps, the issue of providing subsidies will be solved after the government will put up for sale the remains of its property in the fuel and energy complex (FEC). “Privatization will continue. Clearly, this will not be Naftohaz of Ukraine. It is unlikely that privatization will take place in its pure form in this case. But there will certainly be the privatization of the FEC. We are already going along this road,” said Marunych.
In order to sell a part of the FEC objects, first the parliament (after the Cabinet of Ministers) has to approve the state program for privatization and the list of the items for sale. Marunych leaves open the possibility that the debate on the introduction of duties on imports of petroleum products will be transferred to the parliament. To impose such duties, changes have to be made to the Customs Code.
“2012 was the year of privatization of coal generation and distribution assets and 2013 will be the year of finalizing these processes. Then this process will enter the oil and gas sector, which was in the shade to some extent this year, even though there was suggested a reform for this sector. This will be the last battle for energy power. Grab what is left unattended to,” Honchar voiced his vision of oil and gas issues in the parliament of the new convocation. He says that first of all, most likely, the legislative changes needed for introducing reforms (i.e. reorganization) of Naftohaz of Ukraine will be pushed in the parliament. “Thus, there will take place privatization of mining assets (Ukrhazvydobuvannia, Chornomornaftohaz). Obviously, there will be battles, discussions, and debates in the parliament for this too. Each of the ‘cotenders’ will attempt to legitimize to the maximum the obtained control or ownership of such assets,” explained director of the Energy Programs of Nomos Center.
“ENERGY” OF DISCORD
We should also expect the battle in the new parliament of business groups for the development of traditional and alternative energy sources. According to Marunych, interests of these business groups have not yet been crossed. However, the group of those working with the alternative sources of energy already step on the heels of the traditional gas companies, according to experts. The most recent evidence of this is the fact that the parliament has adopted and the head of the state has signed the amendment to the Law “On Energy,” which introduces green tariff for the producers of electricity from biogas. Of course, it costs only a little money from the budget, but still it is a pretty good start. This struggle will only increase. Because on the one hand there is alternative energy sector with attractive green tariff and, on the other hand, there is oil and gas industry, which require increasing subsidies. However, at the present moment Ukrainian energy system is more focused on the traditional sources of energy. “This will be a struggle not between traditional and non-traditional energy sources, but between the past and the future,” noted Kovach.
According to the experts that commented on the issue for The Day, the struggle of the lobbyists of traditional and non-traditional gas will begin when the alternative energy will receive big investments. Currently, the share of the renewable energy barely reaches 0.5 percent of the total energy produced in the country. However, very soon this situation may change. Rainer Hinrichs-Rahlwes, member of the Board of Directors of the German Federation of Renewable Energy, President of the European Renewable Energies Federation (EREF) says that the Ukrainian market of renewable energy is extremely attractive for European companies. This appeal is largely caused by the favorable conditions for the development, for example, by the presence of the green tariff. Hinrichs-Rahlwes sums up that if the state policy on the issue of alternative forms of energy will be stable, Ukrainian energy industry can expect significant investments in this area.
According to the experts, the efforts of the parliamentary lobbyists of business groups will be directed for finding solutions for the discussed issues. The further development of the country’s FEC largely depends on who will be the winner in this. Marunych believes that there will be the redistribution of spheres of influences in the market. He suggests that first of all they will try to cut the rights of the Kolomoisky group that has interest in oil sector. “I think that they will be subjected to the most intense pressure,” said Marunych. “At the present moment we see a great interest of the president’s surrounding to this group.” However, according to the expert, the DETEK group will retain its influence and interests in coal industry and electrical energy industry because at the moment they do not have a stronger opponent in the market. “Historically, other business groups did not enter this area,” explained Marunych. And the influence of the Firtash group will depend on the composition of powers in the new Cabinet of Ministers. Marunych is convinced that if Valerii Khoroshkovsky retains his positions in the government, the group will increase its influence.
