Naftogaz renews contracts with gas suppliers to public, to switch to exchange trading from May 2022

KYIV. Oct 4 (Interfax-Ukraine) – NJSC Naftogaz Ukrainy from October 1 began to supply gas to companies for its subsequent sale to the population on a new contractual basis – the Balancing Group, having refused, in particular, from the contract with JE Energy of Dmytro Firtash, chairman of the board Yuriy Vitrenko said.

"The advantages of the new approach – the Balancing Group are a European instrument, market-based in itself; security of supply – enough gas for the population; impossibility of resale; the same conditions – fair competition, transparent supplier margins for antitrust regulation, for communities and politicians," he wrote on Facebook.

The Energy Suppliers Association confirmed to the Interfax-Ukraine agency that all its members supplying gas to the population have signed a contract with Naftogaz to purchase the resource.

Vitrenko explained that the Balancing Group includes gas suppliers to household consumers, while Naftogaz is responsible for taking gas for them to the Gas Transmission System Operator of Ukraine (GTSOU).

"Naftogaz has contracts under which we sell to suppliers the volumes that are taken by their household consumers," Vitrenko said.

He stressed that the price of gas for all companies within the Balancing Group was set at the price level set by Naftogaz for JE Energy by the previous management of Naftogaz headed by Andriy Kobolev – UAH 7.42. Vitrenko explained that for a number of companies this means a price reduction, but he called it fair.

Vitrenko especially noted the ban on the resale of gas to industrial consumers in new contracts, which, given the current market gas prices of about UAH 30, made it possible to make a profit without risk.

At the same time, he admitted that there are still a number of problems in this area: the risk of "dead souls," problems with charges (allocation) due to the lack of online meters, and the dishonesty of both consumers and regional gas companies.

"These problems are not new, and their solution should now become one of the priorities," Vitrenko said.

He noted that the new contracts are valid until May.

"According to the plan, then everyone will switch to exchange trading. I note that this requires centralized clearing and liquidity of annual contracts, without which such a transition will be just an imitation. Well, and we need to ensure full data integration and digitalization of processes in the triangle ‘bill-targeted assistance-consumer solvency’," he added.

Commenting on the financial stability of the new model, he explained that "the portfolio of own production and supplies specifically for the needs of the population (through suppliers) is relatively balanced," which allows signing contracts with an annual fixed price.

Among other initiatives on which Naftogaz works, Vitrenko singled out the introduction of monthly bills based on an annual profile, recalculated once a year; transition to one payment order; a single distribution tariff for consumers with subsequent redistribution between operators; incentive tariffs that reflect only the costs of the "efficient operator"; payment for the use of networks without increasing tariffs; allocation agreements; balancing neutrality principle.

"And most importantly – incentives and opportunities for increasing the level of energy efficiency," the head of Naftogaz noted.