The core obstacle to pass this law in the lack of member of parliament voices in the session hall despite the fact that piece of legislation became a top priority in the reform agenda promoted by Ukraine’s partners in the West and international donors.
In particular, the issue of energy regulator has been raised by the new head of the European Union delegation to Ukraine as the critical prerequisite for the release of the second tranche of 600 million euros under the European Union macro-financial assistance to Ukraine, and the European Bank of Reconstruction and Development office in Ukraine, the Energy Community, other international organizations that work in Ukraine arguing that independent energy regulation agency is the core institution that will guarantee successful
implementation of various energy sectoral reforms (e.g., gas market and electricity market reforms) and create healthy regulatory environment in the sector.
On the other side of the scale there is a concentration of the interests of different Ukrainian political groups that are eager to keep control over NEURC as an instrument of pressure on political counterparts related to energy business and manipulation with energy
tariffs for population for gaining the political scores on this painful public issue. Inability to reach the compromise on the balance of different powers in a committee that will nominate the candidates for NEURC Board led to disappointing results of voting this summer, in July, when the draft was returned to the Fuel and Energy Committee to be prepared for another second reading.
In the beginning of September, the key political stakeholders have managed to find a deal on Nomination Committee composition (2 members of the Committee are to be proposed by the President, 2 – by the Parliament, 1 – by the Cabinet) that resulted in successful voting on the Fuel and Energy Committee meeting last week. Now the 2966-d draft law is ready for another round of voting but it is not necessary
transformed to required MPs votes on Rada scoreboard as the key question – who will influence and control the nomination of NEURC Board members (or commissioners)? – is still in the air.
The civil society and international actors (especially, the EU and Energy Community) have a clear answer on this question – nomination of
Ukrainian energy regulator is to be public, transparent and as much politically neutral as possible. Of course there are plenty of models worldwide but one crucial point foreseen in 2966-d as well is to be sustained, namely that selection process should run under strict rules established in the Law and the Selection Committee is to be comprised from politically neutral experts. With the purpose to guarantee this neutrality the draft law foresees a number of requirements for Nomination Committee members to avoid interference in
selection process by politicians, officials and energy companies that are the subject of regulation. More important, there is a condition in the draft law that the nomination procedure can be optionally monitored by representatives of the European Union, Energy Community Secretariat as well as other international organizations that can serve as the independent observers and raise an advisory voice at the Nomination Committee meetings in case of any attempts to breach the rules.
In our opinion, the detailed selection procedures and truly independent members of the Nomination Committee would be the best guarantee of fair and transparent process of NEURC Board members’ selection and, as a result, full-scale restart of the high-level NEURC
management. That’s also very important to conduct the first rotation of NEURC Board Members by “all-at-once” principle using the new mechanism after the law will be put into force and nominate new NEURC members independent from political interference. The first public selection of Commissioners under the new rules will become the critical checkpoint to monitor for international and
donor community as well as for civil society in terms of transparency and fairness of this public selection.
Adoption of 2966-d and its implementation into current legal framework will allow to conduct the deep reform of NEURC not only for selection procedures but also for real independence of this important regulatory agency from political interference that since its
creation led to inefficient, politically motivated regulation of Ukrainian energy sector and high-level corruption schemes. After the provisions of the energy regulator law will come into force the NEURC will be effectively shielded against the attempts of politicians and large energy business by the mechanism of legal prosecution of such actions, guarantees of financial independence (shift from direct funding from State Budget to regulatory fees from companies), adequate staff remuneration, as well as much stricter rules to
transparency of NEURC decisions. All that should bring the new quality of energy markets regulation in Ukraine that is favorable for everyone: state, energy companies and citizens.
Finally, new rules for independent regulator can be considered as the matter of trust between Ukrainian state and its own citizens and Ukraine and its international partners. Having really independent regulatory authority on energy market Ukraine will fulfill very important part of its international obligation – large and comprehensive energy reform that in line with the Ukraine obligations
under the Association Agreement and Energy Community. It will be impossible to finalize the first attempts to modernize Ukrainian energy sector without strong and trustworthiness agency that will balance interests of all stakeholders in
the manner favorable for sustainable development of energy markets in Ukraine. This becomes especially important in anticipation of the heating season when the state need to communicate with ordinary citizens hiked energy tariffs. Here is the simple recipe: decisions of the national regulator are to be trusted by ordinary people to eliminate the suspects that high tariffs for energy are not the hidden sources for energy monopolies revenues and really spent for energy infrastructure development.
One who is aimed at blocking this draft law in the parliament has to remember: absence of the reformed regulator makes the situation in energy sector and in the country as well much less sustainable. At stake is so much needed macro-financial assistance for Ukraine from international donors, large scale private investments into energy sector, and social stability in the country. So, let this draft law pass through the final line!
Dmytro Naumenko is a senior analyst of the Ukrainian Center for European Policy.
