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Reform not for the sake of it but in consumers’ interests

Reform not for the sake of it but in consumers’ interests

Only the practical application of certain documents whose drafts are currently being worked out by the Project Office could unequivocally answer how efficient certain legal acts, rules, and codes are. This would lead to harmonization of documents, take into account the views of experts and consultants, coordination of efforts of state agencies and precisely the regulator, while the Office assesses step-by-step whether this is the right direction and determines further steps…

The adviser to the Deputy Prime Minister, Volodymyr Yevdokimov, sat down with TerminaL to tell us about the work of the Energy Market Reform Project Office.

A hundred days have passed since you took up office as head of the Project Office for the implementation of the Law of Ukraine on the Electricity Market. What are your first results? What have you already accomplished?

We have solved all the organizational issues as regards the launch of the Project Office. The very launch was a real challenge as some of the participants did not support the idea of the Office being set up. Anyway, the decision has been taken, supported by the coordination center responsible for the introduction of the new electricity market. So we’ve started our work.

Together with the [National Energy and Utilities Regulation] Commission (NEURC), we’ve worked out a detailed integrated schedule for the Introduction of the new market in line with Law «On the Electricity Market.» Conditions were created for transparent debates on drafts of secondary legal acts. The PsycheaExpertus multiservice system gave the opportunity to launch an open, professional discussion of regulatory acts.

We have selected consultants in the relevant areas including wholesale and retail markets, finance, and introduction of software of the market operator [SE Energorynok] and transmission system operator [SE NEC Ukrenergo]. Of five consultants we planned to attract, we’ve selected four, in the areas I’ve mentioned. The selection procedure for the fifth consultant continues. The already selected consultants come from the Czech Republic and Slovakia. They are experts in the energy sector who directly participated in market reform in European countries.

We have come up with a philosophy of discussions and decision-making on draft regulatory acts of secondary-level legislation and other measures envisaged by the law on the electricity market. Due to the large number of regulations against shortage of time, we have gone along the path of identifying conceptual issues which we will be returning to once we’ve worked out test assessments of the new electricity market. Further improvements will be made to the rules and codes – all other regulatory acts to be implemented in the process of transition to the new market model. The process is expected to start on July 1, 2019.

Basic regulations, namely the rules and codes the Commission has approved are not perfect as of today, but we will actually feel their quality only once we move on to test assessment, that is, closer to the end of this year. Once we start doing that test assessment, we will see problems that may arise in the process, and accordingly, we will see where to move further and what changes are required to the regulations.

As an example, our Polish neighbors drastically changed the rules of the market three times within a year. Therefore, those rules of ours that have been approved do make sense, and it is necessary that market participants already start doing their work and making decisions in line with these rules.

What do you expect from foreign consultants attracted?

I now expect them to start working more actively. The thing is that since the start of their work (February 1, 2018) they really struggled to understand our realities; some consultants are in command of our language, while some need an interpreter. Now I am expecting them to work more productively on the implementation of their plan and development of relevant proposals for secondary legislation drafts.

What stands in the way of the introduction of the new energy market model?

Time is our major enemy. We have a clear action plan, we know where we are moving, we are aware of all measures needed to be taken, and we also realize that there is very little time to implement them. We seek to find the best way to take all these measures and make corresponding decisions. If some measures can be implemented in parallel lines, that’s how we’ll be doing it; while we are still trying to prioritize measures that can be taken only after relevant decisions have been taken and implemented. This is done in order to start our work in all areas of the introduction of the new electricity market law. As an example, the Commission [NEURC] has already approved the regulations (rules, codes) which were subject of debate on the part of the market participants, who had been asking for more time for finalization. At the same time, I believe that this was the right decision as it will allow the launch of other processes and measures to ensure effective reform of the industry.

Another obstacle is the rotation of Commission members, which in turn may result in a no-quorum situation ahead of an open meeting. Also, as new people will be coming there, they will need some time to see what’s happening and review the already worked-out projects.

What are the next steps toward the implementation of the law on the electricity market?

Now we have passed the first stage of development and approval of secondary legislation regulations. Next, we will have to work on other stages. The first of these is the purchase and introduction by the market operator and the transmission system operator of software and hardware required to start the necessary test assessment of the new model of the electricity market, meeting the deadlines set by the law.

The second one is infrastructural change. It’s about the unbundling of energy supply companies, corporatization of SE NEC Ukrenergo, setting up an independent transmission system operator, restructuring SE Energorynok and establishing on its base a guaranteed green energy buyer and market operator.

These are the infrastructural changes that both the government and market participants have plenty of work to be done on. The efforts will take about two to three months.

How much money has been planned for software purchases and how will the purchase take place?

Most of the budget will be spent on the transmission system operator’s software. The funding will come from the World Bank.

The software for SE Energorynok is planned to be purchased at the company’s expense. Outsourcing services are planned to be used for the purchase of finished software products already applied in European countries. The coordination center decided not to develop a software product but to buy an already working one, adapting it for the specifics of our energy industry.

The Project Office was created to coordinate joint efforts of the NEURC, the Ministry of Energy and Coal, and other specialized bodies responsible for the implementation of the law on the electricity market. How efficient are those joint efforts, in your opinion?

The main objective of creating the Coordination Center is to ensure coordination of efforts by all central executive agencies and the NEURC. The Project Office drafts the Coordination Center’s proposals for the documents required by the integrated schedule of implementation of the electricity market law provisions. I must admit that not all deadlines are being met, but the situation is not critical. I think that in two or three months we will catch up on the schedule.

Are expert opinions being duly taken into account? Are the drafts worked out being harmonized with each other?

We have foreign consultants whose main task is to process documents, harmonize them, and put forward proposals. Not all the proposals provided by consultants after they had been worked out with market participants during one month were taken by the Commission into account.

At the same time, the Project Office together with the consultants identified and discussed with market players a list of conceptual questions to the regulations approved by the NEURC, which should be further worked out together with the Commission as appropriate solutions must be found thereon. The list was voiced at the Coordination Center meeting on March 16 and published on its website. The list was supported by the meeting participants and now it will be formally forwarded to the Commission. The important issues identified relate to rules and codes, as well as other measures envisaged by the integrated schedule.

First of all, it’s about the procedure for providing support to vulnerable groups of the population, organizing the work of universal service providers who will supply electricity to households, the work of «last hope» suppliers, and other key issues of the new model of the Ukrainian electricity market, on which we will be working with the Commission. Hopefully, we will find the best solutions and continue to develop specific proposals to the regulations.

Since the Soviet times, a system has been developed of experts working in groups. As head of the project, what have you changed in this regard?

I’d like to thank STC Psychea for their great help. The PsycheaExpertus analytical system they’ve provided has turned out to be one of the active elements and tools of transparency and openness. Organizing our work, the process of review and provision of proposals via the Psychea system allowed market participants to draft their proposals quickly. Amid shortage of time, this is something extremely important. Besides, we only have a few experts: just a couple of them sift through all paperwork, submitting proposals. The system allowed these experts to do much of their work remotely, thus saving time. Therefore, as Project Office manager, I believe that PsycheaExpertus is an interesting and effective system of expert interaction, and I hope that we will be strengthening it, attracting more experts to the process. In general, our experience of employing the Psychea system has been very successful, and it is necessary to distribute it further. Moreover, I will ask STC Psychea to be involved in the process of our work on the next package of documents, so that we could apply it to work out a new list of secondary legislation with experts.

How does PsycheaExpertus influence the speed and quality of experts’ work on documents?

I have to admit that the system is new to experts and somewhat constrains them psychologically, but at the same time it gives them an opportunity to see the opinions of various participants. This is a very important aspect as there is an ongoing exchange of opinions, analytical data, reports, which allows them to prepare proposals more efficiently and in a quality manner without spending too much time on them. Efficiency and quality make sense.

Besides, we can see which experts give their proposals, who is directly involved in the discussion, so we can work directly with the experts who are actively involved in the discussion via the said system.

. . .

Read the complete version of the interview in the magazine TerminaL.

Tel.:(+38 044) 263-68-39, email: terminal.psychea@gmail.com



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