NEURC made three decisions to stabilize electricity market
The National Energy and Utilities Regulation Commission (NEURC) has made the following decisions to stabilize the situation on the electricity market, namely: reduced down to 30 % of the mandatory purchase of day-ahead electricity by electricity distribution network operators to cover technical losses, equalized the price caps on the balancing market to market level day-ahead electricity price caps, canceled block nominations for day-ahead electricity to eliminate formality of electricity nominations by power generating companies.
The corresponding decision was made at the NEURC’s regular weekly meeting on August 6, 2021.
"We aim to make decisions that will further liberalize the market. Firstly, we want to provide distribution and transmission system operators with the opportunity to buy in all market segments, reducing the mandatory purchase of day-ahead electricity down to 30%. Secondly, we are reducing price caps in the balancing market to the level of price caps set for day-ahead an intraday electricity markets. That's why I urge buyers to buy electricity at prices they need, and not at the top price caps [so as not to be urged into the balancing market, where the price is higher - Ed.].
"Demand should not form the maximum price, and there should not be a market favorable exclusively to power generating entities. Thirdly, the main issue is the elimination of block nominations for day-ahead electricity," said a NEURC’s Commissioner Dmytro Kovalenko.
In particular, the NEURC reduced the lower limit for the purchase of electricity by distribution network operators at day-ahead electricity market to compensate for technological losses from 95% to 30% to ensure the break-even point of operations by electricity generators and network distribution operators.
Also, the NEURC decided to set the upper price caps for the balancing market at the level of the price caps set for day-ahead and intraday electricity markets: 2000 UAH/MWh for minimum load hours and 4000 UAH/MWh for maximum load hours [to date, price caps for the balancing market were at the level of 4600 UAH/MWh and 2300 UAH/MWh, respectively - Ed.].
“We want to encourage suppliers to be active players in the day-ahead market, so, we will reduce price caps in the balancing market. We set a single level of price caps in all market segments," NEURC said.
The NEURC’s Chairman Valerii Tarasiuk noted that, as of current, it is the demand side that distorts day-ahead intraday electricity markets, and therefore the reduction of the price cap for the balancing market will allow to set more market prices for bids in the spot segments.
Commenting on the current situation with day-ahead electricity, Valerii Tarasiuk said that today high market prices were formed due to the fact that electricity buyers (suppliers and distribution network operators) bade for purchase of electricity at price caps (2000 UAH/MWh for nighttime hourly schedules and 4000 UAH/MWh for daytime hourly schedules).
"Today the situation is such that it is the demand side that distorts the market. The demand side is our suppliers and distribution network operators,” he said, adding that it was the demand side that bade for day-ahead electricity at 4000 UAH/MWh.