Parliament adopts law on integrating Ukraine, EU electricity markets

Ukraine's Verkhovna Rada has adopted, at the final reading, a law on integrating the electricity markets of Ukraine and Europe (bill No. 12087-d).

The decision was made at a plenary session of parliament on Tuesday.

A total of 245 lawmakers voted in favor of the law authored by MPs Andriy Zhupanyn, Andriy Gerus, Maksym Khlapuk, and others.

"This law is about fully synchronizing the energy systems of Ukraine and Europe. When there is a surplus, we will be able to export freely, and conversely, when there is a deficit, we will be able to import. There are negative electricity prices in Europe. We have never had that. Therefore, with this law, we want to allow cheap electricity from Europe to enter Ukraine," commented Gerus, head of the Verkhovna Rada Committee on Energy and Utilities, ahead of the vote.

According to the bill's author, Deputy Committee Chairman Andriy Zhupanyn, the law will in no way affect electricity prices for households, and its goal is to gradually introduce uniform rules across the markets.

"This law will bring us EUR 500 million under the Ukraine Facility," Zhupanyn said.

Earlier, presenting bill No. 12087-d at a meeting of the parliamentary energy committee, Zhupanyn described it as visionary, aimed at integrating the electricity markets of Ukraine and the EU. According to him, at least 12–18 months will be required after adoption to achieve such integration. During the plenary session, he named January 1, 2028, or January 1, 2029, as possible dates for integration, "since a number of by-laws are still needed."

First and foremost, Zhupanyn said at the committee that the law abolishes price caps in the electricity market.

"In EU markets, price caps are largely technical in nature and do not serve as a mechanism for limiting prices as they do in Ukraine. Our EU partners' principled position was that price caps must be abolished, and abolished even before market integration. This will be a signal that Ukraine is ready to move toward European markets. Accordingly, price caps will be abolished as of May 1, 2027," Zhupanyn explained.

At the same time, he said that the national energy regulator NEURC "may, in the event of a declared energy emergency, return to discussing the idea of price caps." However, according to him, this would not follow the current procedure but would instead allow for rapid response to critical situations in the energy sector, for example, if part of generation capacity is destroyed and price growth cannot be contained.

Another provision introduced by the law is the retention of tenders for new generating capacity only until May 1, 2028.

"Our European partners view such tenders [where Ukrenergo compensates capital investments in generation facilities through the transmission tariff] as a hidden form of state support for business. Therefore, until May 1, 2027, Ukrenergo will be able to conduct such tenders as it does now; until May 1, 2028, there will be a transition period, with tenders only in energy-deficient regions. That's it," Zhupanyn said.

In addition, the law retains for 10 years the provision on netting the transmission tariff for energy storage facilities, whereby they pay it only on the difference between electricity injected into and withdrawn from the grid, for investors who will have energy storage facilities or technical conditions for them by May 1, 2027. Otherwise, the issue of paying the transmission tariff for energy storage will be left to NEURC's discretion.

Commenting on the draft law, Gerus said as a positive factor that the provisions will take effect over time, providing predictability for the market.

As reported, on July 22 the Verkhovna Rada adopted bill No. 12087-d at first reading, "On amendments to certain laws of Ukraine regarding the implementation of EU energy legislation on market integration, supply security, and competitiveness in the energy sector." According to the Ministry of Energy, the legislative proposal was developed based on nine EU energy legal acts and is intended to create the necessary legal framework for full integration of Ukraine's electricity market into the single European market on the principle of reciprocity.

The document foresees, in particular, integration of short-term (spot) electricity markets of Ukraine and the EU (market coupling) and balancing markets, which will increase market liquidity, simplify electricity trade with the EU, enable more efficient use of cross-border interconnection capacity, enhance power system flexibility, and provide access to EU reserves.

The bill also provides for additional mechanisms to protect consumer rights and strengthen their role in the market by increasing transparency of supply conditions and introducing tools for comparing supplier offers, as well as creating conditions for consumers to participate in other market segments, including ancillary services.

The ministry said that adoption of the document as a whole will make it possible to ensure synchronization of electricity markets in early 2027.