Energy ministry proposes extending PSO to sell gas to households, heating supply companies until April 2021 pegging to price in non-heating season

The Energy and Coal Industry Ministry has proposed extending public service obligations (PSO) to sell natural gas to households, heating supply companies and religious organizations until April 2021.

According to the draft government resolution drawn up by the ministry and posted on its website, the price of gas is calculated using a formula pegged to imported gas at the German gas hub NCG bought in the period from April 1 through September 30 preceding the heating season.

If earlier it was clearly said that public joint-stock company Ukrgazvydobuvannia and public joint-stock company Chornomornaftogaz sell natural gas to form the resource required for households directly to national joint-stock company Naftogaz Ukrainy, which is eventually sold to gas supplying companies, the draft document proposed by the ministry now says that state-owned gas producing companies are obliged to do so.

Naftogaz Ukrainy would be obliged to supply gas for the needs of heat generating companies.

As reported, in H2 2017, the ministry used a new formula to validate the unchanged price of natural gas for households until April 1, 2018. According to the energy ministry's estimates, the gas price for the period from October 1, 2017 to April 1, 2018 will be UAH 5,223.06 without VAT, which is only 5.6% higher than the current price, since the calculated price does not exceed 10% of the current price, there are no grounds for its revision for the 2017-2018 heating season

According to the current formula, the gas price for import parity for the period from October 1, 2017 to April 1, 2018 is calculated for 12 calendar months before the month of the calculation (June 2016 - May 2017), and the Energy Ministry suggests changing this period to April 2016 - October 2016 and April 2017 - July 2017, to avoid price changes.

Government resolution No. 187 foresees the adjustment of the gas price sold under PSO depending on the change of the price at the European hub.

Naftogaz Ukrainy's calculations show that according to the formula presented in the resolution, the price of gas from October 2017 should grow by around 19%.

Prime Minister of Ukraine Volodymyr Groysman spoke against the increase in gas prices for households. According to him, the Cabinet of Ministers is holding a discussion with the International Monetary Fund (IMF), proving that there is no reason to raise the price of natural gas for households.