Naftogaz, Ukrgazvydobuvannia demand UAH 11 bln of compensation for PSO from govt

 National joint-stock company Naftogaz Ukrainy and public joint-stock company Ukrgazvydobuvannia have asked the Cabinet of Ministers of Ukraine to compensate the loss of UAH 111 billion for supply of gas under public service obligations (PSO), Naftogaz Ukrainy has said in a press release.

The right of the companies to demand the determination of the sources of financing and the procedure for compensation for PSO by the government is confirmed in court.

"The current scheme of entrusted PSO harms the state and consumers and the development of the market. The existence of this scheme during the last two years cost a considerable amount of money, which we estimate at more than UAH 110 billion. For these funds, the state could have conducted a large modernization of utilities, make the living conditions of citizens more comfortable, bills smaller and make the services of high quality," Naftogaz Head Andriy Kobolev said.

According to the calculations of Naftogaz, from October 1, 2015 through December 31, 2017, Naftogaz delivered 40.7 billion cubic meters of gas to its counterparties under the PSO. According to the law, the group has the right to receive compensation for its economically justified expenses reduced by the income received in the course of PSO performance, and taking into account the acceptable level of profit. In particular, the compensation of Ukrgazvydobuvannia is estimated at UAH 74.8 billion, the lost profit is UAH 12.1 billion, and the doubtful debt for the supplied gas on Naftogaz today is UAH 24.1 billion.

"At the same time, Naftogaz paid all taxes related to the sale of this gas to the national budget in full and in due time. For comparison, the level of payments for gas delivered during this period to counterparties not subject to PSO amounted to almost 100%," Naftogaz said.

Naftogaz reminded of the frauds already revealed by law enforcement agencies with gas supplied under PSO.

"The current system leads to multi-billion dollar losses of the state. It must be urgently abolished and replaced by transparent market conditions. Ukraine has sufficient volumes of gas and sufficient gas suppliers. We have repeatedly proposed that the government introduces a mechanism of market pricing and free competition for each consumer, and the revenues from this market are sent to increase production and energy modernization," Kobolev said.

He said that without the completion of the gas market reform, ambitious plans to increase domestic production, refuse to import gas, reduce gas prices for households and implement large-scale energy efficiency measures will be doomed to remain on paper.