Naftogaz may lose UAH 200 bln over four years from extension of public service obligations to sell gas to households

 NJSC Naftogaz Ukrainy and consequently the state may lose UAH 200 million because of the extension of public service obligations (PSO) to sell natural gas to households and thermal utilities at a regulated price until April 2021.

"A new resolution draft is in the pipeline - they will decide whether extend or not [the PSO]. Speaking the language of numbers, it means that we will lose another UAH 200 billion in the next four years - 2018, 2019, 2020, and 2021," Naftogaz CEO Andriy Kobolev said on Channel 5 on Tuesday evening.

Kobolev said it is necessary to drop the practice of PSOs under which gas distribution companies buy natural gas for resale at a reduce price if there is no proper audit how it is sold.

"Is there any point in supporting that model? If the period of SPOs is extended, we'll tentatively have UAH 50 billion [in Naftogaz losses] per year. It seems to me it's wrong to support the ineffective system at such expense. The money could be spent on energy efficiency, on an improvement in services, subsidies and other social benefits," he explained.

As was earlier reported, Naftogaz and public joint-stock company Ukrgazvydobuvannia earlier asked Ukraine's Cabinet of Ministers for reimbursement worth UAH 111 billion lost because of the supply of gas under PSOs.

The right of the companies to demand that the government find sources of financing and decide on PSO refunds procedures has been confirmed in court.

"The current model of entrusted PSO harms the state and consumers and the development of the market. The existence of this scheme in the past two years cost a considerable amount of money, which we estimate at over UAH 110 billion. For these funds, the state could have conducted a large modernization of utilities, made the living conditions of citizens more comfortable, bills smaller and services better," Kobolev said.