12:59 03.07.2021

NEURC recommends bilateral contracts for sale-purchase of electricity do not focus on DAM

3 min read
NEURC recommends bilateral contracts for sale-purchase of electricity do not focus on DAM

The National Energy and Utilities Regulatory Commission (NEURC) advised market participants, both consumers and generators of electricity, not to focus on the day-ahead market (DAM) as a price indicator in bilateral agreements, and use a fixed price at which the resource is bought and sold.

According to the regulator's statement on the website late on Friday evening, it provided such recommendations in response to a sharp, by almost a third, decrease in the price of day-ahead market in the first days of July, which was explained by the withdrawal of demand from DAM to the bilateral contracts market.

"The volume of day-ahead market on July 2 due to a decrease in demand decreased by 32,293 MWh or 40% [to 47,940 MWh from 80,200 MWh as of July 1]. The weighted average price of DAM decreased by 29%, to UAH 1,035 per MWh [price as of July 1 was UAH 1,451 per MWh]. At the same time, there is a significant increase in the volume of bilateral contracts market," the commission said in a statement.

In turn, the regulator explained the sharp decrease in demand by a decrease in the purchase of a resource on the DAM by individual market participants, indicating that this is primarily D.Trading LLC (DTEK group), which, according to the regulator, reduced the purchase on DAM by 74%, while increasing the volume of its purchases on the bilateral contracts market "from related parties."

"Such excessive power of individual players in the electricity market threatens its efficient, competitive and stable functioning," the regulator said, adding that in the near future the relevant information will be transferred to the Antimonopoly Committee for investigation.

For its part, the commission intends to contribute in every possible way to the introduction of amendments to the legislation, providing for the obligation of all market participants, regardless of their form of ownership, to buy and sell electricity under bilateral contracts exclusively at electronic auctions.

"This, among other things, minimizes the possibility of non-transparent sale of electricity to its own traders or related parties," the regulator said.

According to the Market Operator, the weighted average price of electricity for DAM in the United Energy Systems of Ukraine on July 3 decreased to UAH 665.42 per MWh, which is almost 36% lower than the price of July 2 and 54% lower than the price as of July 1. Compared to July 2, the volume of DAM decreased by almost 5,000 MWh, to 43,200 MWh.

At the same time, D.Trading urged NEURC to put things in order in the new electricity market in accordance with European standards of work, urgently remove manipulations and speculations that distort, in its opinion, the energy reform of Ukraine.

"Due to the new wave of speculation on the DAM and the fall in prices due to speculative traders D.Trading insists on the need for the regulator to take decisive action to combat manipulation in the market and ensure the stability of the energy system," the company said on the website on Friday.

At the same time, the company said they consider the inactivity of NEURC in solving its problems and creating conditions for manipulations to be fatal for the market.

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