The document outlines the framework for the launch of Ukraine's new electricity market on July 1, 2019, emphasizing the importance of competition among producers and consumers to rectify past pricing mistakes. It discusses key market segments, regulatory compliance, risks, and necessary actions to ensure a successful transition while addressing potential price shocks for consumers. The text identifies risks such as regulatory failures and highlights the necessity for strong regulatory mechanisms and consumer protections.

1. NEWELECTRICITY MARKETHOW CO NS UME RS W ILL PAY FO R THE PA S MISTA KES
MA DE AT THE STA RT O F THE NE W MA R KE T
• Generation • Consumers• Tariffs• Competition at the new market

2. New market segments: market of bilateral
agreements, day-ahead market, intraday
market, balancing market and ancillary
services market
Strengthened competition among
electricity producers
Tariffs only for monopolies
Market-based pricing
The ownership of the Transmission
System Operator unbundled and the
TSO Certification Procedure
completed in accordance with
European standards
Free electricity export/import, including
import into the IPS of Ukraine and the
Burshtyn TPP island that will be
competing with national electricity
producers
WHAT DOES THE LAUNCH OF THE NEW ELECRICITY MARKET
ON 1 JULY 2019 PROVIDE FOR?
2
Since 1 January 2019 the following has
been introduced:
A. Retail energy market (there is a possibility of choosing a supplier freely, but it relates only to
major consumers)
B. Unbundling of the energy companies (done in fact on formal grounds, the TSO owners
virtually control the suppliers)
Market volume of ₴250 bln, the reform
concerns 42 mln Ukrainians, 338000
enterprises and 1,446 mln sole
entrepreneurs. All market processes are
administered by almost 500 participants

3. 3
WHY THE COMPETITION AMONG THE ELECTRICITY PRODUCERS AND CONSUMERS IS A
PREREQUISITE FOR THE SUCCESSFUL REFORM AND THE CONSUMER PROTECTION
• The main purpose of the reform is to ensure
competition between Ukrainian electricity
producers and importers
• The lack of a large number of electricity
producers, high concentration and "manual"
pricing regime in the market have led to
serious price distortions, whereas the cost of
thermal generation is higher than in Europe
and the cost of nuclear generation is lower.
• The only way of increasing competition is to
have strong Regulator and AMCU (the
Antimonopoly Committee of Ukraine), and
special measures of increasing competition,
as well as purely market mechanisms - first
and foremost, the unimpeded electricity
import and the free access of the new
producers to the market.
• Existing technical possibilities electricity
import allow to provide up to 10% of
competition with domestic generation in the
IPS of Ukraine (excluding Russia) and up to
90% in the "Burshtyn TPP Island" as from 1
July 2019.
55,16
20,98
7,84
2,25 6,16
5,68
1,93
62,9
20,7
3,2
1,7
6,9
4,7
0,0
27,5
48,3
7,7
1,0
15,5
SE NNEGC Energoatom
DTEK
PJSC Ukrhydroenergo
PJSC Donbasenergo
CHPP
PJSC Centrenergo
Other
Participation in the base-load
demand cover, %
Participation in balancing, % Electricity generation by the
generating companies in 2018, %

4. Joint stock company
"Market operator" and
a separate "Guaranteed
Buyer" company have
not been established.
The inability to finance
the purchase of software
for the system of
balancing market,
ancillary services market
and the work of the
Settlements
Administrator, due to
the political position of
the Ministry of Energy
and Coal Industries
The procedure for
certification and
monitoring of
generation units
involved in the ancillary
services market has not
been approved.
СТАН ПІДГОТОВКИ ДО ЗАПУСКУ РИНКУ
The absence of the
approver manner of
conducting electronic
auction for bilateral
agreements that
enables the national
generation (more than
65% of the balance of
Ukraine) to participate
in the certain market
segment
4
The need to address the issue of
avoiding possible price shock for
households through the
appropriate PSO (provider of
special obligations)
mechanism or subsidies for
vulnerable consumers. At the same
time, the PSR mechanism is riskier
due to the possibility of
manipulating data on consumption
by the universal service provider
and DSOs
Measures envisaged by the law in force, but not enforced
1 2 3 4 5

5. 5
СТАН ПІДГОТОВКИ ДО ЗАПУСКУ РИНКУ
Measures envisaged by the law in force and
enforced, but requiring adjustments
It is necessary to ensure the possibility of
using the existing regulatory framework for
the allocation of the throughput capacity of
the interstate transmission lines for export-
import operations (NEURC No. 426 dated
28.03.2017) until the joint auctions are fully
prepared. Otherwise there will be no
competition between domestic producers
and importers
The absence of a guaranteed mechanism
to prevent the emergence of new debts.
The procedure for granting a protected
customer status is too complicated and
qualified users do not initiate this
procedure from their part. The mechanism
that provides for the payment of electricity
to such consumers is contrary to the law
(Cabinet of Ministers Resolution 1209
dated 28.12.2018).

6. 6
THE STATUS OF PREPARATION FOR THE LAUNCH OF THE MARKET
Measures not envisaged by the law in force and in the view of Ukrenergo are
necessary to be implemented
To oblige the major producers (or a
group of related producers) whose
market share exceeds 20% of the
market volume in the prior period to
sell 10-30% of their energy to an
independent state supplier (suppliers)
at the price of "operating expenses +
adjusted margin “. The margin is
determined by law (for example, 10%).
This experience is being successfully
used by France in particular
The absence of proper informational and
educational work, first of all, with market
participants, heads of enterprises,
consumers
NCSREPU should have the necessary
leverage and be obliged to set margin
prices for different market segments or
products - peak, non-standard, base
and hourly load, balancing services,
auxiliary services - in such a way as to
prevent the uncontrolled growth of for
consumer prices

7. SCENARIO 1: MARKET LAUNCH FROM 1 JULY. KEY RISKS AND CONSEQUENCES
7
• The failure of the Regulator and the Cabinet of Ministers to adopt all
laws as required or the adoption of the laws, which will require
additional time to fulfill their requirements
• The uncontrolled increase in electricity prices and the absence of a
system for protecting vulnerable consumers
• Low level of competition due to high concentration of electricity
producers
• Lack of opportunities for state-owned generating companies to
participate in the market of bilateral agreements
• Absence of a well-established system of representation of
commercial accounting data from the DSOs to the Commercial
Metering Administrator (CMA)
• Insufficient level of involvement of market participants in the testing
of software of the TSOs and the market operator
• The absence of organizational capacity for electricity import
• The absence of qualified support service providers.
K e y R i s k s :
M e c h a n i s m s f o r e l i m i n a t i n g r i s k s :
w h a t n e e d s t o b e d o n e b e f o r e
1 J u l y 2 0 1 9
• To leave the current procedure of conducting auctions on the distribution of the
capacity of interstate crossings in force (decision of the NEURC)
• To develop a mechanism for functioning of the auxiliary services market until the
qualification moment (decision of the NEURC)
• To introduce monetized subsidies for vulnerable consumers in the electricity
market or to implement the appropriate mechanism of PSR (the Government’s
decision)
• To approve the procedure for conducting electronic auctions under bilateral
agreements (the Government’s decision)
• To agree terms of settlements in the balancing market with the conditions for
obtaining the final correct data from distribution system operators, for example,
30 days after the tenders (decision of the NEURC)
• To introduce the price caps for different market segments or products - peak,
base, hourly and hourly load, balancing services, auxiliary services - in such a way
as to prevent uncontrolled growth of prices for consumers (decision of the
Verkhovna Rada of Ukraine)
• To provide proper informational and educational work, first of all, with market
participants (the Ministry of Energy and Coal Industries and the NEURC)
Заходи, які неможливо
виконати до 1 липня:
• Забезпечити участь державних генеруючих підприємств у ринку двосторонніх договорів.
• Розширення конкуренції серед внутрішніх виробників.
• Запровадити ринок допоміжних послуг з повноцінною акредитацією учасників ринку

8. SCENARIO 2: MARKET LAUNCH FROM 1 OCTOBER.KEY RISKS AND CONSEQUENCES
8
• The failure to adopt the
necessary changes to the Law of
Ukraine "On the Electricity
Market" in terms of ensuring
competition between large
electricity producers
• The absence of a well-
established system of
representation of commercial
accounting data from DSOs to
the Commercial Metering
Administrator (CMA).
• There will be no opportunity to
qualify some CHPP eligible to
participate in the auxiliary
services market that operate
exclusively during the heating
season.
K e y R i s k s :
M e c h a n i s m s f o r e l i m i n a t i n g r i s k s :
w h a t n e e d s t o b e d o n e b e f o r e
1 O c t o b e r 2 0 1 9
 To ensure active participation of all market participants in testing (decision of the NEURC)
 To leave the current procedure of conducting auctions on the distribution of the capacity of interstate
crossings in force until the full readiness of the necessary regulatory framework and technical means for the
introduction of joint auctions (decision of the NEURC)
• To introduce monetized subsidies for vulnerable consumers in the electricity market or to implement the
appropriate mechanism of PSR (the Government’s decision)
 To approve the procedure for conducting electronic auctions under bilateral agreements (the Government’s
decision) and to ensure the functioning of the auction platform (the decision of the Ministry of Energy and
Coal Industries and the NEURC). This procedure must ensure the ability to freely use all platforms that
technologically meet the required parameters. The market participants should have the right to free choice
of such a platform. It is necessary to remove from the procedure the Auction Committee having the right to
change the auction procedures at its own discretion, which provides possibilities for corruption abuses.
• To agree terms of settlements in the balancing market with the conditions for obtaining the final correct data
from distribution system operators, for example, 30 days after the tenders (decision of the NEURC)
• To introduce the price caps for different market segments or products - peak, base, hourly and hourly load,
balancing services, auxiliary services - in such a way as to prevent uncontrolled growth of prices for
consumers (decision of the NEURC)
• To implement mechanisms for guaranteeing the solvency of the protected customers - enterprises of the
coal Industries, water utilities and heat and power utilities (the Government’s decision)
 To approve typical consumption profiles for consumers in which there is no hourly electric energy
accounting (the decision of the Ministry of Energy and Coal Industries and the NEURC)
 To provide proper informational and educational work, first of all, with market participants (the decision of
the Ministry of Energy and Coal Industries and the NEURC).

9. SCENARIO 3: MARKET LAUNCH FROM 1 APRIL 2020. KEY RISKS AND CONSEQUENCES
K e y R i s k s :
M e c h a n i s m s f o r e l i m i n a t i n g r i s k s :
w h a t n e e d s t o b e d o n e b e f o r e
1 A p r i l 2 0 2 0
• It is necessary to carry out all the measures envisaged for the
market launch scenario from 1 October 2019 (decisions of the
Verkhovna Rada of Ukraine, NEURC, CMU, MECI)
• To ensure from 1 October 2019 the complete cessation of all
articles of the Law of Ukraine "On Electricity“ and prior to the
launch of a new market model, all arising rights and obligations
shall be borne by NCSREPU (decision of the Verkhovna Rada of
Ukraine)
• To reformat the coordination centre to include NEURC, the MECI,
the AMCU, the TSO and the market operator. The head of the
coordination center should be the head of the NEURC (decision of
the Verkhovna Rada of Ukraine)
• The failure to adopt the necessary changes
to the Law of Ukraine "On the Electricity
Market" in terms of ensuring competition
between large electricity producers
• Any changes to the existing market rules
must be approved by the Council of the
wholesale electricity market, the voting
rights of which belong to the largest market
participants.
9

10. Thank you!