Olga Savchenko, Partner of Altelaw Law Firm analyzed several provisions of draft law No. 9381, which the Verkhovna Rada of Ukraine voted for in the second reading and in general on January 14th.
The Verkhovna Rada of Ukraine adopted the Law “On Amendments to Certain Laws of Ukraine in the Fields of Energy and Heat Supply to Improve Certain Provisions Related to the Conduct of Economic Activity and the Effect of Martial Law in Ukraine” (Draft Law No. 9381, hereinafter – the Law) on January 14th, 2025. It was sent to the President of Ukraine for signature on January 17th.
The law amends most legislative acts concerning electricity, heat, and water supply.
In particular, many provisions from the draft Laws of Ukraine No. 11392 and No. 11301-d, which were actively considered by the industry community in 2024, were implemented in the text of the draft law for the second reading.
The key changes implemented by the law can be divided into multiple parts.
First and foremost, it is worth mentioning that the law stipulates the following: technical specifications issued to the customer remain valid until the completion of the construction of the facility (or its last stage) for which they were issued, including in the event of a change of parties to these specifications (customer or issuing entity). The basic duration of the technical regulations is set at 3 years.
Meanwhile, after payment of the connection cost by the requirements of the Transmission System Code (hereinafter referred to as the TSC) and the Distribution System Code (hereinafter referred to as the DSC), development and approval of project documentation by the transmission system operator (hereinafter referred to as the TSO) or distribution system operator (hereinafter referred to as the DSO), and obtaining a permit to start work, the validity of the TSO is extended for the period of construction of the last stage, but in general may not exceed 6 years (i.e. 3 + 3 years).
If the project documentation is not approved and the connection fee has not been paid by the end of the initial three-year period, the connection agreement is terminated.
Customers who have already had technical specifications and transmission system connection agreements are given three months (from the date of entry into force of the law) to align them with the new requirements, as well as nine months to submit project documentation.
For RES producers who have already concluded valid connection agreements before the introduction of martial law and have project documentation approved by the TSO or DSO and submitted to the TSO or DSO as of the date of entry into force of the law, and at the same time have paid for connection under the terms of their agreement, the terms of reference will be automatically extended for an additional 3 years.
Moreover, the provisions of the law establish that the connection customer has the right to apply for TSOs directly in cases determined by the law and the CPC.
In such cases, the cost of connection is EUR 10,000 per 1 MW. Of this amount, 50% shall be paid within 30 days after receipt of the TSO’s technical specifications, and the remaining 50% within 12 months.
For customers of transmission services who have already had valid connection agreements, it is stated that such payment (EUR 10,000 per 1 MW) should be made no more than 9 months from the date of entry into force of the law, according to the scheme:
-50% within 30 days from the date of invoice (it must be issued no later than the 100th day after the law enters into force);
-the remaining 50% – within six months from the payment of the first half.
Furthermore, the draft law introduces a capacity reservation mechanism: if a customer plans to connect wind turbines of more than 20 MW, it must enter into a capacity reservation agreement with the TSO.
According to such an agreement, the customer reserves a technical decision on the connection (power supply) scheme for up to 2 years. During this period, the defined scheme can be adjusted at the initiative of the customer.
The reservation fee is EUR 5,000 per 1 MW, which is transferred to an escrow account within 20 calendar days from the date of the reservation agreement. If the customer subsequently applies for direct connection, the reservation amount is credited to the connection cost; if the application for connection is not submitted, the funds paid are transferred to the TSO’s account.
In addition, as part of the changes to the connection regulation, the law stipulates that the customer of non-standard connection services with a capacity of more than 1 MW has the right to independently design the equipment of power grids, construction, installation, commissioning of the linear part of the connection and/or capacity creation works, with the approval of design decisions by the DSO or TSO.
The last, but most exciting innovation in the framework of grid connection is the introduction of cable pooling.
According to the law, a potential electricity producer may connect different electrical installations operating on various energy sources at the same connection point, even if their capacity exceeds the permitted capacity. However, such a producer will only be able to supply power to the grid within the limits of the allowed capacity, while ensuring proper commercial accounting for each type of installation.
The provisions of the law have amended the legal regulation of the activities of active consumers, particularly the capacity limits. Thus, an active consumer will not be able to obtain a license for electricity generation with a capacity of 20 MW instead of 5 MW.
Additionally, consumers using cogeneration units (including gas turbine and gas piston stations) may also become active consumers according to the Law. Consequently, such consumers will be able to operate without obtaining licenses for the production and supply of electricity, subject to compliance with the provisions of the new law and sectoral legislation.
On top of that, along with the necessary simplifications to increase maneuverable generation, the law also regulated the provisions of the legislation on the operation of electricity storage facilities (hereinafter referred to as “EDFs”).
It stipulates that an installed energy storage facility at a renewable energy generation facility may be charged by its own generation and from the grid – and such activities will not be subject to licensing and may be carried out within the connected capacity, provided that correct commercial metering is ensured. However, it is crucial to emphasize that no market premium will be charged for the volumes of electricity supplied by energy storage facilities.
In addition, the law provides for the approval of a state-targeted economic program to encourage the development of small distributed generation from renewable energy sources.
The law also introduces the concept of “unauthorized electricity withdrawal” and liability for this violation.
Among other things, unauthorized electricity withdrawal will be considered to be electricity withdrawal in the absence of a concluded and valid electricity supply agreement or the case of unauthorized connection to the electricity networks of the TSO or DSO outside the consumer’s commercial metering device. In the event of an unauthorized connection, the consumer will be disconnected from the electricity supply and may be subject to significant fines.
Nevertheless, the changes introduced by the law stipulate that geographic information systems of electricity facilities will be created on the websites of DSOs and TSOs, which provides for the provision of a wide range of information that is usually required by potential producers to determine the location of the facility construction in the context of connection.
Similar requirements for the creation of systems are mandated by law for heat transportation companies, ensuring that all vital information for connection is provided. It is also important to note that certain market participants are required to open current accounts with a special mode of use.
Additionally, the law improves the interaction of utility companies with investors under ESCO contracts by introducing rules according to which a utility company may enter into a power purchase agreement with a third party that has installed a generating facility for a term similar to the lease of property or land for such a facility.
In this case, such a third party will not need to obtain a supply license to sell electricity, and the utility company, meanwhile, will have the opportunity to become an active consumer within the framework of the presence of a generating facility on its territory and enter into a self-production agreement.
Furthermore, the law amends the obligations of the supplier of last resort (the “SoLR”), according to which the term of mandatory electricity supply is 90 days, and the SoLR shall terminate supply after the expiration of the specified term or in case of supply by another electricity supplier.
The Law also clarifies the procedure for supply and the timeframe for notifying the consumer of its termination in case of debt or failure to comply with the terms of debt restructuring.
The Law clarifies the regulation of REMIT. In particular, it defines insider information as information that can significantly affect the market, information on available and unavailable capacities and the possibilities of their use, and information that can be used both to conclude transactions and to submit proposals for transactions. The Law also introduces the concepts of “unscheduled unavailability of electrical installations” and “disclosure of insider information”.
Apart from that, it will not be considered market misconduct to fail to disclose or to disclose insider information in violation of the requirements established for the disclosure of such information, or to conduct transactions within the EEA without registration as an AEO. At the same time, the Law clarifies the application of penalties and changes the amount of penalties for non-payment of fines for abuse (previously 1.5%, now double the NBU discount rate).
Also, all contracts with a place of performance (delivery) outside of Ukraine, including those for access to capacity/distribution of power to/from Ukraine, were excluded from the list of QEPs.
It is worth mentioning that the law stipulates that the Regulator does not disclose a certain category of information before the end of martial law and within one month after its end.
The Law amended the terms of auctions for the allocation of support quotas by increasing the amount of the annual support quota to 50%, which an entity is entitled to receive independently or together with others if they have a common ultimate beneficial owner.
Previously, this indicator reached 25%. However, the rule is currently fixed in such a way that its application will be possible only at the next auction, not the nearest one.
To repay debts on the market, the law stipulates that by the end of martial law (+1 year), the excess income received from the results of dispatch (operational and technological) management activities in 2023-2024 should be used with the following distribution
45% – to repay debts in the balancing market;
45% – to repay debts to the State Enterprise “Guaranteed Buyer”;
10% – to repay debts to universal service providers for further payment for electricity generated by generating facilities of private households using alternative sources.
Simultaneously, the law suspends enforcement actions and measures to enforce decisions (including seizure of property and funds) in enforcement proceedings in terms of recovery of the inflation index for the entire period of delay in the fulfillment of a monetary obligation, 3% per annum of the overdue amount of the monetary obligation, and penalties (fines, fines) for delay in fulfillment of financial obligations, the payment of which is provided for by the relevant agreements.
The rule will be applied to all participants in the electricity market, including to the relationship between the SE Guaranteed Buyer and RES producers.
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