In March 2021, market participants extracted with no authorization some 754 million cubic meters of gas from the system of the main gas pipelines. Of these, 89%, or 674 million cubic meters are the offtakes of Gas Distribution System Operators (region – and city gas distribution companies). The increase in debt to GTSOU and new accruals amount to UAH 4.8 billion.
In total, since the beginning of 2021, the offtakes of gas by regional gas companies for their own production and technological needs (PTN) have increased by 20 times. The total outstanding amount owed to GTSOU and accruals payable * – UAH 9.9 billion, of which UAH 3.5 billion are the overdue debts.
The largest debtors of the Company remain Donetskoblgaz (UAH 724 million) and Ternopilmiskgaz (UAH 435 million). Since the beginning of 2020, they have owed some UAH 1,159 million, whereas the new accruals due, to be repaid during May and June 2021, pursuant to the NKREKP Resolution No.235 of February 17, 2021 *, amount to another UAH 212 million. At present, the NKREKP has revoked the license for gas distribution from Donetskoblgaz. Moreover, the inspection of law enforcement agencies has discovered documents and equipment that indicate cases of abuse by Donetskoblgaz, which resulted in losses for the state.
The highest dynamics of negative imbalances growth in the 1st quarter of 2021 was demonstrated by Kyivoblgaz (UAH 306 million of debts and UAH 856 million of accruals), Lvivgaz (UAH 216 and 621 million), Kharkivgaz (UAH 124 and 437 million), Dnipropetrovskgaz (121 and 408 million UAH).
A sharp increase of withdrawals in the 1st quarter of 2021 highlighted the existing distortions in the natural gas market, namely the ineffectiveness of available mechanisms for preventing unauthorized gas offtakes and debt growth. This is the reason why state-owned Gas TSO of Ukraine suffers losses. An effective measure that can solve the problem is the introduction of distribution accounts: when the funds paid by the population in the gas tariff for PTN will be automatically allocated according to their target use. Also, in order to prevent market abuse, some stricter instruments are required to monitor the activities of Gas DSOs breaching the law, including the introduction of temporary administrations and license revocation.
“Over the past few months, the situation with unauthorized gas offtakes has spiraled out of control and has also demonstrated the need for legislative changes. We call upon all the branches of power to adopt and introduce the distribution accounts (draft law 3800). This will allow to stop the abuse in the natural gas market and motivate regional gas distribution companies to settle their imbalances by themselves in compliance with the legislation, instead of shifting the responsibilities and debts to Gas TSO of Ukraine,” said Sergiy Makogon, CEO of GTSOU. “As the situation with Donetskoblgaz has shown, there is a need for more stringent measures to control the activities of the GDSOs. First of all, this will allow to protect the consumers, as well as prevent the state losses. The next step should be the introduction of a mechanism of temporary administrations in regional gas distribution companies, which systematically violate the law, following the analogy of temporary administrations in the banking sector. Regional gas companies are local natural monopolies, providing socially important service of gas distribution, therefore the NKREKP should have a possibility to quickly intervene in case of critical situations, such as the one that currently has developed with Donetskoblgaz and Ternopilmiskgaz, in order to ensure uninterrupted gas supply to households”.
It is worth reminding that the problem of non-payment for imbalances, generated due to the unauthorized gas offtakes by Gas DSOs, has remained unresolved since 2015. This led to the accumulation of bad debts to the previous operator of the GTS (JSC Ukrtransgaz) in the amount exceeding UAH 44 billion.
Today there is another risk for increasing the unauthorized gas offtakes. In May, Resolution of the Cabinet of Ministers of Ukraine No. 867 dated 19.10.2018 on introduction of the public service obligations for natural gas market participants expires. In case of PSO cancellation without simultaneously fixing the sources of natural gas supply at the expected price, the natural gas supply to thermal power plants may be jeopardized. Particularly to those companies that currently have accumulated significant debts for delivered natural gas. This can result in gas supply interruptions or, in case GDSOs continue to supply gas to consumers without a valid supplier, may lead to unauthorized offtakes of gas by thermal energy producers. With the aim of preventing the offtakes accumulation within the regional gas companies grids, and accordingly to increase in negative imbalances of the GTS, it is essential to develop mechanisms in advance and plan where and how the heat generating companies will intake the gas for heat production. Otherwise, the critical situation with the offtakes can become stalemate.
* According to Resolution No. 235 dated 17.02.2021, adopted by the NKREKP upon instructions of the Government, the participants of the natural gas market were given a 90-day deferral of payments for generated negative imbalances for the period from February to March 2021 (previously this period was up to 20 days).