Yahoo Finance Heat rates to rise following electricity increase — Interview with Ukrainian MP
Yaroslav Zheleznyak, First Deputy Chairman of the Committee on Finance, Taxation, and Customs Policy, discussed the increase in electricity tariffs in Ukraine, the imminent rise in heat prices, and the allocation of funds in an interview with Radio NV.
On June 1, electricity tariffs for households were raised. Perhaps it is my wrong impression or assumption, but somehow the tariff increase was very quiet. I have not heard any discussion in the parliament or with the public. Apparently, MPs now have the opportunity to travel around their constituencies and talk to their voters about what they think about the tariff increase, whether they are ready. Perhaps there was some kind of closed sociology that society approves of this tariff increase and can bear it. Am I wrong or am I right when I say that the tariff increase was not discussed with the public or with MPs?
I would probably argue a little bit. It seems to me that this was not new to the MPs, at least relevant committee was aware of the situation.
Frankly speaking, you don't need to be a big energy expert or a specialist in pricing to understand that this was inevitable. We can discuss why it was inevitable, but the outcome was obvious.
Let's face it, this is not a popular decision. I have little idea what this discussion with society looks like in terms of the fact that it is obviously a very unpopular decision. And it will never be approved if we do a general sociology.
Read also: Household electricity prices to rise by up to 80%
The fact that it was poorly communicated is a separate story, just like all the decisions that the government makes. The explanation could have been better. MPs raised this issue.
I don't know why other MPs are allowed to travel outside of Kyiv, it's strange. If they are not allowed to go abroad, the Office of the President could have continued with its reforms. But nevertheless, this was heard.
But the decision has been made. As you remember, at the beginning of the full-scale war, we even voted for a populist law on a moratorium on tariff increases.
Yes, it happened. And where did it go? Did Parliament break the law or what?
It didn't explicitly mention electricity, so in this case, in my personal opinion, no.
Little insight: on June 4, Parliament partially canceled moratorium. It was in the law. Of course, there is an amendment after an amendment after an amendment, and no one noticed this amendment. MPs should probably read the law. I saw this when I was re-reading what we voted for. This is a partial lifting of the moratorium on tariff increases, though not for household consumers, not for the population, but for industry, and this is included there.
Therefore, I think we should expect such “surprises” from the government not only in the electricity sector.
What else will they raise tariffs for?
At least for heating. I think this is the next thing.
When? Starting with the new heating season?
I don't know, I'm not the Minister of Energy, thanks God. Apart from the fact that I don't deal with corruption, I don't deal with these utilities either. We don't have a Minister of Regional Policy and Infrastructure.
Yaroslav, you are not the Minister of Energy or the Minister of Infrastructure. But all these costs, of course, fall on the shoulders of Ukrainians who stayed in Ukraine despite the war, despite everything. And obviously, it will be very difficult for them. Are there any solutions planned to make life easier for those who will find it difficult to pay double the price if the tariffs for heat are also increased? Obviously, this is a question for you, because the budget will be drawn up, and we will have to look for some money. Benefits, subsidies?
I know that subsidies will be recalculated according to the new tariff. Forgive me for a little bit of black humor: God willing, we will have something to pay for. For now, the problem we have is that there is no electricity supply at all. I'm sitting here right now, and my lights are off, just like most of the people in Kyiv.
As for everything else, no, it is not and will not be. We have a gap in military spending of 200 billion hryvnias, as of now. The money will not come from anywhere. God forbid we have to raise [tariffs] even more.
So, if you hear from some government officials or other political representatives that something is going to happen, they are just opening their mouths to make some populist statement. The numbers in the budget quickly give an answer to this question, and it is negative.
Now, as for where and what this money that Ukrainians will pay for electricity will go to. I heard that most of the money that Ukrainians will now pay for electricity will go to Energoatom. Energoatom said that this is all manipulation, nonsense and untrue. So where and what will this money go for, why did they raise these tariffs, to do what?
You won't believe it, but it will go to Energoatom. I also saw this statement from Energoatom. To avoid a long walk, let them take the accompanying documents to the resolution on raising tariffs, it is directly written there. The Cabinet of Ministers writes this directly, and I even have this document saved, so I can show it to clear up this issue.
I'm going to simplify things a little bit, because this is a complicated story. The entire energy sector in Ukraine is a chain of payments. Someone produces it, someone supplies it, someone pays for it, it's a very complicated story. And the first in this chain are those who have special tariff responsibilities. One of the links, the main one, is Energoatom. According to their financial results, they have a fairly large debt, and then this leads to debt throughout the system. Accordingly, no one can recover.
Read also: How Ukraine will cope with electricity shortages this summer — analysis
The answer is that the money will go to Energoatom, which is the beneficiary, but this is not only a problem for Energoatom.
As always, we have two complaints against Energoatom. The first is that they have stolen in the past and are still stealing now. There are several examples even in recent days: we have found quite strange procurements, similar to all the others for which NABU is chasing them, and some of them have even been served with suspicions.
And the second is absolutely idiotic statements about construction of nuclear power units. Okay, if you don't want to listen to Zheleznyak, who is an economist, not an energy expert, you recently had a great program (on Radio NV), I really liked it, with Director of the Center for Energy Studies Oleksandr Kharchenko. He's an expert in this field, and he says what others are saying: it's almost impossible to build units in five years, and 10-15 years is a lot of money and a very, very short-term prospect.
And as I understand it, no one guarantees these units safety from Russian strikes.
This is a separate problem, as, probably, with any generation. But in any case, even if we start this, it will take five years. Why do we spend money on this, why do we conduct procurement? By the way, we need the Parliament to pass a separate law for this. Many things are unclear.
That is why, frankly, there is a fairly direct claim to Energoatom in this matter, which they will never answer: how did they, such great managers, bring the situation to this point and what is going on with their procurement? Thank God, we no longer buy everything at ZNPP that we can and have never deliver it. It was quite a massive corruption there. But Energoatom is a corruption piece of Deputy Head of the Presidential Office Rostyslav Shurma and the company. This has become a new “Big Construction” from which the conditional political elite is collecting the biggest benefits.
But the decision has not been made, is this your assumption that they can build the units?
They even announced a procurement yesterday for construction. They are constantly talking about this, and they even submitted a draft law for consideration. Because in order to build the units, the law must first be adopted. The decision to build each unit is made by law.
In any case, there are many claims against Energoatom. I hope that suspicions announced by NABU regarding Energoatom are not the last. Separately, I would like to mention the palace of acting CEO of NNEGC Energoatom Petro Kotin, which was found by Skhemy journalists and which we have not yet seen in his declaration. This is the quintessence of everything.
Are you saying that most of the money will go to Energoatom and that Energoatom's statements are false when they say that it's all manipulation?
I say that Energoatom needs to read the accompanying note to the Cabinet of Ministers' resolution, where everything is clearly written about why they are in this system, in black and white.
Where should this money ideally go? I am reading the comments of our viewers now, and people are very concerned about this issue. At the same time, I see that some people agree that prices should have been raised a long time ago, because they were completely non-market. Although, if we equate them to the minimum wage in Ukraine, perhaps they were just fine. Where should this money be spent, and what discussion is there about it?
I'm not a big expert in tariff setting, but the obvious answer is to rebuild generation sector. This is logical, it was the same reasoning behind the tariff increase.
As for the tariffs, they are not, first of all, non-market-based. It is a false discussion to equate them with the minimum wage. It is the same as saying that we should have cheaper iPhones or cars. Unfortunately, it doesn't work that way. We do have lower tariffs.
And the second thing that consumers often don't notice is that their price and the price for businesses are very different. For business, it is already quite high, because it partially compensates for electricity consumers. And then you go to the store and buy bread, which is more expensive, you still paid for this tariff.
Read also: Electricity rates to rise by over 60%
I'm not suggesting that tariffs should remain at that level. I am not an expert in this matter, but as an economist, I understand that money cannot come out of thin air. We pay it either through taxes from the budget, as subsidies, or in the prices of products we buy from businesses, or directly through payments. And here I like the direct payment the most, because I will save money. I turn off the lights, try to buy some energy-saving appliances, etc. But communication is a bit of a failure in this regard.
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