Parliament adopted Law "On natural gas market"

On April 9, the Verkhovna Rada of Ukraine adopted in the second and final reading the Law of Ukraine "On natural gas market."

This is a key document that sets civilized European norms defined in the EU Third Energy Package on the Ukrainian natural gas market.

This Law was elaborated in close cooperation with the Energy Community that officially confirmed compliance of the submitted bill with the EU Third Energy Package.

The document stipulates a mechanism aimed at supporting vulnerable customers and quality control services, making the market transparent and clear to investors, stimulates competition. In addition, the Law clearly outlines the Government’s intervention limits.

From the Ukrainian side this law was developed by representatives of the Ministry of Energy and Coal Industry, National Commission for State Energy and Public Utilities Regulation, Naftogaz, PJSC Ukrtransgaz, representatives of regional gas pipelines, other participants of the gas market, representatives of NGO Dixi Group, as well as representatives of parliamentary factions in the Verkhovna Rada of Ukraine.

The Law "On natural gas market" fixes economic foundations of functioning of the gas market with consideration of main requirements of the EU legislation.

1. The Law separates the activity connected with managing the gas infrastructure from the activity of vertically integrated organizations connected with extraction and supply of natural gas.

The Law introduces adopted in EU mechanisms to prevent anticompetitive impact of gas distributors and suppliers on the work of GTS operators, gas storage facilities, gas distribution systems and potential service of LNG terminal.

The Law does not foresee the privatization of a state-owned gas transportation system operator.

2. The Law distincts clearly outlines the functions of the state and independency of a regulator.

On the one hand, the law is called to secure state regulation at markets of transporting services, distribution and preserving natural gas and service of LNG terminal, on the other, to ensure development of free fair competition for all players of the natural gas market.

It is crucial that the bill stipulates reduction of involvement of the state into activity of the wholesale natural gas market. Hence, activity of a wholesale provider should not be subjected to licensing.

At this, involvement of the Government should only be stipulated by public interest. For instance, by the interest to secure a smooth flow of natural gas to consumers of Ukraine, diversification of sources of such flow, and so on, and is carried out on a non-discrimination and transparent principle.

3. The Law stipulates free price-forming.

The Law stipulates effect of a free price-forming principle at the wholesale and retail natural gas markets (except for when the Cabinet of Ministers of Ukraine has used the right to assume special obligations on natural gas market actors) and the freedom to select natural gas supply sources.

The Law creates preconditions for a new model of natural gas market, based on the principles of free competition and focused on high level of protection of the rights and interests of consumers.

The aforesaid mechanisms shall facilitate raising competitiveness due to new players on the market, what, in turn, shall entail reduction of prices for energy carriers.

After signing by the President the Law enters into force from the date of publication, but is applied from 1 October 2015 (except for certain provisions that will be applied later). From 1 October 2015 the Law of Ukraine "On the principles of functioning of the natural gas market" becomes invalid.