“It was a simplistic decision...”

Prime Minister of Ukraine Arsenii Yatseniuk presented to the parliament his Cabinet’s action plan for 2015 on December 11, 2014. During the presentation of his program, the prime minister stressed the need to increase energy tariffs to market levels. “Raising tariffs to the market level is our only option,” he stressed.

According to the head of the government, the tariff increases will also involve compensations from the state budget, but only for those who are unable to pay the full cost of energy. “As for subsidies in the energy sector, we have to pay the real price, the market price for energy. Otherwise, Naftohaz’s deficit, already exceeding the budget deficit, will be there forever. The whole country should not work to support one company, Naftohaz of Ukraine, which is running a 110 billion hryvnias deficit this year, as opposed to the state budget deficit, which is amounting to just 68 billion hryvnias,” Yatseniuk explained.

“I have read through the whole Cabinet program, and it strikes me as a very simplistic proposition. Even if they succeed in all their measures, the energy system will still be out of balance. The program needs a comprehensive revision and reconfiguration based on market mechanisms,” Yermilov said.

He maintained that the Coalition Agreement included a more detailed, even if still incomplete, vision of effective energy reform. “I was involved in its preparation a little, and it had everything described more extensively and in more depth. By telling people that we will raise tariffs tomorrow and everything will be fine, the government is just totally deceiving and misleading them. I agree that our tariffs are unbalanced and residential consumers pay below-market prices. However, it is not the only problem facing the energy sector, and not the gravest one,” he added.

Let us recall that the Coalition Agreement provides for measures to reform the energy system of Ukraine, such as: reorganization of energy markets and implementation of European energy legislation in accordance with the Treaty Establishing the Energy Community, including a comprehensive restructuring of Naftohaz Ukrainy and certifying the gas transmission system operator in order to separate production, transportation, storage and supply of natural gas; gradual elimination of cross-subsidization and equalization of natural gas and electricity prices for different consumer categories; changing the tax burden; improving legislation and the regulatory environment to attract private investment in the energy sector; privatization of all coal mining enterprises according to a special law of Ukraine.