ENERGO: DTEK and regulator blame one other as power prices on the day-ahead market plummet

The electricity price on the day-ahead segment of the wholesale market decreased to UAH1,035 per MWh on July 2 and reached a new low of UAH426/MWh on July 4, down from the June average of UAH1,425/MWh, according to data from the market operator. The power sector regulator (the NERC), reported that the collapse was caused by a 40% decline of power purchases in the day-ahead segment on July 2. This was caused by a 74% decline in demand from D.Trading (a subsidiary of DTEK Group) which increased power purchases in another market segment, the bilateral contract market, from its related parties. The significant market power of the mentioned trader “threatens the market’s efficient, competitive and stable operation,” the NERC reported on July 2. It also promised to initiate legal changes to oblige selling electricity under the bilateral contracts exclusively on electronic auctions.

The regulator initiated an extraordinary meeting on July 4 to address the issues, where he decided to set a price floor on the day-ahead market at UAH734.9/MWh till July 8, limit the sale of electricity to related parties on bilateral contracts to 50% of monthly volumes, and force power transmission and distribution companies to purchase on the day-ahead market all the electricity for their own needs. It also initiated a study of possible violations of market rules on July 2-4.

In its turn, D.Trading called the regulator’s decisions “inappropriate”, as they were adopted without professional discussion and contradict European rules, liga.net reported on July 5. The company accused the regulator of creating an environment that allows for manipulations on the market and asked top Ukrainian officials to pay attention to the regulator’s activities on the electricity market over the last 1.5 years.

“All the disputes show that Ukraine’s new model of the electricity market, after functioning for two years, remains inefficient and unbalanced. This does not enable forecasting wholesale electricity prices and the profitability of power generation companies like DTEK Energy (DTEKUA) of Centrenergo (CEEN UK). Meanwhile, it adds risks to the functioning of such large market players as DTEK, which is blamed from time to time, not without reason, for either jumps or collapses of market prices. It might take some more years for the market to find an equilibrium, bringing short-term risks to top market players. This prevents the prices of DTEKUA bonds from recovering from the level of 65% of par,” an analyst at the Kyiv-based Concorde Capital brokerage said in a research note.