On 10 March 2016 the National Commission on State Regulation of the Energy and Public Utilities Sector (the “Regulator”) adopted important amendments to the Gas Transmission Code of Ukraine (the “Code”) concerning cross-border capacity auctions and re-nominations. The amendments come as a result of the continued work by the Regulator to improve of the secondary gas market legislation, adopted last year in compliance with the EU Third Energy Package. 

The Regulator added a new section to the Code setting out the procedure for holding auctions on booking and the allocation of the cross-border gas transmission capacity. The Regulator also permitted customers to change the nominated volumes of gas to be transported by the Operator. 

The auction procedure is described in more detail below: 

  1. an electronic auction for allocation of cross-border transmission capacity products (the “auction”) shall be held by the Operator (currently – Public JSC “Ukrtransgaz”) only in the event that the volume of cross-border capacity requested by the customers exceeds the volume of the available capacity. The capacity products (at the relevant physical entry/exit points at the border of Ukraine) shall be further allocated according to the results of this auction; 
  2. the capacity products may be offered, subject to the following:
  • an amount not exceeding 90 % of the technical capacity at any interconnection point shall be offered at the annual yearly capacity auction; and
  • an amount not exceeding 10 % of the technical capacity shall be offered at the quarterly capacity auction within the relevant gas year;
  1. auctions shall be conducted by the Operator in line with the timelines established by the Auction Calendar of the European Network of Transmission System Operators for Gas (ENTSOG); 
  2. the auction announcement, list of the offered capacity products, and large and small price steps shall be published both on the Operator’s web-site and on the web site of the chosen auction platform within the following periods:
  • prior to 17 February – for yearly capacity products;
  • prior to 10 May – for quarterly capacity products (for the upcoming year); and
  • at least 5 days prior to the auction date – for quarterly and monthly capacity products (for the current year);
  1. the yearly capacity auctions shall be held once a year, offering capacity for a maximum of 15 years;
  2. the Operator shall choose the relevant auction platform(s) and publish instructions on its web-site, both in Ukrainian and in English; 
  3. during the auctions customers shall be able to participate in one or several auctions in relation to each physical interconnection point in order to apply for capacity products;  
  4. only “auction participants” may submit their bids in the auction. A customer of the gas transportation services is entitled to participate in the auction if:
  • the customer has no debt to the Operator for the services rendered within the previous periods; and
  • the customer was duly registered on the auction platform;
  1. the auction participant shall be required to provide financial security to the Operator at least one day prior to commencement of the auction, as a guarantee of the customer’s further payment of the auction premium. Such security may be provided either as an “auction contribution” (i.e.; an irrevocable unconditional bank guarantee) or as an “auction obligation” (i.e.; deposit amount paid by the participant); 
  2. the auction participant may determine the amount of financial security at its own discretion, with a due account of the fact that the participant’s auction bid may not exceed the amount of the provided security;
  3. auction participants make bids by confirming the amount of required capacity against the sequentially increasing prices announced. The bid may be made, changed or withdrawn until the end of bidding round. 

LAW: Resolution No 304 of the National Commission on State Regulation of Energy and Public Utilities Sector “On Approval of Amendments to the Gas Transmission Code of Ukraine and to Resolution No 2494 dated 30 September 2015” as adopted on 10 March 2016