On October 14, 2014 the Parliament of Ukraine registered the Draft Law "On Amendments to the Law of  Ukraine "On the Principles of Functioning of the Natural Gas Market" (regarding the promotion of  competition in the market of works for connection the Unified Gas Transportation System of  Ukraine)". The adoption of this Draft Law may allow gas distribution companies to avoid competition  violations.

It should be noted that during 2013-2014 the issue of connection to gas networks was among the  priorities in the work of the Antimonopoly Committee of Ukraine. In accordance with Par. 1.7 of the  Procedure for calculating the payment for connecting customers’ objects to gas networks approved by  Resolution of the National Commission for Energy Regulation dated 31.01.2013 No.77, customers may  be connected to the UGTSU networks under a standard or non-standard procedure. According to the  existing rules, the fee for non-standard connection is determined by the design and estimate  documentation, which the customer should arrange for and the cost of which is included in the  connection fee.

In general, the services for connection to gas networks include, inter alia, preparation of  specifications by a gas distribution company, survey work, design work, and construction of gas  networks for external gas supply to the customer’s object from the point of provision to the point  of access (construction and installation work).

Analysis of the relevant practice of the Antimonopoly Committee of Ukraine shows that the typical  violations of the antimonopoly legislation committed by gas distribution companies connecting  customers to the UGTSU networks are delays in the performance under connection agreements,  unreasonable requirements included in the specifications, and overstated prices for connection  services.

At the same time, the antimonopoly regulator notes that violations are not always due to deliberate  actions of gas distribution companies. Thus, delays in the performance under connection agreements  may be due to the necessity to obtain permits for construction work, which are not always issued  within a short term.

Some provisions of the above Draft Law propose to amendment the current wording of the Law of  Ukraine "On the Principles of Functioning of the Natural Gas Market", which will stipulate that  surveying and construction work will be arranged for by customers (in addition to the development  of design and estimate construction work will be arranged for by customers (in addition to the development of design and  estimate documentation), while its cost will also be included in the connection fee. Moreover, it is  proposed to stipulate that customers will be able to require an expert examination of technical conditions for  compliance with the applicable standards, rules and regulations.

If the proposed amendments are adopted, gas distribution companies will be able to avoid liability  for failure to meet the timelines under connection agreements, as surveying and construction work  will fall under the scope of the customer’s responsibility (thus, even if the customer choses a gas  distribution company to perform the mentioned work, the terms of performance will be further  regulated contractually). In addition, if unreasonable requirements are included into  specifications, gas distribution companies will be able to change such conditions based on expert  examinations initiated by customers. In other words, gas distribution companies will have an  opportunity to remedy their violations without being brought to liability.

It should be noted that a similar situation with antimonopoly compliance is also observed in cases  of connection to the electric power grid. Thus, one of the most common violations in this area is  that specifications oblige customers to conclude electricity supply agreements only with particular  electricity distribution companies. If similar amendments were made in the relevant laws in the  power sector, they would allow customers and electric power distribution companies to resolve the  arising grid connection disputes without involving the Antimonopoly Committee of Ukraine, and,  accordingly, without any sanctions applied to electric power Antimonopoly Commit distribution companies.