New Licensing Conditions for Electricity Generation (the “Licensing Conditions”) were promulgated on 20 June 2017 and will come into force on 20 August 2017. The National Commission for State Regulation of the Energy and Public Utilities Sectors (the “Regulator”) shall then apply the new Licensing Conditions for the issuance of new licenses starting from this date, while the existing licensees (power producers) shall still have a month following this date (i.e. until 20 September 2017) to bring their activities into compliance with the Licensing Conditions.
The Licensing Conditions were adopted by the Regulator by its Resolution No. 309 dated 22 March 2017.
The Licensing Conditions contain the requirements for obtaining electricity generation licenses. Said requirements shall apply to the following electricity producers:
- if the installed capacity of the producer's electricity generating facility equals or exceeds 5 MW; or
- if the electricity produced by the producer's renewable power plant or co-generation facility is to be sold at the Wholesale Electricity Market (WEM) of Ukraine. This is irrespective of the plant or facility's installed capacity.
The applicants shall be required to submit to the Regulator the following documents (the list is exhaustive):
- an application (in accordance with the model form attached to the Licensing Conditions);
- a copy of the passport of the applicant’s representative (or director);
- two copies of a list showing the submitted documents;
- duly certified copies of the documents confirming title to or the right to use electricity generating facilities/power plants (including rights granted under concession, leasing, commercial management agreements, etc.);
- duly certified copies of the relevant pages from the technical passports of the installed electricity generating facility or any other similar documents which confirms said facility's capacity;
- scheme for the connection of the power plant to the grid, along with the location of the power metering equipment indicated; and
- note on the location and availability of the resources required for the performance of the electricity generation activity (prepared by the applicant in accordance with the model form attached to the Licensing Conditions), where the applicant shall be required to provide the following information:
i. name and location of the electricity generating facility;
ii. name, type, quantity, capacity of the installed electricity generating equipment; and
iii. type of fuel/energy resources.
The Licensing Conditions contain numerous organizational, technological, professional and special requirements, as established for the licensees. Failure to comply with such requirements may result in the cancellation of the relevant electricity generation licence.
The staffing requirements include in particular:
- the precondition that a minimum number of employees have the relevant positions and a certain number of employees have the relevant education, qualification and/or experience, thus enabling the company to carry out its functions and activity.
The organisational requirements (which is the most extensive set) include:
- that an internet website to publish information be set up showing the share of energy sources (fuel) used by the applicant for its electricity production in a previous year;
- that the Regulator be notified in a timely and due manner (i.e. within a month) about any changes to the information and documents filed to obtain the licence;
- that the necessary reports be submitted to the Regulator in a manner as provided for by the law and that the Regulator’s orders and resolutions be complied with;
- that the electricity generated be sold at the Wholesale Electricity Market (WEM), except for cases provided for by law, in particular: (i) if the electricity is not generated for the purpose of its further sale and is used for own needs; (ii) if the installed capacity is below 20 MW; and (iii) if the total output of electricity to the Unified Power System of Ukraine (UPSU) in the past year was less than 100 mln kWh;
- certain exceptions from this rule are provided (i.e. regarding the direct sale of electricity to local power suppliers and/or end consumers) for renewable power plants and cogeneration units;
- that the regulatory fee be paid on a quarterly basis (within 30 days following end of the relevant quarter): starting from 2018 the licensees shall be required to pay the regulatory fee, as calculated by the licensee according to the following formula: Regulatory Fee = Dkv * Vkv / 100 % Dkv – net income generated from the company’s licensed activity in the relevant financial quarter; Vkv – rate established by the Regulator (it is currently equal to 0.065% for the year 2018, according to the Regulator’s Resolution No. 617 dated 28 April 2017); and
- that the measures for the protection of critical infrastructure, as provided by the applicable regulations be complied with.
The technological requirements include in particular:
- that the electricity metering be carried out in line with the applicable regulations, instructions and procedures.
The special requirements:
- a prohibition on cross-subsidies (i.e., compensation for the low price paid by certain customers, typically the households, at the expense of others, typically industrial customers, who pay higher price); and
- applicants must not be controlled (e.g., owning at least 25% of the shares in such company) by the residents of countries that carry out acts of military aggression against Ukraine or whose actions may give rise to a military conflict in Ukraine or to a use of force against Ukraine.
Power producers (licensees) are expected to bring their activities into compliance with the Licensing Conditions and submit the required documents (in compliance with the above mentioned set) to the Regulator no later than 20 September 2017.
Legislation: Resolution of the National Commission for State Regulation of the Energy and Public Utilities Sectors “On Approval of the Licensing Conditions for the Performance of Business Activities on the Generation of Electricity” No. 309 dated 22 March 2017