State of compliance
The National Energy and Utilities Regulatory Commission of Ukraine (NEURC) is the single authority for regulating gas and electricity in Ukraine. Since the adoption of the new Law on the National Commission for the Regulation of Energy and Utilities in 2016, the regulator’s competences and level of independence are theoretically well aligned with the Energy Community acquis. According to national legislation, NEURC shall be headed by seven commissioners, including a chairman. In praxis, only five commissioners were appointed in May 2018, one of which is chairing the commission. The appointment for the first time followed a transparent selection procedure. The term of board members is limited to six years, renewable once. With the resignation of two commissioners on 8 October 2019, the authority lost its decision making quorum. This comes at a moment when a number of strategic market design decisions have to be taken, including certification of transmission system operators and the adoption of electricity balancing rules.
In May 2019, the Secretariat published an update of its 2018 audit report on the legal framework, independence and practical performance of the regulator. The new report confirmed increasing independence and market reform ambitions of the authority.
Independence of NEURC is currently at stake following a ruling of the constitutional court that declared the regulator’s independent status a breach of the constitution. By the end of 2019, NEURC will lack a legal basis for operation. Draft legislation meant to continue NEURC’s operation at the expense of its independence was heavily criticized by the Secretariat and other international partners. On 9 October 2019, NEURC also lost its decision making quorum due to two commissioners stepping down. This came at a moment when a number of strategic market design decisions, including certifications, have to be taken and where the Secretariat positively observed increasing independence and market reform ambitions of the authority. The deadlock was overcome by appointment of four Commissioners on 29 October 2019 by the President. This bases on a law adjustments made in December 2017 that has been criticized by the Secretariat earlier as a setback and reversals to the previous procedure where Commissioners were appointed at the full discretion of the President is a setback, even if timely limited. The need for such makeover is only a proof for the lack of commitment of the public institutions to comply with procedures defined by law in the first place. Full budgetary autonomy of NEURC still requires amendments of the Budget Code and the practice of delaying the entry into force of decisions by postponing their publication in the Official Gazette continued to be an obstacle.