Despite the occupiers’ attacks on the energy infrastructure, Ukraine survived half of the winter without significant accidents in the heating system. There is confidence that this trend will continue until spring and it will be warm in our homes. However, in order to guarantee the sustainable operation of the industry, the government and business need to solve fundamental problems.
Last year, representatives of the central government repeatedly stated that the current heating season will be the most difficult in the recent history of Ukraine. This is understandable, because in the winter our state entered into the conditions of a full-scale war waged against us by the barbaric Russia, and did not have enough energy resources in case of long severe frosts.
The situation was worsened by the fact that the occupiers began to launch missile and drone strikes in the autumn on critical domestic infrastructure, primarily on energy facilities, without the stable operation of which Ukrainians could face large-scale accidents with a complete lack of light, water and heat.
However, we have already crossed the equator in winter without any catastrophic problems in the field of heat supply. It was possible to achieve this thanks to many factors. First, our heroic defenders worked well, shooting down most of the rockets and drones that the Rashists aimed at our cities and villages. Second, the prompt arrival of more modern Western air defense systems helped strengthen the protection of critical infrastructure. Third, civilized countries provided a significant amount of equipment for repair work and alternative sources of power supply in the form of generators. This made it possible to almost not stop the operation of the boiler rooms in the conditions of frequent power outages.
In addition, it is worth paying due attention to the workers of heat-generating enterprises, who in the conditions of war and under enemy fire ensured the supply of heat to the homes of Ukrainians. Also, the rather warm weather in the first half of winter played a significant role – thanks to this, it was possible to significantly save gas in underground storages and coal in warehouses.
Considering this, Prime Minister Denys Shmyhal assured that Ukraine has enough reserves of energy resources to pass the heating season in regular mode.
“We have enough resources to continue and complete the heating season in normal mode. About 11 billion cubic meters of gas are stored in gas storages (before the beginning of the heating season there were about 15 billion cubic meters – UNIAN), and in warehouses – almost 1.2 million tons of coal.” – said the head of the government.
In addition, according to him, the Cabinet of Ministers allowed the state company “Naftogaz of Ukraine” to attract a grant from the European Bank for Reconstruction and Development in the amount of almost 189 million euros in order to import additional volumes of blue fuel if necessary.
That is, as of the second half of January, our country has a sufficient safety margin for a sustainable end to the heating season. It is also good that forecasters do not predict severe frost until the end of winter. And the main challenge remains constant shelling of national energy facilities.
However, despite the optimistic statements of officials, acute problems are accumulating in the industry, which require solutions and the attention of the authorities. And then the country will be able not to worry about the next winters, and the heating plants will not be under the constant threat of bankruptcy and stoppage of activity.
An important feature of the current heating season is that in Ukraine, after the adoption of the relevant law in the summer of 2022, a moratorium was introduced on the increase of thermal energy tariffs during the war and six months after the lifting of martial law.
In the previous two seasons, the authorities signed memoranda of similar content with local self-government bodies, so for the third winter in a row, Ukrainians are paying for an essential service at prices that are significantly lower than market prices.
At the same time, the state undertook to pay the heat producers the difference in tariffs – between the current and economically justified ones. Thus, in the state budget of 2022, it was planned to allocate 14 billion hryvnias for this, but as of today, the thermal utility company has not received a single penny of these funds.
As noted in the interdisciplinary association “Ukrteplocomunenergo”, this led to the fact that in the second half of last year and at the beginning of the current year, demand letters were constantly received by heat supply enterprises. They are sent by the natural gas supplier “Naftogaz Trading”, which demands urgent repayment of the debt for the consumed natural gas.
Despite the lack of compensation from the state, this company began to collect funds from the current accounts of heat suppliers through the so-called undisputed write-off, which is provided for in tripartite agreements between banks, TKE enterprises and the gas supplier.
“In fact, due to the lack of compensation by the state for the difference in tariffs, Naftogaz Trading is completely blocking the accounts and work of heat supply enterprises. This does not allow the latter to fully ensure the technological process – to purchase electricity, coal, cold water, materials, etc.,” – noted in “Ukrteplocomunenergo”.
Oleg Harnyk, an expert of the Analytical Center of the Association of Cities of Ukraine, in a comment to UNIAN, also drew attention to the fact that the state budget for the current year does not provide for financing the repayment of the difference in tariffs at all. Therefore, we can conclude that the situation will not fundamentally change until the end of this winter. This will lead to the fact that in the spring, the arrears from the difference in tariffs may increase almost three times compared to the 14 billion that the state was unable to pay to the thermal power plants last year.
“According to our preliminary calculations, by the end of the heating season, the government’s debt to enterprises from the difference in tariffs will amount to 38 billion hryvnias. These are the funds that enterprises did not receive as a result of the fact that the state assumed obligations, but did not fulfill them. This leads to the point that the entire heat supply industry is now under threat of business shutdown and bankruptcy,” the expert points out.
New industry policy
Given the high probability that the war with Russia will last part of 2023, the state needs to draw conclusions now and approach the next heating season more responsibly.
According to expert Oleh Garnyk, first of all, for this, it is necessary to ensure the stable operation of critical infrastructure objects, including heat, water and electricity supply networks. At the same time, it is necessary to fully provide these systems with individual energy sources, so that in the event of continued aggression and constant missile strikes, they can ensure the provision of services.
The government should finally solve the economic part of the industry’s problems, and not dump it, as it was done before, on local councils, because they already took on a large financial burden in the form of financing important defense tasks.
“The state must accept its responsibility to provide resources (gas and other alternative sources) and compensate for losses, because companies provide services at low rates, and local governments do not have these billions,” he said.
According to him, Ukraine needs an effective mechanism for automatic compensation of the difference in tariffs, so that situations do not arise when heat suppliers do not have the resources to carry out even simple emergency work due to automatic debt write-off.
“We have a situation that repeats itself year after year, when enterprises cannot recover, prepare for the heating season, cannot provide decent working conditions. Thus, we enter the next heating season without spare parts, without capital repairs and without employees. And then in in September, we start looking for ways to solve it,” he said.
Mykolaivovlteploenergo head of the company Mykola Logvinov also believes that after the end of the war, the state needs to carry out a serious reconstruction of the entire heat and energy supply system in order to reduce the loss of coolants and the consumption of the same gas as much as possible. Ukraine should finally move away from populism and introduce market prices for utility services with increased social assistance to low-income citizens.
“The tariff must become economically justified. This is not even discussed, because the state should direct money not to eating or waste, but to infrastructure projects. People should be worried not about the tariff, but about the payment. If we do not close our eyes to the problem, but invest money in energy-saving technologies, we will carry out an energy efficiency program, insulate houses and heat pipes, reconstruct boiler houses, avoid unnecessary heat losses, then it will be called economy,” he said.
We must act
Of course, the authorities now prioritize defense against the Russian invasion. However, government officials should also remember the obligations they have assumed, and not expect that the financial problems of heat-generating enterprises will be solved by themselves or at the expense of local budgets.
Today, heat is steadily supplied to the homes of Ukrainians, but impoverished citizens of Ukraine pay for this service at outdated tariffs. However, sooner or later someone will have to pay for this clear and justified decision during the war and the deep economic crisis caused by it.
The state, in conditions of a severe deficit of finances, continues to act in the same way as in peacetime, transferring the solution of the problem to local authorities. In order not to disrupt the heating season, they are forced to allocate part of their budgets to the purchase of equipment, fuel and lubricants and other resources for heat-generating enterprises. Thereby reducing the amount of money that could be directed to solving other problems of their communities.
But already this year, even this source may dry up due to the continuation of the war and the deepening of economic troubles. Therefore, the question arises: at what expense will it be possible to prepare for the next heating season in the spring and summer, if the state does not pay attention to this problem and does not fulfill its promise regarding financial support for the industry? And how will this affect the quality of service that Ukrainians receive?
So, if in a few months we don’t want the specter of “another most difficult heating season in the history of Ukraine” to return, then we should start solving this problem now. And if everything is done correctly and in a timely manner, then the result will be good.