The purpose of introducing the network gas balancing Code is to develop a competitive short-term wholesale market. Its creation in the EU has always been based on the same scenario, starting with long-term non-standardized contracts and purchase of TSO balancing services, with the transition to balancing platforms and, after all, with the launch of full-fledged exchange trading on a trading platform.
Unfortunately, as is often the case in the Ukrainian reality, the legislative conflict was not eliminated in time: the Law On the gas market and the GTS Code were working, and the Law On public procurement did not allow the GTS Operator to perform operational balancing, through buying and selling gas on the exchange, as required by the target model.
After all, the only method available under such conditions for the formation of payment for the daily imbalance and overly liberal conditions for the creation of imbalances, led to a change in the roles of participants in the market. The Ukrainian GTS operator, which is supposed to transport natural gas and is responsible for the GTS integrity, has turned into the largest gas seller for the other participants. The daily balancing market model should work, so that transmission service customers must balance themselves with the minimum need for TSO in the residual balancing of the network. The incentive for this is the penalty level for daily imbalance. Now participants simply take gas from the GTS, as the margin purchase price is much lower than the market price, and the GTS Operator must buy and replace these volumes.
The daily balancing market has been operating for almost a year and a half. This is quite a significant time for the European norms of Regulation № 312 / 2014 start work in Ukraine. Instead, time and gaps in legislation and timely decisions were used by the market to reformat it into mechanisms of unhealthy competition.
In order to build a competitive, transparent and efficiently functioning natural gas market in Ukraine, CE Ukrainian Energy Exchange and LLC GTS Operator of Ukraine will join their efforts. The gas market operator and the trading platform operator start implementing European approaches to the daily balancing market. We hope for support of regulatory initiatives aimed at ensuring conditions for normal market functioning in terms of amendments to the Law on Public Procurement and the regulator’s latest initiatives on changes to the GTS Code.