Ukraine: New Tariff Methodology for Natural Gas Storage

On the 16 June 2016 the National Commission on State Regulation of the Energy and Public Utilities Sector (the “Regulator”) adopted the Tariff Methodology for Gas Storage (Injection, Withdrawal) (the “Methodology”).

The Methodology states that it will only be applicable to gas storage facilities (“GSF”) that are within the regulated access regime. Currently, access to all GSFs in the Ukraine is regulated and the Methodology is therefore applicable to all GSFs. The situation may change but only if Public JSC “Ukrtransgaz” (the “Storage Operator” which operates 12 Ukrainian GSFs) is unbundled and some of the Ukrainian GSFs are then privatised.

The Methodology provides for a number of formulae to calculate tariffs which are based on the following rules and principles:

• Tariffs will be approved by the Regulator annually, on the basis of the documents and calculations provided by the Storage Operator;
• The tariff for gas storage services will be calculated on the basis of the Storage Operator’s planned (estimated) tariff proceeds for coverage of the planned “semi-fixed costs” of the Storage Operator and by (i) taking into account the planned “level of profitability” of the Storage Operator and (ii) dividing by the planned “GSF storage capacity”:

• the definition and list of the planned “semi-fixed costs” are provided by the Methodology and include the Storage Operator’s expenses and costs which do not depend on changes in the volume and/or capacity of gas injection, storage and withdrawal performed by the Storage Operator;
• the planned “level of profitability” will be calculated as a proportion of the planned profit of the Storage Operator and the total planned cost of the services provided by the Storage Operator; and
• the planned “GSF storage capacity” is a combination of the available volume of GSFs and the injection and/or withdrawal capacity, calculated by the Storage Operator on the basis of executed gas storage agreements, taking into account forecasted changes.

• The tariff for gas injection/withdrawal services will be calculated on the basis of the Storage Operator’s planned tariff proceeds for coverage of the planned “semi-variable costs” and by (i) multiplying by 0.5, (ii) taking into account the planned level of profitability of the Storage Operator and (iii) dividing by the planned “GSF injection/withdrawal capacity”;

• the definition and list of the planned “semi-variable costs” are provided by the Methodology and include the Storage Operator’s expenses and costs which may be changed in proportion to the change of volume and/or capacity of gas injection, storage and withdrawal performed by the Storage Operator;
• the planned “GSF injection/withdrawal capacity” is the guaranteed yearly injection/withdrawal capacity of GSFs calculated by the Storage Operator on the basis of executed gas storage agreements, taking into account forecasted changes.

• the Regulator may also approve tariff indexes for the Storage Operator, which may be applied to the storage (injection/withdrawal) tariffs in the event that (i) yearly capacity or (ii) monthly capacity or (iii) interruptible capacity or (iv) an individual service (i.e. an additional interruptible monthly/daily capacity for existing customers) is contracted. Such indexes must meet the following requirements:

• the index for yearly capacities will be equal to 1;
• the index for monthly capacities will not exceed 1.5;
• the index for individual services will not exceed 2.0; and
• the index for interruptible capacities will fall between 0.1 and 0.8.

LAW: Resolution No 1131 of the National Commission on State Regulation of Energy and Public Utilities Sector “On Approval of the Methodology for Definition and Calculation of the Tariffs for the Natural Gas Storage (Injection, Withdrawal) Services, Applicable to the Gas Storage Facilities with the Regulated Access” adopted on 13 June 2016