The retail price of electricity in Ukraine is low, but this situation has serious consequences for the country’s energy sector, as the low tariffs fail to cover the actual costs of production and transmission. This, in turn, leads to financial difficulties for state-owned energy companies, which are forced to operate at a loss. This was reported by The Ukrainian Review, citing energy and corporate governance expert Dovydas Vitkauskas.
For decades, the promise of ‘cheap electricity’ for retail consumers has been a form of currency, converted into votes in nearly every election by most political forces in Ukraine. In the context of this policy, questions like ‘What is the real cost of production?’ or ‘How much investment is needed to secure the future?’ have always been secondary, – Vitkauskas stated.
The latest recorded tariff in June 2024 was 9.8 eurocents per kWh, including transmission costs. This is relatively inexpensive, even after a 64% increase from the 2022 levels.
However, such pricing significantly worsens the financial position of state-owned energy companies, such as Energoatom and Ukrenergo.
The financial burden of this political maneuvering is shifted onto state producers and transmitters (Energoatom, Ukrenergo), which have ‘special social obligations’ to ensure low electricity prices. These state players, in turn, pass this burden onto their partners and suppliers. It’s a vicious cycle of financial distress, – the expert emphasized.
To ensure stability and development, more attention must be paid to the real cost of energy, with greater encouragement for investment in production.
