This publication was prepared with the support of the European Union. The contents of this publication are the sole responsibility of NGO “DIXI GROUP”, as well as Civil Network “OPORA”, All-Ukrainian NGO “Energy Association of Ukraine”, Resource & Analysis Center “Society and Environment”, Association “European-Ukrainian Energy Agency”, and can under no circumstances be regarded as reflecting the position of the European Union.

The project “Enhancing impact of civil society in monitoring and policy dialogue on energy and related sectors’ reforms in line with the Association Agreement implementation” aims at strengthening the role of civil society in advocating reforms in the energy and related sectors.

The key objectives of the project are:

• monitoring of the implementation of the energy provisions of the Association Agreement, including relevant environmental and trade-related commitments;

• strengthening the civic experts’ and local actors’ capacity to track actual implementation of the reforms;

• facilitation of public dialog to lead in proper implementation of the European energy and environmental reforms;

• informing stakeholders and the Ukrainian society about the meaning and potential benefits of European reforms in energy and related sectors in order to empower them to keep the government accountable for pursuing these reforms.

www.enref.org

Executive Summary In September, the Annual Implementation Report was published by the Energy Community Secretariat. On the one hand, in the foreword, the EnCS director Janez Kopač notes that the race for transposition of the Third Energy Package by the deadline of January 1 was won by Serbia, Albania and Ukraine (for gas), which was also noted in the last Report. On the other hand, it was noted that Ukraine did not continue the energy sector reform at the same pace as during the previous reporting period. The document, again, states that Ukraine remains one of the three Contracting Parties of the Energy Community yet to transpose the directives on energy performance of buildings and on energy services. Our country was referred to among those countries which have failed to transpose European standards of electricity markets regulation into their national law so far. In general, the analysis made by the Secretariat had the following conclusion — “the newest members of the Energy Community, Ukraine and Moldova, are lagging behind in nearly all implementation-related dimensions, but are on average not worse than the Balkan members of the Energy Community in terms of transposition”. In addition to the shortcomings described above, the document also focuses on a likely failure to comply with the commitments on unbundling as well as with adoption of a law on the energy regulator.

In the natural gas sector, this month showed the progress in the realm of legislation. In particular, the Laws of Ukraine “On the National Energy and Public Utilities Regulatory Commission” (NEPURC) and on amending the Law “On the Natural Gas Market” have been adopted. The Energy Community Secretariat, which had called upon Ukraine for a long time to adopt a law on the energy regulator, welcomed that progress. Nonetheless, there are still pending issues in respect of the progress in reforming the sector, which only redoubled by the situation with handover of control over key state companies.

Electricity sector also shows progress in legislative work, in particular, it concerns the adoption of the Draft Law “On the Electricity Market” in the first reading. There is also an intensified discussion in the sector on ensuring stable supplies of the respective resources prior to the start of the heating season. In addition, there are ongoing safety checks of the Ukrainian NPPs as well as the search of diversified supplies of the nuclear fuel supply.

Suspension of “warm loans” programs as well as doubtful budgetary prospects of such support in the next year only add pessimism as to the state of affairs in the sector of energy efficiency. Besides, the protracted process of creating the Energy Efficiency Fund has not received legislative framework so far; neither were any of the vital sectoral draft laws, despite being considered by the parliamentary committees, submitted for consideration of the Verkhovna Rada in September.

In the area of environment, a number of decisions are still expected to be made, and particular legislation on environmental impact assessment and on strategic environmental assessment to be adopted. In this context, it is hard to deny a strict assessment by the Energy Community Secretariat of the absence of reform in that sector. Renewable energy sector, despite lack of substantial progress in regulation, shows intensification of business activities.

Slow rate of implementation was also characteristic for oil and oil products’ sector. Despite creation and launch of groups for drafting and adoption of decisions in the sector, the key problems remain unresolved on the legislative level.

As for the business climate, the above draft laws may be considered a progress along with the continued dialogue between the stockholders on competition in the energy sector, organised through intermediary of the civil society.

Abbreviations

NAK — Naftogaz of Ukraine NJSC VRU — Verkhovna Rada of Ukraine Commission — European Commission FES — fuel and energy sector GTS — gas transportation system CMU — Cabinet of Ministers of Ukraine

TPP — thermal power plant AA — Association Agreement SNRIU — State Nuclear Regulatory Inspectorate of Ukraine МЕCI – Ministry of Energy and Coal Industry of Ukraine NEPURC — National Energy and Public Utilities Regulatory Commission

Gas Adoption of two crucial laws to regulate the gas sector has become a major achievement in September — “On the National Energy and Public Utilities Regulatory Commission” (NEPURC) and on amending the Law “On the Natural Gas Market” concerning reduction of maximum size of the insurance reserve down to 10% of planned monthly supplies.

All experts’ attention was turned to the conflict between the trader Naftogaz of Ukraine NJSC and the operator of the Ukrainian GTS Ukrtransgaz PJSC. That conflict, again, turned attention not only to the unbundling procedure but also to the issue of reform in Naftogaz. In fact, the Ministry of Economic Development and Trade, by its order, unilaterally assumed control over Ukrtransgaz. As result of the lack of transparency, failure to involve the international partners, and overreaction on the part of Naftogaz, the order was cancelled, which, however, didn’t solve the problem.

Months-long blockade by the Ministry of Justice of the Guidelines for Calculation of Tariffs for Services of Natural Gas Distribution as submitted by the NEPURC hampers further introduction of an entry-exit tariff system in Ukraine. As a result, separation of the gas bills and diminishing of domination of the regional gas distribution companies on the retail market has been slowed down.

Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (AA: Articles 338, 341, Annex XXVII) pursuant to Article 278 of the AA

Since the conditions as adopted by the Government’s Resolution No. 496 of 1 July 2016 provide for the unbundling of the gas transportation operator from Naftogaz only after Stockholm Arbitration has delivered its judgment, the actual unbundling of activities in Naftogaz has not started yet. Dependence of an operator which must ensure equal access to the GTS to all the competitors from a single (major at the present time) supplier hampers competition and causes management conflicts, which showed in September.

On September 7, the Ministry of Economic Development and Trade (MEDT) which managed NAK until that time, without notifying its management, amended and approved a new version of Naftogaz’s Articles of Association, assuming control over Ukrtransgaz with the purpose to facilitate its independence (order of MEDT No. 14781). The Ministry, in particular, took on the right to do as follows:

• dismiss and appoint GTS operator’s management; • control (permit or prohibit) Ukrtrasgaz’s actions concerning financial transactions; • amend the operator’s articles of association.

Along with that, all relations pertaining to property between Naftogaz and Ukrtransgaz have been retained.

Not only NAK’s management negatively assessed that step 2but also representatives of the international creditors financing the reform of the company (in particular EBRD3) did so. On September 19, during a general meeting with Prime Minister Volodymyr Groysman with representatives of MEDT and Naftogaz it was decided to cancel Ukrtransgaz’s subordination to MEDT4, which was reflected in a new order by the MEDT No. 1577 of 19.09.20165. The above order approved two versions of the NAK’s Articles of Association, one with immediate effect and the other entering into force in April 2017.

Finally, in accordance with the governmental resolution (No. 6756) approved on September 22, MEDT was bound to hand over, within 10 days after the date of entry into force by that resolution, 100% of Naftogaz’s shares to the Cabinet of Ministers. So “in view of the need to reform and improve the management”, the

1 http://www.naftogaz.com/www/3/nakweb.nsf/0/0D0D1DFF88C3A5BFC225803D0039D9F3?OpenDocument 2 http://www.naftogaz.com/www/3/nakweb.nsf/0/B947718D26D4FE7EC2258030005B00C8?OpenDocument&year=2016&month=09&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8 3 http://ua.interfax.com.ua/news/general/370528.html 4 https://www.rbc.ua/ukr/news/groysman-otmenil-prikaz-mert-perepodchinenii-1474296280.html 5 http://www.naftogaz.com/www/3/nakweb.nsf/0/C1BEF7C89E549FD0C225803C0022DC4B?OpenDocument 6 http://www.kmu.gov.ua/control/uk/cardnpd?docid=249369692

Gas Government decided to subordinate the company to its direct shareholder, i.e. to itself7. Therefore, from now on, the Government will be directly responsible for settling problems in respect of “the conflict of interests” between the gas trader and gas transmission operator, as well as for compliance with Ukraine’s commitments to the Energy Community in respect of creation of real competition on the gas market.

Meanwhile, the Cabinet of Ministers also amended the Provisions on imposing special obligations on the natural gas market participants to whom Naftogaz is bound to ensure gas supplies from Odessa Port Plant OJSC until the end of the year for a price which conforms to a price for the same category of consumers8.

The progress in reforming the legal framework of the gas market was also demonstrated by adoption of the law establishing rules as regards the activities of the national energy regulator — the Draft Law No. 2966-д9 on NEPURC was adopted in the second reading as a whole. Creation of an independent regulator is a necessary long-awaited measure on the way towards a competitive market10, and delays with the adoption of such law were indicated in the Energy Community’s report published in September as a substantial shortcoming of the reform going on in Ukraine11.

The most substantial amendment introduced by the new law for achieving balanced influence on the regulatory process concerns a mechanism of formation of a competition commission to choose NEPURC members (presently appointed by the President): the above commission will include two representatives from the President of Ukraine, two from the Verkhovna Rada of Ukraine and one from the Government on the proposal from the Ministry of Energy and Coal Industry. Entry by the new law into force is delayed as result of registration with the Parliament of the resolution aiming at cancelling the vote12. That means that until MPs have considered it, the speaker of the VRU can sign the adopted law and submit it to the President for signature.

At the same time, the adopted Draft Law No. 361713 of 10.12.2015 ensuring introduction of equal conditions for gas suppliers within the framework of implementation of a new mechanism of maintaining the insurance reserve has already been forwarded for the President’s signature. By amending Article 12(6) of the Law of Ukraine “On the Natural Gas Market”, its rate was established as no more than 10% of monthly supply. Prior to entry into force by that law, the insurance reserve formation is regulated under the CMU Resolution No. 795 of 30 September 2015. In accordance with it, suppliers on whom the special obligations are imposed, don’t create insurance reserve, and the rest of gas suppliers are bound to create the insurance reserve of 50% of the monthly supplies planned for the next month.

By its separate resolution, the Government, inter alia, amended the Template for the natural gas sale contract which Naftogaz concludes with gas suppliers under special obligations, for the needs of household customers and religious organisations14. In particular, settlement of the transfer of the right to gas, signing of the acceptance certificates and settlements are intended to resolve a problem of delays in receipt of funds from Naftogaz.

On September 30, the NEPURC held public hearings on the implementation of the Law of Ukraine "On the Natural Gas Market"15. The Regulator reported the lack of tariffs for services of gas storage as determined in accordance with a new methodology and impossibility to fix tariffs for services of gas distribution (based on the payments for the capacity) due to the aforementioned problem of adjustments, as well as to include tariffs for distribution and transmission, in accordance with the CMU Resolution, in the price for gas for

7 http://www.kmu.gov.ua/control/uk/cardnpd?docid=249369692 8 http://www.kmu.gov.ua/control/uk/cardnpd?docid=249357203 9 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=58234 10 It’s worth noting that the Draft Law No. 2966-д is the tenth draft law on the regulator for the last 16 years registered in the Rada. 11 https://www.energy-community.org/portal/page/portal/ENC_HOME/DOCS/4332394/3D790302C9FD5024E053C92FA8C0D492.pdf 12 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=60092 13 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=3617&skl=9 14 http://www.kmu.gov.ua/control/uk/cardnpd?docid=249354036 15 http://www.nerc.gov.ua/?news=5430

Gas households. The regulator also listed steps intended for transition from the gas accounting based on the volume units to the accounting based on energy indicators.

The month prior to the start of the heating season, the NEPURC paid a special attention to the issue of tariffs and prices. In particular, the regulator published the Procedure for open hearings on prices/tariffs, their components, for all categories of consumers16; it also published a response to an enquiry of 301 local governments17, particularly on issues of gas prices. Based on the results of monitoring of prices for natural gas for all categories of consumers in Ukraine, the regulator reported on the maximum price in August 2016 for consumers not covered by provisions on special obligations (8,135.52 UAH/tcm, VAT included).

Regulation (EC) No. 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No. 1775/2005 (AA: Articles (AA: Articles 338, 341, Annex XXVII) pursuant to Article 278 of the AA, trade-related issues (Articles 269–274 of the AA)

At the joint briefing following the meeting on September 2 with Vice President of the European Commission for Energy Union Maroš Šefčovič18, Prime Minister Volodymyr Groysman stated that Ukraine is ready to sign a “winter pack” for gas supplies in the format Ukraine–Russia–EU and start purchasing Russian gas with the funds of the World Bank. On his part, Mr. Šefčovič assured that the Commission is ready to meet Naftogaz’s requests halfway and comprehensively analyse the facts where the Russian suppliers reduce the pressure of the gas coming from Russia to Europe through the Ukrainian GTS.

Pursuant to the Law of Ukraine “On the Natural Gas Market”, the NEPURC developed and published in September with the view of further discussions, the draft resolutions on approval of amendments to the Code of gas distribution systems19, standard contract for natural gas transmission20, licensing provisions for economic activities on the natural gas market21.

Directive 2004/67/EC concerning measures to safeguard security of natural gas supply (Articles 338, 341, Annex XXVII to the AA), functioning of an 'Early Warning Mechanism' (Annex XXVI to the AA), reacting to an emergency situation (Articles 275–276, 309, 314)

During the meeting on September 2, Prime Minister Volodymyr Groysman and European Commissioner Maroš Šefčovič agreed that the Government, together with the European Commission, with the view to enhancing energy safety of Ukraine, will accelerate the updating of the energy strategy and signing of a memorandum on combined action22.

Signing of the Memorandum of Understanding between Ukrtransgaz and GTS operators in Greece (DESFA S.A.), Bulgaria (Bulgartransgaz EAD) and Romania (NGTC TRANSGAZ S.A.) was one of the results of the CESEC group meeting held on 8–9 September in Budapest dedicated to the development of the gas transportation infrastructure in Central and South-Eastern Europe23. That document was a result of those countries’ attempt to agree on a plan of establishing a two-way gas transmission corridor24.

Meanwhile, the Government defined a traditional form of coordination in respect of security of supplies of energy resources, i.e. the Inter-ministerial working group for preparing fuel and energy sector facilities for the 2016–2017 autumn and winter period with the view to going through it25.

16 http://www.nerc.gov.ua/?id=21404 17 http://www.nerc.gov.ua/?news=5393 18 https://www.youtube.com/watch?v=yrtI8KdIvDs 19 These amendments provide for enhanced public control over drafting plans for the development of gas distribution systems by the GTS operators. 20 These amendments concern setting the capacity of an exit point from the GTS where a direct consumer orders gas transmission services. 21 http://www.nerc.gov.ua/?id=18452 22 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249279515&cat_id=244276429 23 https://ec.europa.eu/energy/sites/ener/files/documents/CESEC%202016.09.09%20HLG%20conclusions%20-%20FINAL.PDF 24 http://utg.ua/utg/media/news/2016/09/pdpisano-memorandum-pro-spvpraczyu-z-operatorami-gts-bolgar-rumun-ta-turechchini.html 25 http://www.kmu.gov.ua/control/uk/cardnpd?docid=249350578

Electricity and Nuclear Security The major event in September was passing by the VRU of the Laws “On the Electricity Market of Ukraine” (No. 4493) and “On the National Energy and Public Utilities Regulatory Commission” (No. 2966-д) as a whole.

The NEPURC focused on regulatory acts on quality of energy supplies to households.

Prior to the heating season, the major attention of the Government was turned to resolving the issue of energy crisis, in particular accumulation of coal and drafting plans for compensation thereof from other energy sources. During September, measures were also taken to enhance safety of NPPs and improve the radiological monitoring in accordance with the EU standards. In accordance with the Law of Ukraine “On Nuclear Power Use and Radiological Safety”, the draft order “On approval of General provisions of safety as to radioactive waste management prior to disposal thereof” was published. The VRU ratified the Agreement between the Government of Ukraine and the European Atomic Energy Community on scientific and technological cooperation and associated participation of Ukraine in the Euratom Research and Training Programme (2014–2018).

Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (AA: Article 269, Chapter 11, Title IV of the Association Agreement between the EU and Ukraine)

During the plenary meeting on September 22, the VRU approved the Draft Law of Ukraine On the Electricity Market of Ukraine” (No. 4493) in the first reading26. The Committee on Fuel and Energy Complex will accept proposals from MPs on the amendments to that Draft Law during the next two weeks. The working group is chaired by MP from the Samopomich faction Lev Pidlisetskyi. On the following day, the Committee on Fuel and Energy Complex, with the participation of MPs, managers in the sector and Ukrainian and international experts, held the Round table “Major challenges for the new electricity market”.27

On September 22, the VRU also approved the Law of Ukraine “On the National Energy and Public Utilities Regulatory Commission” (No. 2966-д) as a whole.

Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (AA: Article 273, Chapter 11, Title IV)

The Government of Ukraine published the CMU Resolution No. 591 of 23.08.2016 amending the Rules of use of electricity by the households (CMU Resolution No. 1357 of 26 July 1999). 28 These amendments aim to improve the procedural issues, notices of disconnection, contracts on sale and purchase of electricity at the “green” tariff. These amendments became effective on September 20.

On September 2, the NEPURC published the Draft Resolution “On approval of the Procedure of ensuring compliance with electricity supply service quality standards”.29 This draft provides for reimbursements to consumers for failure to comply with the guaranteed electricity quality standards.

On September 7, the Commission published the draft resolution on amendments to the Methodology of calculation of payments for connecting electricity generating plants to electricity networks.30 That draft document provides for improving the provisions of the Methodology, simplifying and improving the procedure of setting the price for connecting electricity generating plants to electricity networks and improving Ukraine’s ranking in the Ease of Doing Business Index prepared by the World Bank and the

26 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=4493&skl=9 27 http://kompek.rada.gov.ua/kompek/control/uk/publish/article;jsessionid=E91CDBE66DA431B34DDC1FB258A67F13?art_id=52642&cat_id=52641&showHidden=1 28 http://www.kmu.gov.ua/control/uk/cardnpd?docid=249303067 29 http://www.nerc.gov.ua/index.php?news=5366 30 http://www.nerc.gov.ua/index.php?news=5383

Electricity and Nuclear Security International Finance Corporation (IFC) on an annual basis. A number of experts turn their attention to the possibility of implementation of the ideas incorporated into that draft document only after amending the Law of Ukraine “On Electricity”.

On September 20, the NEPURC held consultations with the civil society — public hearings “State and the prospects of development of the monitoring system and regulation of the quality of services in the electricity sector”. The purpose of that event was discussion of the state of the monitoring of the quality of services in the electricity sector, prospects of its development and transition to regulation of the quality of such services.31

On September 23, the Procedure for market formation of market-based retail tariffs for electricity supplied to the consumers was officially published (NEPURC Resolution of 13.06.2016 No. 1129) entering into force on 1 January 2017. The regulator believes that this Procedure will allow gradual transition to fair market-based retail electricity tariffs for consumers and make possible cancellation of region-based cross-subsidies between the consumers and energy companies.32

On September 26, the NEPURC published the draft Procedure for open hearings on prices/tariffs, their components, for all categories of consumers, changes in such prices/tariffs to be made by natural monopolies and participants of the adjacent markets. The purpose of adoption of that Procedure is to ensure unhindered and free access of consumers to information on calculation of the prices/tariffs for electricity, gas and housing and public utility services.33

Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (AA: Article 274, Chapter 11, Title IV)

The MECI created the Managing Committee for coordination of work on updating the Energy Strategy of Ukraine until 2035 composed of the representatives of that Ministry, NEPURC, MPs, donor organisations. On the meeting held on September 13, the Managing Committee proposed to appoint the National Institute for Strategic Studies as the chief contractor to draft the above document34.

Regulation (EC) No. 714/2009/EC of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No. 1228/2003 (AA: Article 270, Chapter 11, Title IV)

In accordance with the NEPURC Resolution of 30.08.2016 No. 149235, SE Energorynok was entitled to create a local authority responsible for issuing energy identity codes ЕІС ENTSO-E (МОВ ЕІС ENTSO-E).

The European Network of Transmission System Operators (ENTSO-E) authorised 36 МОВ ЕІС ENTSO-E functioning on the basis of SE Energorynok.37

Regulation (EC) No. 714/2009/EC of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No. 1228/2003 (AA: Article 271, Chapter 11, Title IV)

NEC Ukrenergo, being the system operator of the United Energy System, published a draft document on September 1 proposing amendments to the 2016 Investment Programme. Those amendments aim to

31 http://www.nerc.gov.ua/index.php?news=5404 32 http://www.nerc.gov.ua/index.php?news=5417 33 http://www.nerc.gov.ua/index.php?news=5420 34 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245142949&cat_id=35109 35 http://www.er.gov.ua/data/entso/postanova.jpg 36 http://www.er.gov.ua/data/entso/LIO_62_ENERGORYNOK2.pdf 37 http://www.er.gov.ua/

Electricity and Nuclear Security redistribute proceeds from trading emissions under the Kyoto Protocol as well as income from capacity distribution of interstate electricity networks38.

On September 1, NTC Ukrenergo informed about the completion of the investigation into the reasons of violation of normal regimes of network operation in respect of the Kyiv 110 kV power node which occurred on 21 June 2016 when interconnections 330 kV Chernobyl NPP – Pivnichna, 110 kV Chernobyl NPP – Pivnichna, 110 kV Chernobyl NPP – Bohdany were switched off.39 Among the major reasons were insufficient control of generation of active and reactive capacity on Kyiv CHPP-5 (with no generation at the CHPP-6) along with the grow in consumption of Kyiv power node in the summer period and inability on the part of Kyiv’s HPPs and pump-storage generating units to immediately increase the load with the reduced voltage.

September 19 saw completion of construction and connection of a facility of national importance, the entry of an aerial power line with the voltage of 750 kV between Khmelnitskyi NPP – Chernobyl NPP to the 750 kV sub-station Kyivska. Putting that facility into operation will ensure switching in of Khmelnitskyi NPP’s capacity and reliable supply of both Kyiv and central regions of Ukraine40.

Article 338, Chapter 1, Title V of the EU–Ukraine Association Agreement Cooperation Agreements with IFIs

On September 2, Maroš Šefčovič, the Vice President of the European Commission for Energy Union, confirmed the EU’s readiness to provide Ukraine with Macro-Financial Assistance in the amount of EUR 600 million but it may happen only after passing a legislative package concerning the NEPURC’s status, reform of the gas and electricity markets, creation of the Energy Efficiency Fund41. On September 22, Satu Kahkonen, the World Bank Country Director for Ukraine, Belarus and Moldova, stated that the World Bank plans to provide Ukraine with USD 500 million credit guarantees in close future with the view to purchasing natural gas needed for the heating season.42

According to the Prozorro system data, on September 1, SE NNEGC Energoatom concluded an agreement with Merrill Lynch, Pierce, Fenner & Smith Inc. acting in the capacity of Bank of America Merrill Lynch, on coordination of investment of USD 250 million for the nuclear waste repository.43

Within the framework of deepening cooperation with other countries in the energy sphere, with the view to fostering development of the energy sector, on September 19, Minister Іhor Nasalyk and Zhang Jinsong, Vice General Manager of the CNBM International Corporation, PR China, signed the Memorandum of cooperation and implementation of common projects in the energy sector. The planned size of CNBM’s investments is expected to be up to USD 2 billion.44 Also, in accordance with the Prime Minister’s statement, Ukraine and the EU intend to sign, until 2017, the Memorandum of understanding and cooperation in the energy sector.45

On September 6, the Government approved the final report on the results of implementation of the project, together with the EBRD and Euratom, on post-construction modernisation of the nuclear power unit 2 of Khmelnitskyi NPP and the nuclear power unit 4 of Rivne NPP.46 On September 20, under the Project of the Joint Operational Programme Romania–Ukraine–Republic of Moldova 2007–2013 (JOP RO–UA-MD 2007–2013), technical and economic conclusions were presented as to the possibilities of synchronous interconnection of Ukrainian and Moldavian energy systems with the continental European energy system. In accordance with those conclusions and recommendations, some authorities, including ENTSO-E, will

38 http://www.ukrenergo.energy.gov.ua/Pages/ua/DetailsNew.aspx?nID=3016 39 http://www.ukrenergo.energy.gov.ua/Pages/ua/DetailsNew.aspx?nID=3023 40 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245144412&cat_id=35109 41 http://www.epravda.com.ua/news/2016/09/2/604251/ 42 http://eircenter.com/news/svitovij-bank-dast-ukrayini-500-mln-dol-kreditnix-garantij-na-zakupivlyu-gazu/ 43 https://www.rbc.ua/ukr/news/bank-of-america-pomozhet-energoatomu-privlech-1473070906.html 44 https://www.rbc.ua/ukr/news/bank-of-america-pomozhet-energoatomu-privlech-1473070906.html 45 https://www.rbc.ua/ukr/news/ukraina-es-namereny-2017-podpisat-memorandum-1472808596.html 46 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245140944&cat_id=245070653

Electricity and Nuclear Security decide on necessary measures, and Ukrainian and Moldovan experts will continue further preparation of their energy system for synchronous operation.47

Article 339, Chapter 1, Title V of the EU–Ukraine Association Agreement, coal market

The coal sector is in deep crisis. The proposed Concept of reforming the coal sector until 2020 does not provide a clear vision of the future development of the sector. This situation is the result of failure on the part of the MECI to finally decide on the general concept as to the vision and prospects of the sector development48, and that is why it cannot propose a clear strategy of tackling the crisis. Despite that, adoption by the VRU of the draft 2017 State Budget already approved by the Government on September 15, which provides for the allocation of UAH 1,8 billion for restructuring the domestic mines and support of the coal industry, will make it possible to stabilise the situation in the short-term prospects49.

During September, the Government was forced to focus its attention and efforts on solving immediate problems relating to preparations to the heating season. According to Minister Ihor Nasalyk, the MECI conducts preparatory works for the winter period in accordance with the schedule provided for by the Plan of preparation for the autumn-winter season50. However, a number of experts express concerns as to the risks of disruption of the heating season because of pretty low coal reserves and real lagging behind the schedule for accumulation of coal set by the MECI51. That rather critical situation is also proven by the fact that the Government has been forced to reactivate, for the first time during the last four years, the oil/gas units of TPPs52 and to order the creation of the fuel oil reserve as well as to increase the plan of natural gas injection up to 17 billion cubic metres53. The Government, however, is adamant in its attempts to deal with the situation successfully. The Minister of Energy assures that Ukraine may entirely be independent of the fuel coming from the ATO zone due to the above measures, imports and increase in NPP productivity54. He also stated that a clear strategy of increasing domestic coal mining has already been tried and tested to make it possible to give up using imported gas within a four-year period.55 Ukrainians will have a chance to check the Government’s efficiency in dealing with the challenges in the energy sector as soon as the heating season starts.

On September 22, the CMU adopted Ordinance No. 677-р “On the reallocation of some expenditures of the State Budget as provided for by the MECI for 2016”56, which provides for the allocation of funds for the Government subvention in respect of the coal mined, which, accordingly, will make it possible to close the current issue pertaining to unpaid miner salaries.

Article 342, Chapter 1, Title V of the EU–Ukraine Association Agreement, cooperation in the nuclear safety sector, Council Directive 2014/87/Euratom, Council Directive 2013/59/Euratom, Council Directive 2006/117/Euratom

With the view to fulfilling its commitments as regards the issues of radiation safety and bringing it in line with the EU standards, the Ukrainian party, during September, worked towards the implementation of projects on improvement of both the security of Ukrainian NPPs and radiation control. On September 15, the SNRIU’s Draft Order “On approval of the General provisions for safety of radioactive waste management prior to

47 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245144936&cat_id=35109 48http://www.kmu.gov.ua/control/uk/publish/article?art_id=249343697&cat_id=244276429 49 http://economics.unian.ua/industry/1524764-proekt-byudjetu-2017-vugilna-galuz-otrimae-mayje-2-milyardi.html 50 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245142167&cat_id=35109 51 http://ua-energy.org/post/62958 52 https://daily.rbc.ua/ukr/show/gori-vse-nakanune-otopitelnogo-sezona-strane-1473370308.html 53 http://www.kmu.gov.ua/control/ru/cardnpd?docid=249295853 54 http://economics.unian.ua/energetics/1522579-ukrajina-moje-povnistyu-obiytisya-bez-postavok-vugillya-iz-zoni-ato-ministr-energetiki.html 55 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245144961&cat_id=35109 56 http://zakon3.rada.gov.ua/laws/show/677-2016-%D1%80

Electricity and Nuclear Security disposal thereof” was published. The order was prepared on the basis of the Law of Ukraine “On Nuclear Power Use and Radiological Safety”.57

Ukraine has been submitting data to the European Radiological Data Exchange Platform (EURDEP) in real-time in the testing regime for over two months which enhances the opportunities for making assessment and prognosis in radiological emergency cases and provides free access of the public to the radiological information, in accordance with the EU standards for protection of the population against the dangers arising from exposure to ionising radiation.58 Also, in accordance with the recommendations of the IAEA’s OSART mission on introduction of the international principle of the radiation protection ALARA and the repeated inspection of the Nuclear Insurance Pool of South Ukraine NPP’s location, actual works on creation of a system of monitoring of tritium and carbon 14 emissions commenced at South Ukraine NPP in September. The above system is planned to be launched in test operation before the end of the year.59

On September 28, Energoatom NNEGC and Westinghouse agreed to start works on the Efficiency Improvement Program (EIP) for Ukrainian NPPs, which will include a number of measures taking into account security aspects to ensure compliance with the particular EU standards. The above measures will be supplementary to the ongoing works on improvement of security within the framework of the Complex Consolidated Safety Upgrade Program supported by the EBRD and Euratom.60

Ratification by the VRU of the Agreement on Scientific and Technological Cooperation between Ukraine and Euratom and associate participation of Ukraine in Euratom’s research and training program (2014–2018) was a positive step towards the implementation of the EU nuclear safety standards.61 Ukraine’s joining the Euratom as an associate member opens ways for participation of Ukrainian research institutions in promising nuclear energy projects.62

During September, in the framework of the Treaty between Ukraine and IAEA on Non-proliferation of Nuclear Weapons, IAEA inspections took place at Zaporizhia and63 Rivne NPPs64. In the framework of improvement of safety and reliability of the NPPs, WANO visited South Ukraine NPP (SUNPP)65 and Khmelnitskyi NPP (KhNPP).66 WANO will prepare a detailed report on the results of WANO’s work, which will also include conclusions and recommendations; the WANO’s experts, however, have already noted substantial progress achieved by SUNPP compared to 2014.67 Moreover, the level of security at KhNPP was monitored by representatives of the OCSE special monitoring mission in Ukraine, who visited the above plant on September 20.68

57 http://www.snrc.gov.ua/nuclear/uk/publish/article/334595 58 http://www.snrc.gov.ua/nuclear/uk/publish/article/334369 59 http://www.energoatom.kiev.ua/ua/press/nngc/45838-na_yujnoukranskyi_aes_stvoryutsya_sistema_kontrolyu_vikidv_trityu_ta_vugletcyu_s/ 60 http://www.energoatom.kiev.ua/ua/press/nngc/45900-joint_statement_of_se_nnegc_energoatom_and_westinghouse_on_expansion_of_cooperation_on_the_occasion_of_the_visit_of_secretary_of_commerce_penny_pritzker/ 61 http://rada.gov.ua/news/Novyny/134904.html 62 http://mon.gov.ua/usi-novivni/novini/2016/06/28/pidpisano-ugodu-pro-uchast-ukrayini-u-programi-naukovix-doslidzhen-evratom/ 63 http://www.energoatom.kiev.ua/ua/press/nngc/45794-na_zaes_provoditsya_planova_nspektcya_magate/ 64 http://www.energoatom.kiev.ua/ua/press/nngc/45874-raes_dotrimutsya_umov_ugodi_z_magate/ 65 http://www.energoatom.kiev.ua/ua/press/nngc/45859-na_yujnoukranskyi_atomnyi_stantc_prohodit_povtorna_partnerska_perevrka_vao_aes/ 66 http://www.energoatom.kiev.ua/ua/press/nngc/45851-na_hmelnitckyi_aes_zavershila_robotu_msya_tehnchno_pdtrimki_vsesvtno_asotcatc_operatorv_atomnih_elektrostantcyi/ 67 http://www.energoatom.kiev.ua/ua/press/nngc/45882-na_yujnoukranskyi_atomnyi_elektrostantc_zaversheno_planovu_povtornu_partnersku_perevrku_vao_aes/ 68 http://www.energoatom.kiev.ua/ua/press/nngc/45867-rven_bezpeki_na_hmelnitckyi_aes_montorili_predstavniki_ms_obs/

Electricity and Nuclear Security On September 21, the power unit 1 of Zaporizhia NPP was put into operation in an off-design term based on the license for continuing operation of ZNPP’s power unit 1 until 23 December 2025.69

The Government continued looking for ways to achieve the objective to diversify nuclear fuel supplies. On September 19, the second meeting between Ihor Nasalyk with the Chairman of the Board of NAC Kazatomprom JSC Aska Zhumagaliyev took place. Ukraine considers Kazakhstan as a reliable supplier of enriched uranium in future. The parties agreed to work out the above issue in more detail in view of its economic viability for both parties.70

Article 342, Chapter 1, Title V of the EU–Ukraine Association Agreement, Cooperation in the nuclear safety sector. Cooperation aims at resolving problems caused by the Chernobyl accident and putting Chernobyl NPP out of operation

As of mid-September, construction of a New Safe Confinement (the Arch) at Chernobyl NPP is at the final phase of the second stage of transforming the “Shelter” into an environmentally safe system. It is planned that the Arch structure would slide in place on 29 November 2016, with the participation of the donor countries of the Chernobyl Shelter Fund.71

SEZA, Chernobyl Research and Development Institute and EasyBusiness presented a teaser they made for an investment project Chornobyl Solar which concerns construction of a solar power plant in the exclusion zone. The project is at the stage of development, and both domestic and foreign investors are invited to take part in it.72

69 http://www.energoatom.kiev.ua/ua/press/nngc/45871-energoblok__zaporzko_aes_pristupiv_do_roboti_v_ponadproektniyi_strok/ 70 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245144738&cat_id=35109 71 http://dazv.gov.ua/novini-ta-media/vsi-novyny/povidomlyaemo-pro-datu-zavershennya-protsesu-budivnitstva-ta-nasuvannya-arki-na-ob-ekt-ukrittya-chornobilskoji-aes.html 72 http://dazv.gov.ua/novini-ta-media/vsi-novyny/vidnovlyuvalna-energetika-u-zoni-vidchuzhennya-novi-mozhlivosti-dlya-sektoru-energetiki.html

Energy Efficiency and Social Issues The Government’s inability to effectively fight against the obstacles in the way to large-scale modernisation in the country only strengthens a negative assessment of Ukraine’s actions to fulfil its commitments to the European Union under the Association Agreement. In the context of the declared reform objectives, the effective results achieved are next to none. The statements of politicians on the need to implement large-scale energy efficiency measures remain only populist theses pronounced during numerous conferences dedicated to the issues of energy efficiency, never turned into reality.

The “warm loans” program in so far as it concerns support of natural persons, never resumed in September as a result of tangled bureaucratic procedures of decision-making by central executive bodies. Inability of the Ministry of Regional Development to bring into effect the already taken decision about additional financing of the programme is a bright example of an inconsistent public policy. As a matter of fact, that programme may end in 2016 because despite the fact that the SAEE submitted a budget request for the next year to the Ministry of Finance seeking further financing in the amount of UAH 1.9 billion, the Law of Ukraine “On the State Budget for 2017” provides for no expenses for that purpose.

The process of creation of the Energy Efficiency Fund, which is among the preconditions for Macro Finance Assistance from the EU, also goes on quite slowly, the regulatory basis to regulate its operation has not yet been developed. The draft State Budget for 2017, however, provides for the expenses for the Fund’s operation in the amount of UAH 800 million, which is, nonetheless, 60 times less than the expenses provided for the subsides for households.

The draft laws of Ukraine on the energy performance of buildings, commercial accounting of public utility services and on public utility services (new version) were submitted to the Verkhovna Rada of Ukraine as those of the highest priority but weren’t put on the agenda for vote in September.

Directive 2012/27/EU on energy efficiency

Energy audits and energy management systems (Article 8)

According to the information from domestic sources, the CMU’s draft Ordinance “On approval of the Action plan for the introduction of the energy management systems in state-financed organisations” is pending at the Ministry of Finance while repeatedly agreed on based on the results of the coordination meeting with representatives of the civil society held on 6 September 2016. In accordance with the regulatory requirements, when agreed on by the Ministry of Finance, the said draft document is to be submitted to the Ministry of Justice for legal assessment and then submitted to the Government for consideration.

Metering (Article 9)

The Draft Law submitted by MPs “On Commercial Accounting of Public Utility Services” (No. 4901 of 06.07.2016) was considered at the meeting of the Parliamentary Committee on Construction, Urban Development, Housing and Communal Services. That Draft Law proposes to define principles of arranging commercial accounting of thermal power, hot water, district water supply services and providing consumers of those services with the relevant accounting information. Based on the result of the consideration, the Committee decided to recommend the Verkhovna Rada to adopt the Draft Law in the first reading and to put it at the next meeting on the list of high priority draft laws to be considered in October 2016. On September 22, the draft resolution was registered in the Verkhovna Rada.73

Energy Efficiency Fund, Financing and Technical Support (Article 20)

In pursuance of the adopted Concept of introduction of the mechanisms of stable financing of the energy efficiency measures (creation of the Energy Efficiency Fund), the Ministry of Regional Development has drawn up a draft action plan for the implementation thereof. The respective regulatory act, after having been agreed on with all executive bodies concerned, is pending legal assessment in the Ministry of Justice. According to unofficial information, specialists of consultative bodies on the EU technical assistance joined up the process of drafting secondary legislation and improving certain norms of the relevant framework draft 73 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=60106

Energy Efficiency and Social Issues law, so that we may expect substantial improvement in those draft documents in conformity with the EU acquis.

Energy services

Despite some inconsistency between the provisions regulating public procurement and the regime of concluding energy services contracts74, the first contract of that type was signed in September, and particularly it was in respect of a secondary school in Odessa oblast, whose reduction in energy consumption during the next 10 years is expected to reach at least 28%.75

Directive 2010/31/EU on the energy performance of buildings

The relevant Parliamentary Committee, on September 21, considered a long-awaited Government’s Draft Law “On the Energy Efficiency of Buildings” (No. 4941 of 11.07.2016) and recommended the Parliament to adopt it in the first reading and to put it on the list of the draft laws of the highest priority for consideration. Therefore, we may expect that the Law will be passed, at least in the first reading, already in October this year.

Directive 2010/30/EU on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products

With the assistance of the EBRD’s Finance and Technology Transfer Centre for Climate Change Programme (FINTECC), SAEE has held first meetings of the Technical consultative group and Inter-ministerial work group that are drafting secondary legislation on ecological design.76 Officials, experts and manufacturers of industrial goods discussed the drafted Technical regulations but were unable to finalise that work.

Social issues

In the context of difficulties with financing of so called “warm loans” for households with the substantial lagging behind the schedule as regards systematisation of efforts on improving energy efficiency through the relevant Fund, the Government pays much attention to social support of the population. In the draft State Budget for 2017, about UAH 50.7 billion are planned to be allocated to finance household subsides and allowances, and it also planned to additionally allocate almost UAH 2.5 billion to finance acquisition by the population of solid and liquid fuels for households.77 The Government’s inability to arrange monetisation of the idle balances left from the subsidies provided is a sensitive issue, which at the same time dissuades the population to reduce consumption and also disables the opportunity to allocate substantial resources for the implementation of measures aimed at improving energy efficiency.

According to the part of the Annual Implementation Report on the Acquis under the Treaty Establishing the Energy Community prepared by the Energy Community Secretariat dedicated to Ukraine, provisions aimed at social protection of the population in Ukraine have been introduced partially and fragmentarily.78 Among other observations, the Secretariat notes that the system of protection of most vulnerable customer categories is based on the general support schemes for the population, and therefore, it doesn’t take into account the relevant provisions of the EU directives. At the same time, in the gas sector, the situation is somewhat better as a result of adoption of the sectoral law, and the law on the electricity market developed in line with the social standards of the Third Energy Package is yet to be adopted by the Verkhovna Rada.

74 http://saee.gov.ua/sites/default/files/15_Dragonchuk.pdf 75 http://energynews.com.ua/news/18585 76 http://saee.gov.ua/uk/news/1341 77 http://ua.interfax.com.ua/news/general/371003.html 78 https://www.energy-community.org/portal/page/portal/ENC_HOME/DOCS/4332414/3D795DA4811D69D4E053C92FA8C07422.pdf

Environment and Renewable Energy Sources In its implementation report for 2015/2016, the Energy Community Secretariat noted that two infringement procedures had been initiated against Ukraine (as regards sulphur and EIA) which makes Ukraine’s performance in the field of environment one of the worst in the Energy Community.79 Meanwhile, the Parliament and the Ministry of Ecology and Natural Resources of Ukraine are preparing two vital draft laws for the second reading: on environment impact assessment and on strategic environmental assessment.

It is even more relevant because, according to the World Health Organisation’s survey, Ukraine tops the list of the countries with the highest rate of deaths related to air pollution relative to its population80.

Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment (codification) (Article 363 of the AA)

On 12 July 2016, the Parliament approved the Draft Law of Ukraine “On Environmental Impact Assessment” (reg. No. 2009а-д) in the first reading.81 That Draft Law is now being prepared for the second reading.

As result of Ukraine’s failure to fulfil its obligation to introduce the procedure of environmental impact assessment, the Energy Community Secretariat initiated the infringement procedure against Ukraine and sent a relevant notice to that effect. On 7 September 2016, the Ministry of Ecology and Natural Resources of Ukraine published a statement with its opinion on the situation and called upon the Parliament to pass the relevant draft laws as soon as possible. “Hope that joining forces of the public authorities, civil society and MPs will make it possible to achieve success — to fulfil the international commitments and adopt up-to-date European acquis in the area of environment. The Ministry of Ecology and Natural Resources of Ukraine, in its turn, is ready for the open discussion of the draft laws and the procedure of settlement of the contradictions that arose with the representatives of the Energy Community Secretariat”, the statement reads.

In support and facilitation of the draft laws on EIA and SEA, on 20 September 2016, the round table “EU integration in the field of environmental assessment: EIA and SEA” took place with the participation of MPs, the Ministry of Ecology and Natural Resources, members of the European Parliament and the European Commission, the Energy Community Secretariat, civil society, experts.82 All the speakers underlined the importance and necessity of the introduction of the procedures of Environmental Impact Assessment and Strategic Environmental Assessment to meet the EU standards. There were also critical remarks as regards of the draft laws, and particularly concerning the need to bring the procedures in line with the urban-planning standards, inefficiency of the licensing nature of EIA procedure, the problems with activities requiring environmental impact assessment.

Directive 2001/42/EC on the assessment of the effects of certain plans and programmes on the environment (Article 363 of the AA)

On 12 July 2016, the Parliament approved the draft Law of Ukraine “On Strategic Environmental Assessment” (reg. No. 3259) in the first reading.83 The document is now being prepared for the second reading.

Directive 2009/147/EC on the conservation of wild birds (Article 4.2) (Article 363 of the AA)

79 https://www.energy-community.org/portal/page/portal/ENC_HOME/DOCS/4332394/3D790302C9FD5024E053C92FA8C0D492.pdf 80 http://life.pravda.com.ua/health/2016/09/28/218446/ 81 http://zakon3.rada.gov.ua/laws/show/1449-19 82 https://www.facebook.com/OrhusCenterKyiv/posts/1624043224559976 83 http://zakon5.rada.gov.ua/laws/show/1450-19

Environment and Renewable Energy Sources What concerns the two draft laws that may have a positive impact on the conservation of wild birds, registered with the Parliament in July 2016 (the Draft Law of Ukraine No. 4964 of 12.07.2016 on amending certain legislative acts of Ukraine (concerning infringement of environmental legislation)84 and the Draft Law of Ukraine No. 4869 on amending certain legislative acts of Ukraine (on strengthening of conservation measures)85), necessary preparatory works are being performed prior to the first reading; both draft laws received the conclusions of the Central Scientific Experts Office of the Verkhovna Rada of Ukraine Secretariat and of the Committee on Environmental Policy. Both of them have been recommended to be adopted in the first reading with further taking into account of the observations made.

Directive 2010/75/EU on industrial emissions (integrated pollution prevention and control) (Article 363 of the AA)

The Energy Community Secretariat, in its Annual Implementation Report, noted submission for its consideration of the National emission reduction plan of major pollutants from large combustion plants as the only positive step in the area of environment.86 Nonetheless, the Government’s promise to approve the National Plan by the end of 2015 has remained unfulfilled until now.

Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (Article 338 of the AA)

In the end of September, in Hamburg, an international fair WindEurope Hamburg and the summit WindEurope Hamburg 2016 were held, and that became a major event in the world energy industry. The event attracted 1,435 participants from 34 countries, including leading players of the global wind-power market, politicians and financiers. It’s worth noting that the Ukrainian delegation was the largest among those of the post-Soviet states and from the Eastern Europe87.

Moreover, on September 23, the first 3-MW turbine was sent from the Kramatorsk plant Fuhrländer Wind Technology. The wind turbine of that class has been manufactured in Ukraine for the first time. It is going to be installed in Ochakiv raion of Mykolaiv oblast in the area of Prichornomorskyi wind farm.

Directive 2009/28/EC on the promotion of the use of energy from renewable sources

The Draft Law No. 4334 on amending the Law of Ukraine “On Heat Supply” was passed by the Verkhovna Rada in the first reading.88 The above document provides for simplification of the procedure of setting tariffs for thermal energy generated from alternative sources.

The Draft Law No. 4618 on amending Article 8 of the Law of Ukraine “On Alternate Fuels” was also passed by the Verkhovna Rada in the first reading.89 The above Draft Law aims at stopping keeping the state register of undertakings operating in the area of production, storage and marketing of rare biofuels and biogases.

84 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=59662 85 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=59498 86 https://www.energy-community.org/portal/page/portal/ENC_HOME/DOCS/4332394/3D790302C9FD5024E053C92FA8C0D492.pdf 87 http://ua-energy.org/post/63059 88 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=4334&skl=9 89 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=4618&skl=9

Oil The start of a new political season stimulated the Government’s work in the oil sector. In particular, with the view to fulfilling Ukraine’s obligations in so far as they concern simplification of doing business, the Ministry of Energy and Coal Industry of Ukraine has created the Work group on reviewing regulatory acts in the energy sector, and the above group has drawn up the timetable of reviewing the documents to be amended or repealed90.

However, despite certain progress, the rate of the implementation of the EU directives in the oil sector remains insufficient. In particular, the Ministry of Energy and Coal Industry of Ukraine, the Ministry of Ecology and Natural Resources of Ukraine are slow with preparing regulatory acts whose approval was planned for 2016, and the Verkhovna Rada has already several times adjourned consideration of important draft laws on prospecting for, mining and production of hydrocarbons (registered numbers 3038, 3096, 3849) despite their repeated putting on the agenda.

Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products (Article 338 of the AA) In accordance with paragraph 1.1.2 of the Implementation Plan for Directive 2009/119/EC, the Ministry of Energy and Coal Industry of Ukraine must draw up a draft law on maintaining minimal reserves of oil and oil products91, and the Verkhovna Rada is to pass that law in the first reading in December 2016. However, as of 5 October 2016, no information about the progress with that document was published. In the light of that, one may expect that the objective of paragraph 1.1.2 of the Implementation Plan is not going to be met. Another act of the Cabinet of Ministers concerning the model of minimal reserves of oil and/or oil products chosen by Ukraine hasn’t been adopted (objective 1.1.1, deadline — December 2015). Directive 98/70/EC relating to the quality of petrol and diesel fuels and amending Council Directive 93/12/EEC as amended by the Directives 2000/71/EC, 2003/17/EC and 2009/30/EC and regulation (EC) 1882/2003 (Annex ХХХ, Article 360–363, 365, 366 of the AA)

In accordance with the Implementation Plan for Directive 98/70/EC (Articles 7 and 8; paragraph 1.3), the MECI was bound to report on the operation of the system of monitoring of quality and safety of oil products in Ukraine since December 201592. However, as of 5 October 2016, no document to that effect was published.

At the same time, after the liquidation of State enterprise “Ukrainian Scientific and Research Institute for Crude Oil Processing Industry “MASMA””, the chief executor of all tasks as provided for in the plan, especially where it concerned development of the national standards of Ukraine DSTU EN 14274 “Fuel for motor vehicles. Assessment of quality of petrol and diesel fuel. Fuel quality monitoring system” and DSTU 14275 “Fuel for motor vehicles. Assessment of quality of petrol and diesel fuel. Sampling from the dispensers of retail sales and from the fuel pistols at the commercial fuelling stations” harmonised with the respective effective European standards (deadline — December 2016); introduction of the oil products quality and safety monitoring system (deadline — December 2017); ensuring operation of the system of the inter-laboratory comparison of the testing results for confirmation of the quality of testings (deadline — December 2017); development of the national standards harmonised with the European standards necessary for the application of the Technical Regulation on the requirements to petrols for motor vehicles, diesel and ship fuels, and boiler fuels (deadline — December 2016), further works on the implementation of Directive 98/70/EC in Ukraine have been actually suspended.

Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons (Annex XXVII, Articles 279, 280, 341 of the AA)

90 http://mpe.kmu.gov.ua/minugol/doccatalog/document?id=245145708 91 http://www.kmu.gov.ua/document/248091904/Dir_2009_119.pdf 92 http://www.kmu.gov.ua/document/248091869/Dir_98_70.pdf

Oil According to the Implementation Plan for Directive 94/22/EC, a new version of the Subsoil Code of Ukraine is to be approved until the end of 201693. However, as of 05 October 2016, no information about the progress on the part of the Ministry of Ecology and Natural Resources of Ukraine and the State Service of Geology and Mineral Resources of Ukraine to that effect is available. It’s only known that an inter-ministerial group was established to assess the needs of the national economy in strategic mineral resources whose objective is drawing up a relevant draft law94. In the light of that, one may expect that the objective of paragraph 1.1.1 of the Implementation Plan is not going to be met.

On 8 and 22 September 2016, the Draft Law No. 3849 “On Amending Certain Legislative Acts of Ukraine with the View to Fostering Exploration and Extraction of Oil and Gas in Ukraine” was put on the Verkhovna Rada’s agenda95. It proposed to settle the issue of associated mineral resources which are technically or commercially unfeasible to separate during extraction; to cancel the conclusion of production sharing agreements (PSAs) without a tender where they relate to the deposits with insubstantial reserves; to refuse renegotiation in respect of the PSAs relating to particular parts of the fields for which special permits to use the subsoil have been issued; to reimburse the state companies for the development of oil and gas fields prior to the conclusion of PSAs. Unfortunately, the consideration of that Draft Law was adjourned for an unspecified period of time.

The Draft Law No. 3096 “On Amending Certain Legislative Acts of Ukraine with the View to Simplification of Certain Aspects in the Oil and Gas Sector” approved by the responsible committee as far back as on 7 October 2015 and put on the Verkhovna Rada’s agenda on 8 and 22 September 2016 has also been left without consideration96. The document concerns improvement of the procedure of assignment of land lots for conducting prospecting, construction, maintenance, repairs and reconstruction of the pipeline transport, construction of oil and gas well sites, facilities and factories related to the operation thereof, approach drives, power lines and telecommunications. Article 279 of the AA in terms of providing equal access to and exercise of the activities of prospecting, extracting and producing hydrocarbons

Pursuant to Article 279(4) according to which all actors licensed for prospecting, extracting and producing hydrocarbons must pay a certain financial contribution of which the procedure must be properly recorded, the Draft Laws No.No. 3038 and 3038-1 “On Amendments to the Budgetary Code of Ukraine (with the view to streamlining of the system of receipt and application of revenues from the rent for mining, extraction of oil, gas and gas condensate)” on 8 and 22 September were put on the Verkhovna Rada’s agenda. The authors of the Draft Laws No.No. 3038 (3038-1) proposed to fix the distribution of the revenues from the rent for mining, extraction of oil, gas and gas condensate as follows: 2% (1%) — to village, township and town/city budgets, 1.5% (4%) — to the budgets of oblasts, and 1.5% (5%) — to the budgets respective raions (the rest should go to the general fund of the State Budget of Ukraine). But despite the paramount importance of those documents for local communities, their consideration by the Verkhovna Rada has been adjourned for an unspecified period of time.

Article 338 of the AA in terms of continuing and enhancing cooperation in the energy sector

Pursuant to Article 338(a) on the implementation of energy strategies and policies and development/elaboration of forecasts and scenarios, and in view of the concerns expressed by independent experts in August about the fact that the Energy Strategy of Ukraine until 2035 was being developed without the knowledge of the public, the Managing Committee responsible for the coordination of drafting of that document, at the meeting on 13 September 2016, proposed to appoint the National Strategic Research

93 http://www.kmu.gov.ua/document/248102926/Dir_94_22.pdf 94 http://www.kmu.gov.ua/control/publish/article?art_id=249033740 95 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=57980 96 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=56470

Oil Institute to be the chief executor and ensure systematization of the previously prepared materials97. The Energy Strategy in line with Ukraine’s international commitments is expected to be finalized in Q4 201698.

Pursuant to Article 338(d) on development of competitive, transparent and non-discriminatory energy markets in convergence with EU rules and standards through regulatory reforms, by its Order No. 569 of 5 September 2016, the Ministry of Energy and Coal Industry created a Working group for the review of regulatory acts in the energy sector that need to be amended or repealed99. With the purpose to simplify activities in the area of production, storage and marketing of biological alternatives to petrol and diesel fuel, on 22 September 2016, the Verkhovna Rada of Ukraine passed the Draft Law No. 4618 “On Amending Article 8 of the Law of Ukraine “On Alternative Fuels” in the first reading which is proposes to cancel requirements to keeping state register of undertakings that carry out respective activities100.

97 http://mpe.kmu.gov.ua/minugol/control/publish/article?art_id=245142949 98 http://www.kmu.gov.ua/document/249113344/R0418-00.doc 99 http://mpe.kmu.gov.ua/minugol/doccatalog/document?id=245145708 100 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=59009

Business Climate In addition to passing the draft laws on the energy regulator (No. 2966-д) and on the electricity market (No. 4493) in the second and first reading, respectively, a number of drafts laws were also adopted in the first reading aiming to create more favourable conditions for companies to increase heat production from renewable sources (No. 4334) and increase the use of alternative fuels (No. 4618). At the same time, Prime Minister of Ukraine Volodymyr Groysman supported the drafting of the gas industry development strategy until 2020 with the view to giving up imports of natural gas. Moreover, the VRU has adjourned the consideration of the draft law aiming to create more favourable and attractive conditions for mining companies to carry on their economic activity (No. 3849), and hence to increase the domestic oil and gas production. Representatives of the business, the Antimonopoly Committee of Ukraine, the Ministry of Energy and the EU continued their dialogue and held a round table to discuss the issues of competition in the energy sector. Title IV, Chapter 11 of the Association Agreement, Trade-related energy Directives 2009/72/EC and 2009/73/EC concerning common rules for the internal market in electricity and natural gas, respectively

The VRU adopted the Draft Law No. 2966-д on the NEPURC in the second reading as a whole101, however, its further legalisation has been slowed down in view of the registration, on the same day, of the draft resolution by MPs of the Radical Party on cancelling the vote due to the alleged violation of the procedural rules102.

The Draft Law No. 4493 on the electricity market was adopted in the first reading and forwarded to the Committee on Fuel and Energy Complex for improvement with the view to its further approval in the second reading103.

The Draft Law No. 3617 amending the Law of Ukraine “On the Natural Gas Market” was adopted and forwarded to the President for signature.104 Those amendments concern the insurance reserve of which the lower threshold is to be set by the Cabinet of Ministers annually for all gas suppliers, and the upper threshold has been set by the law at the level of maximum 10% of the planned volume of monthly natural gas supply to consumers for the following month.

Consideration of the Draft Law No. 3849 amending certain legislative acts of Ukraine on facilitating prospecting for and extraction of oil and gas in Ukraine has been postponed105. The proposed amendments included reduction of the term for deciding on production sharing from three to one month, definition of the term “subsoil plot”, procedure and terms for environmental contamination assessment. That draft document also provides, for the first time, for covering investor expenditures relating to prospecting for, exploration and extraction within the boundaries of a subsoil plot under a production sharing agreement. Title IV, Chapter 10, Part 2 of the Association Agreement, State aid By its Order No. 587106, the Ministry of Energy and Coal Industry of Ukraine created a working group for quick response to problems of investors in the energy sector of Ukraine. This working group includes all managers of the Ministry, including the Minister of Energy, as well as representatives of the American Chamber of Commerce in Ukraine and the European Business Association.

101 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=2966-%E4&skl=9 102 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=60092 103 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=4493&skl=9 104 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=3617&skl=9 105 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?id=&pf3516=3849&skl=9 106 http://mpe.kmu.gov.ua/minugol/doccatalog/document?id=245143771

Methodology The Project is being implemented by five partners and two invited permanent experts. The Project is being implemented by the following five partners: NGO “DIXI GROUP”, Resource & Analysis Center “Society and Environment”, Civil Network “OPORA”, Association “European-Ukrainian Energy Agency”, and All-Ukrainian NGO “Energy Association of Ukraine”. Among the project permanent members are L. Unigovskyi, General Director of Naftogazbudinformatyka LLC, and G. Riabtsev, Social Program Director of Psycheа Scientific and Technical Centre.

For the purpose of monitoring the implementation of the Association Agreement, the project participants have been divided into six working groups. These are, in particular, Gas group: L. Unigovskyi and R. Nitsovych (DiXi Group); Electricity group: S. Golikova (Energy Association of Ukraine) and O. Shumilo; Energy Efficiency and Social Issues group: T. Boyko (OPORA) and D. Nazarenko (DiXi Group); Environment and Renewable Energy Sources group: N. Andrusevych (Society and Environment) and N. Yermakova (DiXi Group); Business Climate and Investments group: V. Beliakova (European-Ukrainian Energy Agency) and A. Bilous (DiXi Group), Oil group: G. Riabtsev (Psychea) and T. Tkachuk (DiXi Group).

The Project participants identified the monitoring framework for each working group based on the results of their analysis of the Association Agreement. This framework is described in Annex 1.

The main source of information for monitoring purposes is official information provided by public authorities. These include, in particular, adopted regulatory and legal acts, statements by top officials, information about meetings and events with the participation of representatives of public authorities. Also, monitoring could be based on messages by key energy market players, their decisions and initiatives. Other sources of information can include published articles, interviews, news, as well as results of bilateral meetings between experts and energy market players.

The subject of monitoring is transposition and, if appropriate, implementation of Directives. The groups and experts monitor, first of all, transposition of acquis into the Ukrainian legislation and compliance therewith. If appropriate, but only as an option, the quality of implementation of acquis and the effect of their implementation on the market and/or consumers can be subject to monitoring.

Methodology ANNEX 1.

List of Articles of the Association Agreement and Acquis Subject to Monitoring The group Electricity and Nuclear Security conducts monitoring and assessment of issues relating to electricity, nuclear energy, coal and elimination of consequences of the Chornobyl accident. Acquis concerned:

Article 269, Chapter 11, Title IV, Directive 2009/72/EC (market-related provisions) Article 270, Chapter 11, Title IV, Regulation (EC) 714/2009 Article 271, Chapter 11, Title IV, Regulation (EC) 714/2009

Article 273, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC Article 274, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC

Article 305, Chapter 14, Title IV, Directive 2009/72/EC, Directive 2005/89/EC Article 338, Chapter 1, Title V

Article 338, Chapter 1, Title V, Cooperation Agreements with IFIs Article 339, Chapter 1, Title V, coal market

Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector, Council Directive 2014/87/Euratom, Council Directive 2013/59/Euratom, Council Directive 2006/117/Euratom

Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector The group Gas conducts monitoring and assessment of issues relating to gas, in particular, the implementation of the following acquis:

Articles 338, 341, Directive 2009/73/EC (market-related provisions) Articles 338, 341, Regulation (EC) 715/2009

Articles 338, 341, Directive 2004/67/EC + Annex XXVI (Early Warning Mechanism), Articles 275 (Unauthorised taking of energy goods), 276 (Interruption), 309 and 314 (resolution of disputes) of the

Association Agreement Chapter 11 Trade-related energy, in particular Articles 269 (Domestic regulated prices), 270 (Prohibition of

dual pricing), 271 (Customs duties and quantitative restrictions), 272 (Transit) and 273–274 (Transport, cooperation on infrastructure)

Annex XXVII to Chapter 1 Energy cooperation, including nuclear issues — Directive 94/22/EC + Articles 279–280 (Access to and exercise of the activities of prospecting, exploring for and producing hydrocarbons, and

licensing conditions) The group Energy Efficiency and Social Issues conducts monitoring and assessment of the implementation of the following acquis:

Directive 2010/30/EU Directive 2010/31/EU Directive 2006/32/EU Directive 2012/27/EU

Directive 2009/72/EC (social issues) Articles 338, 341 of the Association Agreement

Directive 2009/73/EC (social issues) Articles 338, 341 of the Association Agreement

Methodology The group Environment and Renewable Energy Sources conducts monitoring and assessment of the implementation of the following acquis:

Article 363, Directive 2011/92/EU Article 363, Directive 2001/42/EC Article 363, Directive 2003/42/EC Article 363, Directive 2003/35/EC

Directives 85/337/EEC and 96/61/EC Article 363, Directive 2008/50/EC Article 363, Directive 1999/32/EC

Article 363, Directive 94/63/EC Article 363, Directive 2009/147/EC Article 363, Directive 2010/75/EU Article 338, Directive 2009/28/EC

The group Oil conducts monitoring and assessment of the implementation of the following acquis:

Directive 2009/119/EC Directive 94/22/EC Directive 98/70/EC

Articles 274, Chapter 11 of the Association Agreement (Trade-related energy) Articles 275, Chapter 11 of the Association Agreement (Trade-related energy) Articles 276, Chapter 11 of the Association Agreement (Trade-related energy) Articles 279, Chapter 11 of the Association Agreement (Trade-related energy) Articles 280, Chapter 11 of the Association Agreement (Trade-related energy)

Article 337 of the Association Agreement Article 338 of the Association Agreement Article 339 of the Association Agreement

The group Business Climate conducts monitoring and assessment of the implementation of the following acquis:

Articles 15 of the Association Agreement, Title III Articles 22 of the Association Agreement, Title III

JUSTICE, FREEDOM AND SECURITY Articles 29 of the Association Agreement, Title IV TRADE AND TRADE-RELATED MATTERS, Section 2

Elimination of customs duties, fees and other charges Article 56 of the Association Agreement, Chapter 3 Technical barriers to trade

Article 88 of the Association Agreement, Section 2, Chapter 6 Establishment, trade in services and electronic commerce

Articles 93 of the Association Agreement, Section 3 Cross-border supply of services Articles 97–102 of the Association Agreement, Section 4 Temporary presence of natural persons for

business purposes Articles 104–105 of the Association Agreement, Section 5 Regulatory framework, Sub-section 1 Domestic

regulation Article 127 of the Association Agreement, Sub-section 6 Financial services

Articles 144–147 of the Association Agreement, Chapter 7 Current payments and movement of capital

Methodology Articles 150–156 of the Association Agreement, Chapter 8 Public procurement

Directive 2014/24/EC and Directive 2014/25/EC Articles 255–260 of the Association Agreement, Chapter 10 Competition, Section 1 Antitrust and mergers Articles 296–271 of the Association Agreement, Chapter 11 Trade-Related energy, Directives 2003/54/EC

and 2003/55/EC Articles 272 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 273 of the Association Agreement, Chapter 11 Trade-related energy, Directives 2003/54/EC and

2003/55/EC Articles 274 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 275–276 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 277 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 279–280 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 337–342 of the Association Agreement, Title V ECONOMIC AND SECTOR COOPERATION, Chapter 1

Energy cooperation, including nuclear issues, Directives 2009/73/EC, 2009/72/EC and 2004/8/EC Articles 378–379 of the Association Agreement, Chapter 10 Industrial and enterprise policy

Articles 381–382 of the Association Agreement, Chapter 11 Mining and metals Articles 383–385 of the Association Agreement, Chapter 12 Financial services

Article 387 of the Association Agreement, Chapter 13 Company law, corporate governance, accounting and auditing

Glossary ANNEX 2.

Glossary (Short Description) of EU Acquis Subject to Implementation Monitoring

Gas Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive establishes common rules for the transmission, distribution, supply and storage of natural gas. The rules established by this Directive apply to natural gas, liquefied natural gas (LNG), biogas and gas from biomass. They aim to achieve a competitive, secure and environmentally sustainable market. This Directive provides for compulsory functional unbinding (supply) of transmission system operators (TSO) in vertically integrated undertakings. EU Member States must ensure that all customers are entitled to freely choose natural gas supplier and can easily change supplier within three weeks. At the same time, Member States may impose on suppliers selling gas to household customers obligations which may relate to security, including security of supply, regularity, quality and price of supplies, and environmental protection, including energy efficiency. Regulation (EU) No. 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No. 1775/2005 This Regulation sets common rules for access to gas transmission systems, LNG terminals and storage facilities taking into account the special characteristics of national and regional markets. The document establishes the procedures of certification of transmission system operators, as well as development, elaboration and implementation of network codes (with the participation of the European Network of Transmission System Operators — ENTSO — for Gas). The key objective of this Regulation is to ensure that all market participants have free and non-discriminatory access to relevant infrastructure and capacities. Directive 2004/67/EC concerning measures to safeguard security of natural gas supply This Directive establishes a common framework within which Member States must define general, transparent and non-discriminatory security of supply policies compatible with the requirements of a competitive market, and clarify the roles and responsibilities of market players (including in case of emergency). The government must specify minimum security of supply standards to be complied with by the market players, prepare and update national emergency measures, identify “vulnerable” customers and ensure adequate security for them, establish cooperation with the European Commission and other stakeholders.

Electricity and Nuclear Security Council Directive 2014/87/Euratom of 8 July 2014 amending Directive 2009/71/Euratom establishing a Community framework for the nuclear safety of nuclear installations The Directive establishes a European framework for maintaining and promoting consistent improvement of nuclear safety and its regulation. It sets an ambitious safety goal across the EU in order to prevent accidents and avoid radioactive waste from nuclear installations. The directive applies to any nuclear installation subject to licensing. Council Directive 2013/59/Euratom laying down basic safety standards for protection against the dangers arising from exposure to ionising radiation The Directive establishes basic safety standards to protect the health of employees, the general public, patients and others from the dangers of exposure to ionising radiation. The Directive applies to any planned,

Glossary existing or emergency situation which involves a risk to ionising radiation. In particular, it applies to: the manufacture, production, processing, handling, disposal, use, storage, holding, transport, import to and export from the EU of radioactive material; the manufacture and operation of electrical equipment emitting ionising radiation; human activities withnatural radiation sources that could lead to a significant increase in the exposure of employees or the public, such as the exposure of space crew to cosmic radiation; domestic exposure to radon gas in indoor air and external exposure to gamma radiation from building materials; managing emergency exposure situations that require measures to protect the public and workers. Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC This Directive establishes common rules for the generation, transmission, distribution and supply of electricity. It also lays down universal service obligations and the rights of electricity consumers and clarifies competition requirements. Open internal market enables all consumers freely to choose their suppliers and all suppliers freely to deliver to their customers (free movement of goods, the freedom of establishment and the freedom to provide services). At the same time, this Directive sets stricter requirements to unbundling of transmission system operators (TSO) in vertically integrated undertakings. It also contains consumer rights provisions, reinforces and clarifies the functions and powers of regulatory authorities. Regulation (EC) No. 714/2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No. 1228/2003 This Regulation establishes the rules for cross-border exchanges of electricity with the view to enhancing competition and achieving harmonization within the internal market in electricity. Comparing to the previous Regulation No. 1228/2003, this Regulation contains additional provisions on certification of transmission system operators (TSO), introduction of network codes and publication of information by system operators. It also clarifies that the European Network of Transmission System Operators for Electricity (the ENTSO for Electricity) is responsible for the management of electricity transmission networks to allow trading and supplying electricity across borders within the EU. Directive 2005/89/EC concerning measures to safeguard security of electricity supply and infrastructure investment This Directive establishes measures aimed at safeguarding security of electricity supply so as to ensure the proper functioning of the internal market for electricity, an appropriate level of interconnection between Member States, an adequate level of generation capacity and an adequate balance between supply and demand. It establishes a framework within which Member States are to define general transparent and non-discriminatory policies on security of electricity supply compatible with the requirements of a competitive market for electricity. They must define and publish roles and responsibilities of competent authorities and all relevant market actors. In implementing these measures, Member States are supposed to guarantee continuity of electricity supplies, explore possibilities for cross-border cooperation in relation to security of electricity supply, reduce the long-term effects of the growth of electricity demand, ensure diversity in electricity generation, encourage energy efficiency and the adoption of new technologies, ensure regular renewal of networks. Council Directive 2006/117/Euratom on the supervision and control of shipments of radioactive waste and spent fuel This Directive authorizes transboundary shipments of spent fuel between Member States for processing, requires prior authorization for transboundary shipments of radioactive waste and spent fuel where such fuel is moved from, through the territory of or to a Member State. This Directive also requires return of radioactive waste to its country of origin.

Glossary Energy Efficiency and Social Issues

Directive 2010/30/EU on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products This Directive regulates labelling of energy-related products and provision of information to consumers relating to their consumption of electric energy. It applies to products which have a direct or indirect impact on the consumption of energy and on other resources during use. Suppliers placing products on the market must ensure that such products are labelled with the information about their consumption of energy and other resources. Suppliers must also produce technical documentation to include: a general description of the product; the results of design calculations carried out; test reports; the references allowing identification of similar models. The technical documentation must be available for inspection purposes for a period ending five years. Suppliers must provide the labels and product-related information free of charge to dealers, and the latter must display labels properly, in a visible and legible manner. Directive 2010/31/EU on the energy performance of buildings This Directive promotes the improvement of the energy performance of buildings within the Union, taking into account outdoor climatic and local conditions. It lays down minimum requirements, common general framework for a methodology and covers energy used for heating, hot water, cooling, ventilation and lighting. National authorities must establish reasonable minimum requirements to energy efficiency to be reviewed every five years. They also establish a system of certification of the energy efficiency. Such certificates provide information to prospective buyers or tenants on the energy performance of buildings, and advice on enhancing it. Directive 2012/27/EU on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC This Directive establishes a common framework of measures for the promotion of energy efficiency within the Union in order to ensure the achievement of the Union’s 2020 20% headline target on energy efficiency. Such measures include: • annual 1.5% energy savings resulting from implementing energy efficiency measures by distribution

network operators and suppliers; • enhancing energy performance of heating systems, installation of double-glazed windows and roof

insulation; • purchase of buildings, products and services with high energy-efficiency performance by public bodies; • annual energy modernization of at least 3% of the total floor area of buildings owned and occupied by

public bodies; • expanding rights and possibilities of consumers in the area of energy management which includes easy

and free access to the metering data on the actual consumption; • national incentives for small and medium-sized enterprises to conduct energy audit that should be

mandatory for all large enterprises; • monitoring of the energy performance of new energy generating capacities.

Environment and Renewable Energy Sources Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment (codification) This Directive introduces an important instrument of the environmental policy — environmental impact assessment. Member States must ensure, first of all, that projects likely to have significant effects on the environment (by virtue, inter alia, of their nature, size or location) are made subject to a requirement for development consent and an assessment with regard to their effects. This Directive contains two lists of projects subject to environmental impact assessment (from nuclear power stations, gas pipelines, etc., to

Glossary large pig farms). An important element is stricter publicity requirements, including to the public participation in the environmental impact assessment. Directive 2001/42/EC on the assessment of the effects of certain plans and programmes on the environment This Directive introduces an important instrument of environmental policy — strategic environmental assessment. An environmental assessment must be carried out of certain plans and programmes during their preparation. Such assessment includes preparation of the environmental report (that must contain detail information on the likely significant environmental effects and reasonable alternatives) and consultations with the relevant authorities and the public. Where a transboundary effect is possible, an assessment and consultations in a transboundary context must be carried out. Directive 2003/4/EC on public access to environmental information and repealing Council Directive 90/313/EEC This Directive implements the provisions of the Aarhus Conventions relating to public access to environmental information. It aims to guarantee public access to environmental information owned by public authorities — both upon request and through active dissemination thereof. Environmental information must be made available to an applicant within one month after the receipt by the public authority of the applicant’s request. A request for environmental information may be refused if the request is manifestly unreasonable, or formulated in too general a manner, concerns an unfinished document or internal communications. Directive 2003/35/EC providing for public participation in respect of the drawing up of certain plans and programmes relating to the environment and amending with regard to public participation and access to justice Council Directives 85/337/EEC and 96/61/EC This Directive addresses the implementation of the Aarhus Convention in respect of public participation and access to justice. It sets the requirements to the introduction of mechanisms of informing the public, holding consultations with the public and taking account of comments and proposals of the public in decision-making. Member States must ensure that the public is given early and effective opportunities to participate in the preparation and modification or review of the plans or programmes required to be drawn up under the provisions listed in Annex I of the Directive. Directive 2008/50/EC on ambient air quality and cleaner air for Europe This Directive establishes ambient air quality and ambient air quality management standards. For this purpose, it establishes upper and lower assessment thresholds, target and threshold values, sets objectives for the reduction of the effect of particulate matters, defines and classifies zones and agglomerations, introduces the systems of informing the public and ambient air quality assessment with respect to various pollutants. Where, in a given zone or agglomeration, there is a risk that the levels of pollutants will exceed the alert thresholds, short-term action plans must be drawn up. Directive 1999/32/ЕС relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC, as amended by the Regulation (EC) No. 1882/2003 and Directive 2005/33/EC The purpose of this Directive is to reduce the emissions of sulphur dioxide resulting from the combustion of certain types of liquid fuels and thereby to reduce the harmful effects of such emissions on man and the environment. It sets the maximum sulphur content in heavy fuel oil, gas oil and marine gas oils. It also specifies methods of sampling and analysis of sulphur content in fuel to check compliance with the requirements. Directive 2009/147/EC on the conservation of wild birds (Article 4.2)

Glossary This Directive relates to the conservation of all species of naturally occurring birds in the wild state in the European territory of the Member States. The mechanism of conservation of wild birds provides for the protection of their habitats; protection and use of birds; prevention of harm that can be caused by invasive species; research and reporting. According to Article 4.2, special protection areas need to be established based on ornitological criteria. Special measures also need to be taken to protect migratory species naturally occurring in the territory of a particular state, especially in wetlands. Directive 2010/75/EU on industrial emissions (integrated pollution prevention and control) This Directive lays down rules on integrated prevention and control of pollution arising from industrial activities. It requires using the integrated approach to activities referred to in Annex I thereto. All installations covered by this Directive must prevent or reduce pollution due to using best available techniques, efficient energy use, prevention and control of emissions. Transparency of the integrated approach is ensured by the public participation. Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC This Directive provides for setting mandatory national targets for the overall share of energy from renewable sources in the overall energy balance to take account of statistics and potential of each particular country. These targets include the achievement of a 20% share of energy from renewable sources in overall Energy Community energy consumption by 2020 and a 10% target to be achieved for the share of RES in the transport sector. This Directive, among other, establishes rules for joint green energy projects between Member States and third countries and access to the grid-system of electricity produced from renewable energy sources.

Oil Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products This Directive lays down rules aimed at ensuring a high level of security of oil supply in the Community through reliable and transparent mechanisms based on solidarity amongst Member States. It provides for the adoption of such laws, regulations or administrative provisions as may be appropriate in order to ensure that the total oil stocks maintained at all times within the Community for their benefit correspond, at the very least, to 90 days of average daily net imports or 61 days of average daily inland consumption, whichever of the two quantities is greater. Directive 98/70/EC relating to the quality of petrol and diesel fuels The EU introduced rules prohibiting leaded petrol and limiting the permitted sulphur content in diesel fuel with the view to improving air quality and reducing greenhouse gas emissions. This Directive sets technical specifications applicable to petrol, diesel fuels and biofuels used in vehicles, as well as to gas oils used in non-road mobile machinery. Apart from the prohibition of marketing leaded petrol, Member States must conduct assessment of national consumption of fuel, adopt laws and identify the authorized body (bodies) to introduce the fuel quality monitoring system. Directive 94/63/EC on the control of volatile organic compound (VOC) emissions resulting from the storage of petrol and its distribution from terminals to service stations, as amended by Regulation No. 1882/2003 107 This Directive provides for the registration of all terminals used for storage, loading and unloading of oil products, installation of technical means allowing reduction of VOC emissions from mobile containers with

107 The official translation has a lot of mistakes resulting from inaccurate translation

Glossary oil products, bringing all stationary tanks, rail, marine and motor vehicle tanks and loading installations in compliance with the established requirements. Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons This Directive establishes common rules to ensure the non-discriminatory access to and pursuit of activities relating to the prospection, exploration and production of hydrocarbons. These objective and transparent rules reinforce integration of the internal energy market, encourage greater competition and improve security of supply. The document provides for the implementation of measures to ensure: • equal access to all organizations possessing necessary resources for prospecting, exploring for and

producing hydrocarbons; • granting authorizations on the basis of objective, published criteria; • communication of all necessary information to all organizations participating in the established

procedures.

Business Climate Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC This Directive aims to ensure market openness, as well as fair procurements, in particular in the energy sector: extraction (production), transmission and distribution of gas, heat, electricity. Directive 2014/24/EU on public procurement and repealing Directive 2004/18/EC This Directive aims to ensure open public procurement market, fair competition in awarding public works contracts, public supply contracts and public service contracts between successful tenderers and the state. Public procurements must be published on official websites. The award is made to the tender most economically advantageous from the point of view of price, quality, technical merit, experience. Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC This Directive provides for the implementation of laws on the electricity market which defines electricity as an energy-related product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures non-discriminatory access to the existing infrastructure, creates favourable conditions for electricity producers to invest in new forms of energy (wind, solar, etc.). Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive provides for the implementation of laws on the gas market which defines gas as an energy-related product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures that companies have non-discriminatory access to distribution networks, gas storage facilities and cross-border gas pipelines. Directive 2012/27/EU on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC This Directive provides for the creation of favourable conditions for encouraging and development of high-efficiency cogeneration — provision of investment aid, tax exemptions or reductions, green certificates and direct price support schemes.

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