Why state-financed organizations in Dnipro and across the region pay for electricity at an overinflated rate

Thermal power generation03 February 2021

Starting January 1, 2021, state-financed organizations in Dnipro and the region with a capacity of more than 50 kW, which did not choose an electricity supplier on the free market, became customers of a supplier of last resort (SoLR). As a result, these organizations pay for electricity at an overinflated electricity tariff, which is on average 25% higher of electricity prices set by suppliers on the free market. Among them - Dnipropetrovsk Specialized Clinical Medical Center for Mother and Child named after Prof. M.F. Rudnev, Kamensk City Council ‘City Hospital No. 9’, Dnipropetrovsk Multidisciplinary Psychiatric Care.

335 state-financed organizations in Dnipro and the region failed to choose a sound supplier on the free electricity market, since they did not implement tender procedures to select a supplier in a timely manner. According to the requirements of the Law "On the Electricity Market", they became customers of a supplier of last resort (SoLR). Nevertheless, they cannot be their customers for more than 90 days. At the same time, the electricity tariff set by the supplier of last resort is on average 25% higher in comparison with other suppliers*. Note that 1,566 state-financed organizations in Dnipropetrovsk Region have already chosen a supplier on the free market.

The distribution system operator, DTEK Dnipro Grids, is concerned that a significant part of the state-financed organizations did not conduct timely tender procedures to select an electricity supplier on the free market. Based on the two-year experience in the new electricity market, the company thinks that the SoLR tariff may entail a debt for electricity owned by the state-financed organizations. In turn, such debt can cause power outages, both initiated by the supplier of last resort and the distribution system operator.

In order to buy electricity from an independent supplier on the free market at a market price, all state-financed organizations should conclude an agreement on the electricity supply at open prices. They can choose an electricity supplier on the DTEK Dnipro Grids website or on the NEURC website. After choosing a supplier, they need to contact the selected supplier with a package of documents requested by the supplier. We highlight that the distribution system operator provides the electricity distribution service and interacts with all licensed suppliers on equal non-discriminatory terms.

DTEK Dnipro Grids draws the attention of state-financed organizations that contracts for the electricity distribution and supply (based on the choice of a supplier) and payment for electricity is a requirement of the Electricity Market Law.

We urge the management of state-financed organizations to select electricity suppliers on the free market (through tender procedures) and conclude contracts with them. Moreover, budget managers of these organizations - the Dnipro City Council, City Councils of other cities in the region, as well as the Dnipropetrovsk Regional Administration, relevant ministries and departments, please, enhance control over paperwork and payment for electricity by subordinate organizations.

* Resolution No. 1698 dated September 9, 2020, "On setting the tariff for the services of a supplier of last resort for IVQ 2020".