The debt crisis on Ukraine’s natural gas market and ways to solve it

Abstract

The article considers the main reasons that have led to the debt crisis in the natural gas market of Ukraine due to the accumulation of debt from gas supply and gas distribution companies. The purpose of the study is to identify the main prerequisites for the formation of debt in different segments du-ring the reform of the natural gas market through partial implementation of the requirements of European energy legislation. Having chosen the European vector of development Ukraine is interested in meeting the requirements of European policy within the framework of its international obligations and aspirations for European integration. This necessitates adaptation of the national institutional environment to the basic requirements of the Second and Third energy packages. According to the existing international obligations, the national natural gas market is undergoing significant changes towards liberalization and development of competitive environment. However, in the segment of retail market and supply of natural gas to household consumers for a long time the necessary changes in the institutional environment did not occur or temporary decisions were made, which did not contribute to solving the sector’s crisis, but only froze the existing model of relationships between various market participants. Reluctance to implement unpopular solutions in the supply of natural gas to household consumers and attempts to shift the increase in the cost of gas supply tariffs for the needs of the household consumers to other categories of consumers led to a constant redistribution of monopolistic influence and accumulation of significant debt between market participants. The article analyzes the causes of debt between various participants in the retail segment of the natural gas market, which makes it possible to identify the main factors of such debt. These factors include: the lack of a sufficient level of transparency in the tariff for natural gas supply and transportation services; the absence of a 100% accounting for various categories of consumers, which makes it necessary to establish consumption standards, which later become the object of significant abuse; the existing model of public service obligations, which, given the significant redistribution of natural gas, results in significant market distortions; and the imperfect approach to calculating the costs of gas distribution companies in terms of temperature coefficients in the tariff, provided that gas metering exists not in energy units, but in cubic meters. Based on the results obtained in the article, the author sets forwards various recommendations for the implementation of measures, whose main content is to eliminate the institutional prerequisites that lead to the risks of market failures, which may cause debt.