Ukraine faces corruption scheme on energy tariffs

10:20, 23 June 2016
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New price alert in Ukraine has started as the deputies approved the decision of a National Regulatory Commission raising the energy tariffs for the households, with the new electricity rates being closely tied to coal prices, according to Ukraine Today.

Solid fuel is surprisingly rated at an average European level despite Ukraine having huge deposits of domestic coal. The so-called developed Rotterdam formula allegedly aimed at optimizing the ratings granted the Ukrainians the most expensive coal and electricity, Ukraine Today reports.

The coal extracted in the Ukrainian east is very cheap, under UAH 600 per tonne. The initial cost includes a minimal salary for the workers, no more than UAH 4,000 a month, some simple equipment and bribes, both for the officials and separatist leaders as well.

Read alsoAndriy Herus: "Rotterdam formula" only beneficial to heat generation, coal mining business, most of which owned by one manAfter being extracted and sold out, this coal is successfully being burnt at numerous Ukrainian thermal power stations. According to official statistics, half-legal fuel constitutes nearly 40% of the total amount Ukraine consumes, reads the report.

Paying no attention at first, the officials in Kyiv now allegedly strive for elaborating the tariff formula. A developed mechanism known as "Rotterdam plus," they say, will double the current communal prices.

“We assume the new method is quite transparent, since it takes into account the marginal price of electricity production,” Head of National Regulatory Commission Dmytro Vovk said.

This complicated phrase means the following: Ukrainian coal is to be extracted from Ukrainian mines but sold for the Ukrainian citizens at a price settled in Rotterdam port. The new price includes the transportation costs from the Netherlands, as well as reloading the coal in one of the local Ukrainian ports. In other words, the experts claim Ukrainian coal has thus turned into the most expensive in the world.

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