In early February, when all 15 NPP energy units were put into operation while electricity consumption decreased due to warming, an electricity surplus has occurred in the energy system that resulted in a price decrease in the day ahead market (DAM). However, this situation has been considerably aggravated by market participants with significant market power.

It is worth noting that in January the total demand at DAM from two enterprises: DTEK Group (together with affiliated companies) and “United Energy” made up 77% of the total demand. Meanwhile, the offer by NNEGC “Energoatom” at DAM comprised 42% of the total offer.

In February, the total demand by DTEK Group and “United Energy” accounted for 81% of the total demand at DAM, while the total supply by NNEGC “Energoatom” and the DTEK Group accounted for 39% of the total supply at DAM. This situation reveals enormous market power of individual companies and market monopolization.

Overall, in February the supply at the “day-ahead market” increased by 30% (primarily due to increase in nuclear power generation). But in addition, certain large companies have drastically changed their behavior at the “day ahead market”, which resulted in a significant price drop.

Thus, one group of companies has sharply reduced the price of their electricity purchase and sale bids. Often such bids have been priced below the marginal cost, which contradicts the typical behavior of electricity vendor.

Another company has sharply withdrawn its demand from the day-ahead market and started to purchase electricity at the intraday market (IDM) even when the price there is guaranteed higher by 15% compared to DAM price. Such behavior also contradicts economic logic, because, as a rule, the buyer seeks to purchase where it is cheaper, not where it is guaranteed to be more expensive.

Such actions by participants with high market power have resulted in a chain reaction throughout the market and a price collapse at DAM.

A sharp change in the behavior of major participants may indicate, among other things, a collusion to achieve certain goals. Such goals can be both economic and political, administrative, or regulatory ones.

Examples of economic goals: to buy large volumes of electricity at low prices under a long-term contract from NNEGC “Energoatom” amid low prices at DAM. Political or regulatory goals: to achieve a restriction on operation for competitors (restrict competition), to achieve personnel changes (dismiss officials who may be considered insufficiently loyal to certain companies), or to achieve changes in market rules that can generate additional income for individual companies at the expense of additional payments from consumers.

The bad thing in this situation is that it seems someone tries to achieve their goals by blackmailing. It’s not the first time we experience such situation. The Antimonopoly Committee of Ukraine is already conducting an proper investigation on the past cases and, hopefully, we will see the results soon.

This situation once again demonstrates the critical importance of markets demonopoliziation and reducition of economic power and political influence of financial-industrial groups controlled by individuals with excessive influence on public life. The reason being – it’s precisely on the energy markets where we can see the implications of such excessive influence in the best way possible.

For its part, the NEURC takes and will continue taking additional special measures to stabilize the situation on the electricity market.