Today, the thermal generation is forced to fight for its survival. The abnormally low prices on the day-ahead market, instability, and imbalances caused by price manipulators of speculative traders, multi-billion debts owed to generating companies on the balancing market, of which the major portion is owed to DTEK ENERGY, have caused an acute shortage of working capital required to prepare generating capacities for a heating season. These resources are required to purchase fuel, perform repairs, and maintenance of the equipment.
As a result, two-thirds of power units at thermal power plants were forced to shut down.
In the midst of such a crisis situation, the Ukrainian Railways’ initiative, which includes, among other things, a 30% aggregate increase in coal transportation tariffs starting on 1 September 2021 and 1 January 2022, appears even more threatening. This increase is set out in draft order of the Ministry of Infrastructure ‘On Amendments to Coefficients Applicable to Tariffs of the Domestic Freight Rail Transportation Tariff and Related Services’.
This initiative will lead to the further growth of the cost of thermal generation up to UAH 2 billion per year. Moreover, these costs have not been planned by electricity-generating companies because the initiative announced by Ukrainian Railways was not included in the company’s financial plan.
Considering the current situation in the energy sector, this initiative will exacerbate the crisis in this sector and at the same time will not solve problems experienced by the Ukrainian Railways.
The draft order on increase in tariffs announced by the Ministry of Infrastructure and Ukrainian Railways does not offer any economic calculations that would have justified an increase in the tariff rates.
urthermore, these agencies did not analyse its impact on individual industries, in particular, on such low-margin freights as coal and construction materials.
It is a generally known fact that the existing tariff system is outdated and fails to conform to the existing economic realities. However, freight transportation is profitable even with the existing tariff rates. Their net profit margin exceeds 20%. Ukrainian Railways does not calculate the cost of transportation of each individual type of freight (including coal), which means that there is no information available that would confirm that the transpiration of coal by rail makes the Ukrainian Railways operate at loss. It is no secret that it is the transportation of passengers but not freight transportation that is losing money (losses total up to UAH 13 billion per year) and is subsidized by freight transportation.
This is why we ask the Ministry of Infrastructure and Ukrainian Railways to withdraw the draft order on the increase in the tariff rates for freight transportation by rail, and review the proposals in connection with a reform of the tariff policy of Ukrainian Railways jointly with the Ministry of Economy, expert community, and subject-matter business associations.