The Association Agreement (AA) reiterates the obligation of Ukraine to harmonize its energy sector policies with the EU's Third Energy Package. In particular, Ukraine will have to split the National JSC Naftogaz of Ukraine, a public gas monopoly, in order to separate natural gas transportation and production units. As a result, independent suppliers will get better access to Ukraine’s gas transportation network. Their access to the electricity transmission network will also be guaranteed. That will increase competition in the domestic energy market and contribute to reduction of commercial sector prices for gas and electricity. However, residential gas prices may go up if restructuring of Naftogaz of Ukraine leads to reduction in price subsidies, which are paid now to a large extent at the expense of commercial sector customers. The increase in residential gas prices may be partially offset by targeted subsidies for vulnerable groups.
The above material is a part of a series of short informational materials, developed by the Institute for Economic Research and Policy Consulting (IER), about the potential impact of implementation of the AA on the Ukrainian economy. The purpose of the publication is to explain the content of the AA, because a number of comments on the topic have emerged recently, but their authors have often described the content of the agreement incorrectly.
