The blockade of coal supply from the occupied territories revealed the main problem of the Ukrainian energy sector, i.e. its strategic resource dependence on a party to the armed conflict. We appreciate the determination of the government to support the requirements of the blockade participants to cease trade and exchange with the invaders. We hope that the next step forward will involve the creation of effective incentives to diversify the sources of coal procurement by generation companies.

The expert community of the Reanimation Package of Reforms is committed to protecting the common interests of the state and citizens, based on a stable pro-European vector of development of Ukraine. In order to ensure the independence from the anthracite coal supply, we propose to implement the following steps before the next heating season comes.

The National Security and Defense Council of Ukraine should:

1. Ensure adoption of decisions allowing to purchase imported coal exclusively via open tenders.
2. Ensure that generating companies diversify the coal supply (not less than 30% of the overall scope) from areas (countries) that are not involved in the armed conflict and military aggression against Ukraine.

Government should:

1. Ensure supervision over the correspondence of the coal supply sources to those specified at the time of its sale, including monthly publication of inspection results, as well as the sources and scope of supply on the website of the Ministry of Energy and Coal Industry.
2. Conduct investigation of the omission to act on the part of the officials of the Ministry of Energy and Coal Industry with regard to developing changes to the regulatory and legal acts on the introduction of rent for the coal of Ukrainian extraction and generation of the strategic  coal stocks of the State Reserve after introduction of the formula Rotterdam+ for the calculation of the coal price in the electricity tariff.

Regulator (NKREKP) should:

1. Specify the coal of Ukrainian and foreign origin within the electricity rate.
2. For the coal of the Ukrainian origin, develop a formula taking into account its value without bringing abnormal profit. An acceptable option could be the formula of [Api2] * [calorie coefficient].
3. For the coal of foreign origin, introduce a formula accounting for the cost of its purchase and delivery. An acceptable option could the formula of [Api4] + [costof delivery from the Port of Rotterdam] / 2.
4. Introduce the security quota (surcharge in the tariff) provided for the purchase of scarce coal ranks on the territory controlled by the government, or for importing from countries that are not involved in military aggression. This surcharge will encourage energy sector companies to diversify the sources of coal supply.

The RPR expert group on energy sector reform invites you to discuss the suggested steps. We believe that even if there are some differences of opinion between the government and the public, a constructive dialogue is necessary for further development and defending a common clear stance. We are ready to contribute to the reform implementation by providing professional judgment and advocacy support.