Increase in electricity transmission costs will result in minus UAH 20 billion to budget - media

The increase in the electricity transmission tariff will result in a deficit of UAH 20 billion for the budget due to the increase in the cost of mining and related products.

This is reported by Censor.NET, noting that currently the share of electricity costs in the cost of mining enterprises already ranges from 30 to 50%.

The increase in the electricity transmission tariff, which is proposed for approval by the National Commission for State Regulation of Energy and Public Utilities, will negatively affect sales volumes and revenues to the budget, believes the executive director of the National Association of the Extractive Industry of Ukraine, Ksenia Orynchak.

On November 13, the National Commission for State Regulation of Energy and Public Utilities approved a draft decision that provides for an increase in the electricity transmission tariff in 2025 by 26% - from UAH/MWh 528.57 to UAH/MWh 665.27. According to the association's calculations, in the event of final approval of the new tariff rate, the reduction in tax revenues from Ukrainian mining enterprises is expected to be about UAH 20 billion. At the same time, the current annual amount of tax revenues to the Ukrainian budget from the companies represented by the association is about UAH 300 billion.

"Fluctuations in electricity tariffs affect the economic activity of each mining enterprise, regardless of the complexity of production processes, the presence of enrichment stages, etc. Currently, the share of electricity costs in the cost of mining enterprises is already from 30 to 50%. If costs continue to grow, they will become uncompetitive, especially in the case of exports. Accordingly, the question of limiting production will arise. And these are budget revenues, foreign exchange earnings, and jobs," Orynchak explained.

In turn, the association's analyst Heorhii Popov explained that the cost of production of most Ukrainian mining enterprises is already higher than the costs of competitors from other countries. For example, for iron ore in Ukraine, it is 3 times higher due to the need to enrich the ore, which requires three additional energy-intensive processes. In the case of the production of titanium or ferroalloy products, there are even more such operations, and electricity costs are even higher.

"The average share of electricity in the cost price is from 30 to 50%. And if it reaches 60% and higher, then it is better for the enterprise to stop. Production becomes unprofitable. It is worth noting that in the event of an increase in the tariff proposed by the National Commission for State Regulation of Energy and Public Utilities, mining enterprises will not simply face a decrease in production and sales due to another increase in costs, some of them may simply stop. And income from rent or profit tax will not simply decrease, but may not exist at all," Popov explained.

As Orynchak reminded, business expenses have already increased significantly due to an increase in excise duties on gasoline, diesel and liquefied gas, an increase in electricity tariffs, and an increase in the cost of railway logistics. Therefore, the additional financial burden will only worsen the situation of individual enterprises and the industry as a whole, depriving businesses of resources for modernization of production, increasing efficiency and productivity, and improving environmental standards, which are very important in the context of Ukraine's European integration.

The National Association of the Extractive Industry of Ukraine called the proposal of the National Commission for State Regulation of Energy and Public Utilities unfounded and drew attention to the lack of specific calculations of the impact of the tariff increase on the situation in the industry and the economy of the country as a whole. At the same time, Orynchak expressed hope for the organization of a constructive dialogue with the regulator.

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