The energy sector of Ukraine is experiencing financial instability caused by a number of government decisions that have affected the functioning of the balancing electricity market. Companies supplying electricity to this segment have faced the problem of non-payment, which has led to the accumulation of debts worth billions of hryvnias. Analysts point out that recent regulatory changes have significantly disrupted the balance between government control and market principles.

Ukrainian Energy has found out what is happening in the balancing electricity market.

Systemic problem

The accumulation of debts in the balancing segment of the energy market poses serious risks to the stability of the industry and the state's ability to respond to crisis circumstances. This was reported by Oleksandr Vizir, Head of the Energy and Climate Department of the Ukraine Facility platform.

According to him, the debt of the state-owned enterprise Ukrinterenergo to the transmission system operator NPC Ukrenergo has already reached, according to estimates, from 13 to 15 billion hryvnias, and the amount continues to grow every month. The monthly increase in debt is estimated at approximately 200 million hryvnias, and its partial repayment is carried out at the expense of non-transparent sources, which does not solve the problem systematically.

The expert explains that the roots of this financial crisis lie in deep structural imbalances and unequal conditions for market participants. A significant number of consumers do not pay for the consumed electricity, which is associated with the current ban on disconnections for critical infrastructure facilities, as well as for institutions subordinate to military and civil administrations.

According to Vizir, electricity should be considered as a commodity that requires payment on a general basis, and not as a resource, the consumption of which can be recorded "in debt." He named state and municipal organizations as the main sources of debt accumulation. In addition, there is unsettled consumer debt in temporarily occupied territories, which is currently impossible to collect due to legal restrictions.

The balancing market plays a critical role in stabilizing the energy system, compensating for fluctuations in demand and generation. Its participants provide operational flexibility, but with the introduction of a new system of compensation and changes in pricing, financial responsibility is not distributed evenly. According to experts, state policy in this area lacks transparency - decisions of the National Commission for the Regulation of Energy and Power Generation of Ukraine are often made without wide discussion, and monitoring mechanisms remain formal.

Among the main risks are a decrease in the attractiveness of the energy sector for investors, a likely increase in tariffs for consumers, and a slowdown in technological development. Companies that have lost access to stable financing are forced to reduce spending on modernization and innovation. This threatens the country's energy security in the long term.

Balancing Market

The balancing electricity market in Ukraine is one of the key elements of the energy system, ensuring its stability and prompt response to changes in demand and supply. Its functioning is regulated by the Law of Ukraine “On the Electricity Market” and related regulatory acts, in particular the Market Rules and the Transmission System Code. The balancing market operator is NEC Ukrenergo, which conducts daily auctions for the purchase and sale of electricity in order to balance the system.

The main goal of the balancing market is to settle imbalances that arise as a result of deviations in actual electricity consumption or production from forecasted indicators. Market participants who were unable to sell electricity in the main segments are forced to sell it on the balancing market, often at low prices. At the same time, in the event of a deficit, prices can be extremely high, which creates an additional financial burden.

As of mid-2025, the debt situation on the balancing market has reached critical proportions. According to NPC Ukrenergo, the total debt of the parties responsible for the balance exceeded UAH 35 billion, and of balancing service providers - over UAH 325 million. At the same time, the company itself has debts to market participants of over UAH 16 billion. The largest debtor remains the state-owned enterprise Ukrinterenergo, which serves protected consumers and has a debt of UAH 13–15 billion, which is growing by approximately UAH 200 million every month.

The reasons for the accumulation of debts are systemic imbalances, unequal conditions for market participants, a ban on disconnecting critical infrastructure, as well as historical debt in uncontrolled territories. Experts emphasize that this situation threatens the financial stability of the energy sector, hinders the development of producers, in particular Ukrhydroenergo, and scares away private investors.

According to analysts, the balancing market in Ukraine has actually turned into a “penalty ground” for those who did not have time to sell electricity in the main segments. Prices here are formed according to special coefficients: excess electricity is sold at a minimum price (coefficient 0.95), and the deficit is purchased at an inflated price (coefficient 1.05). This creates additional risks for market participants.

In response to the crisis, experts offer a number of solutions. Among them are the introduction of distribution accounts to control cash flows, the identification of priority debts, attracting public funding and creating favorable conditions for private investors. Ukraine must also adapt its legislation to European standards, in particular Regulation (EU) 2017/2195, which provides for the introduction of standard balancing products and integration into European platforms.

In the long term, effective reform of the balancing market can be a guarantee of the stability of the energy system, increased investment attractiveness and Ukraine's integration into the pan-European energy space. However, this requires political will, systematic work of regulators and transparency in financial calculations.

Trap for energy professionals

The energy market of Ukraine has found itself in a systemic debt trap, which threatens not only the financial stability of key state-owned companies, but also the ability of the entire industry to function without interruptions. At the center of this crisis is NPC Ukrenergo, which acts as a system operator and administrator of the balancing market. It is in this market that tens of billions of hryvnias of debts have accumulated today, the lion's share of which is the result of non-payments by the supplier of last resort, DPZD Ukrinterenergo.

Due to the war, Ukrinterenergo automatically became the only source of electricity for thousands of protected consumers, in particular municipal and state institutions, which were unable to secure a market contract. Despite the obligation to pay for the electricity received, many of these institutions either do not have funding or do not understand the payment mechanisms. This has led to the fact that Ukrinterenergo does not have the funds to settle with Ukrenergo for the balancing market - today the debt of the PON (supplier of last resort) to the system operator exceeds UAH 16 billion. The total debt on the balancing market is over UAH 27 billion, and this figure is growing every month.

At the same time, the state paradoxically pays twice: on the one hand, through special obligations (PSO) it compensates Energoatom and Ukrhydroenergo for losses from supplying cheap electricity to the population, on the other - through the Ukrenergo tariff for transmission and dispatching it tries to cover debts to the Guaranteed Buyer and producers of "green" generation. However, due to chronic non-payment by PON consumers, all these compensatory mechanisms lose their effectiveness. Money circulates in a vicious circle, where some state-owned companies accumulate debts to others, blocking investments, development, and even stable operation of generation.

The situation in Kharkiv is illustrative, where some utility companies were left without a market supplier and went under the PON. Due to the accumulation of debts, there is a risk that Ukrenergo will be forced to resort to extreme measures - disconnecting consumers who do not pay from electricity supply. This threatens complete energy isolation of certain regions even without additional attacks from the enemy.

Despite the fact that the National Commission for the Regulation of Energy and Power Generation (NEPRG) has increased Ukrenergo's tariff for electricity transmission to UAH 528/MWh, and for dispatching to UAH 104/MWh, these measures are not enough to overcome systemic debt. Distribution accounts, which were supposed to become an instrument of financial discipline, have not yet been able to change the situation radically. Without a strict policy on defaulters and a clear mechanism for state compensation for Ukrinterenergo, the vicious circle only intensifies.

As a result, all market participants suffer. Ukrhydroenergo cannot develop hydropower due to lack of funds, investors stay away due to the lack of a predictable financial model, and private suppliers are leaving the market en masse, unable to compete with non-market PON. The way out of the crisis is possible only with a comprehensive solution: writing off part of the debts, strict control over payments, budget support for compensation for PSOs and revising the PON mechanism with a limitation on the period of time the consumer remains in such a status.

There is an alternative

Last year, Advisor to the Prime Minister of Ukraine Yuriy Boyko already explained that solving the problem of debt accumulation in the electricity market should become one of the key priorities in the energy sector this year.

"Because, without breaking the chain of accumulation of debts of "all against all", which already reach 60 billion UAH, we are unlikely to be able to develop the country's energy sector. And let alone the construction of a new distributed shunting generation, which our energy system so needs. Because no investor will go to work on our balancing market if he knows in advance that he will be paid in 12-14 months. There cannot be situations in the market when someone has the privilege of not paying for electricity with impunity and consuming on credit. At the same time, there are consumers whose activities are critically important for the life of the country. For example, water utilities, heat and power, some state-owned mines. On the one hand, the state must take care of their security and stable energy supply for them, but at the same time, along with the preference, assign duties and responsibilities," he noted.

He also added that the new concept of protected consumers in the electricity market is already being considered by the Government. The idea was that the status of a protected consumer for critical infrastructure and guaranteed electricity supply would be provided in exchange for restrictions on the disposal of these consumers' own funds.

There are several key players with mutual financial obligations in the electricity market. The state enterprise "Guaranteed Buyer" reduced debts to "green" generation by 38%, significantly improving the level of settlements - up to 93%, according to the "Razumkov Center".

However, in addition to debts, consumers cover the same amount twice: competitive tariffs of the balancing market and separate costs for transmission and dispatching. As the Government notes, this creates an excessive burden on the budget and wastes funds.

The proposed solution is the introduction of distribution accounts, which will allow for centralized collection of tariffs and monitoring of settlements in real time. However, analysts warn: without legislative correction of the status of “protected consumers”, most debts will simply be transferred to other groups without solving the general problem.

Currently, the state has signed a law that was supposed to strengthen payment discipline, but the list of “protected” ones still includes non-critical infrastructure enterprises — about two-thirds, Yuriy Boyko points out in an interview.

This reduces the effectiveness of the measures introduced back in February 2025.

Therefore, both market participants and experts are demanding that the state restore order in the balancing energy market. Effective steps could be to narrow the list of “protected infrastructure facilities” to truly critical infrastructure with restrictions on benefits, restore alternative sources of compensation, introduce distribution accounts with a single point of payment collection, and also coordinate the tariff mechanism for the balancing market and Ukrenergo services to avoid double charging.

Today, Ukraine’s energy system is on the verge of financial collapse, not so much because of the war, but because of imperfect regulatory mechanisms and weak payment discipline. If decisive measures are not taken, the consequences for market stability could be fatal — with disruptions, blackouts, and loss of trust in state-owned companies.

Olena Marchenko, specially for Ukrainian Energy