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Anti-graft agency probes into coal pricing formula

The cost of coal calculation methodology was knowingly unreasonable, investigators say.

The National Anti-Corruption Bureau (NABU) is investigating the actions of members of the National Energy Regulatory Commission (NKRECU), who approved the formula for determining the wholesale price of electricity, known as Rotterdam +.

The criminal proceedings in Kyiv's Solomyanskyy District Court were opened on 10 July on suspicions of abuse of power or official position members of the commission.

The pre-trial investigation found that the chairman and members of the NKRECU, using their official position, contrary to the interests of the service and acting in the interests of generating companies, intentionally, ensured the inclusion of a knowingly unreasonable formula that increased the cost of coal in order to create conditions for obtaining super-profits by power generating companies," the NABU said.

The investigators argue that by adopting in January-March 2016 when developing the procedure for the formation of the wholesale market price (Rotterdam +), the regulator thus created preconditions for an increase in the wholesale price of electricity.

The anti-graft agency has asked the court to warrant the access to the banking documents of Centrenergo and Dniproenergo, state owned energy companies, to verify the validity of the approval of the Rotterdam + formula. The court declined the request.

In late April of 2016, the NCRECU started applying the new procedure for the formation of the projected wholesale market price for electricity H2 2016. The procedure envisages determining the price of coal by the formula "cost in the port of Rotterdam (API2) plus the delivery to Ukraine."

That is, according to the formula Rotterdam + coal is purchased from Ukrainian producers at the price of fuel in the Dutch port of Rotterdam (South African or American coal, transported by sea to the port) plus the imaginary cost of transportation from Rotterdam to Ukraine and transshipment of such coal in a seaport.