Who is the last resort supplier, and why is it so important for Ukraine?

"Naftogaz" quits its role as the "last resort" supplier. What does this mean for average consumers? Volodymyr Omelchenko, Razumkov Center energy programmes director, tells about it.

Naftogaz Ukrainy Gas Supply Company LLC that, according to the Cabinet of Ministers of Ukraine Order No. 917 dated 22.07.2020, was designated as the last resort supplier and the guarantor of gas supply for consumers that have been left without a supplier for the past three years, informs about expiration of the term of performance of the functions and duties of the last resort supplier from 22.07.2023.

Audio interview with Volodymyr Omelchenko (mp3)

What is the supplier of last resort?

Volodymyr Omelchenko: This is a supplier that provides services if no one else provides them. Either because everyone else has given up on the client due to debts, or because no one else can do it for certain technical reasons. Such consumers exist. There are actually a lot of them. These are, for example, water utilities, thermal utilities. The last resort supplier provides services so that enterprises receive natural gas even when they cannot pay, but are important to the state and cannot be switched off.

"Naftogaz" used to assume a socially important function. No one will perform this function anymore, because consumers that are unable to pay are not wanted by anyone.

What to do now?

Volodymyr Omelchenko: This is a question for the government. It cannot do without a last resort supplier. If this happens, thousands of users will be left without the opportunity to receive natural gas. It can be especially dangerous for thermal utility companies when the winter comes, and, for example, the heat supply of industrial facilities and residential buildings depends on them.

I understand Naftogaz. It is not very nice to perform this function and not to get paid for it. Besides, as far as I know, Naftogaz itself is not in the best financial situation right now. They have debts and are short of money. They have serious economic problems. As always, in principle. Today it is already clear that they cannot perform "rescue" functions. This is an additional burden.

It is not known who will take Naftogaz's place. Not many would like to. There will be no queue.

"Naftogaz" constantly said that they perform social functions. And now, when they give it up, the question arises – why does the state need this company, if it no longer plans to perform the function of the last resort supplier? So you need to make it private. Let it work like everyone else. If it does not fulfil a social function, it makes no sense to have it in the hands of the state.

Why is it dangerous?

Volodymyr Omelchenko: The absence of a "last hope" supplier is fraught with accumulation of multibillion-dollar debts to the operators of Ukraine’s gas transportation system and regional gas companies. The Cabinet of Ministers and the Ministry of Energy should take care of this issue. Debts exist not only in the natural gas, but also in the electricity market. There are tens of billions of hryvnias. These debts grow because the market models are not adapted to the European rules.

Eventually, someone must pay these debts. We do it like this: debts pass over to the state, and then, due to inflation, everything is written off. In 30 years, the hryvnia has fallen 25 times against the dollar. This means that there was practically no cheap gas. We simply paid for it with inflation and devaluation. That is, deterioration of the living standards.

What's next?

Volodymyr Omelchenko: Since no one wants to take on the function of the "last resort" supplier, I think the Cabinet of Ministers will understand that the situation is critical and re-appoint Naftogaz to this position for another 3 years. Perhaps the Cabinet of Ministers has a brilliant solution that no one knows about. Let's wait and see what it says.

There is no brilliant solution, really. Everyone just has to pay. And the one who does not pay should be adjudicated bankrupt. If there are enterprises that are considered important for the state, then the state should take care.

Why do we have problems with municipal heat and energy producers? The price of thermal energy does not cover the cost of natural gas. This price difference increases the debt that no one wants to pay. Including Naftogaz.

We cannot say that there is no money in the country, it is available, but it must be used properly.



Volodymyr Omelchenko

Director, Energy Programmes

Born in 1967 in Kyiv

Education: Kyiv Politechnic Institute, Department of Chemical Engineering (1992)

Author of over 50 scientific works and op-ed publications. Took part in development and implementation of international energy projects and scientific research in international energy policy


1992 – 1996 — worked in different positions in the mechanical engineering industry

1997 – 1998 — Head Expert of the Division of Oil, Gas and Petroleum Refining Industry of the Ministry of Economy of Ukraine

1998 – 2003 — Naftohaz Ukrayiny National Joint-Stock Company, in Charge of Oil Transportation Section

2004 – 2007 — Chief Consultant at the National Institute of International Security Problems of Ukraine’s NSDC

since February, 2007 — Leading Expert, Razumkov Centre. Director of Energy Programmes since 2013

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