Should clients pay for officials’ mistakes?

A warning statement made last Thursday by Lvivoblenerho Supervisory Board member Oleksandr Sahur on an imminent environmental disaster to come in six to eight hours following electricity cutoffs due to debt at Sirka sulfur-extracting chemical plants (Yavoriv and Rozdil, Lviv oblast) fortunately did not come true.

According to him, following the cutoffs the plants would not be able to pump out sulfur-containing water from precipitation reservoirs. As a result, contaminated water could spill into the Dnister, polluting the river as it flows through Ukraine and Poland.

Mr. Sahur said, “In an hour and a half the water will rise to the pumps first level. In six to eight hours it will spill over the dam, flowing into the Dnister and further on to Poland.” Lvivoblenerho has notified the Ministry for the Emergency Management about the looming disaster, Interfax-Ukrayina quotes him as saying. “We have lost our patience. For how long can the government postpone a decision on such a key issue, demanding we secure 100% payments for electricity supplies while putting off allocating money for environmentally intensive enterprises to pay their electricity bills?” Representatives of many Ukrainian oblenerhos admit there are factors which make it impossible to secure 100% payment for electricity supplied by the energy market, citing budget-supported enterprises and organizations which do not pay for electricity in full.

“If electricity supplies were cut off to such enterprises and the pumping of chemicals from precipitation reservoirs stopped, they could be in for some serious trouble,” a source close to the Ministry for Fuel and Energy told The Day. Ukraine is faced with a great problem related both to the economy and environment which is not tackled by anyone in our country, he maintained. There is not a single top executive in Ukraine who could deal effectively with this, and many other, problems, the source added. The executive act like firemen, dealing with emergencies as they arise, not trying to prevent them, the source told The Day.

According to this source, the former vice premier and energy minister were involved mainly in distributing cash flows, while the new vice premier for industrial policy is still a newcomer who does not have the whole picture, and it is he who has to assess and resolve the issue in all its complexity. For a number of reasons, the electrical engineering sector cannot secure payments in full to the energy market for electricity supplied to clients, our source said. This is due to the fact that there is no one in the executive who can assess the future of the electrical industry or even grasp the specifics of relations within the fuel and energy sector. All former leaders of the energy sector had too many concerns, some being absorbed with personal matters, defending entities close to them by banning electricity cutoffs for them, he maintained. To describe cases when enterprises threatened emergencies if electricity was cut to them, the phrase, emergency armor, came into existence. In the end, the source stressed, it turned out that the officials were guided by local, not national interests, claiming it would be dangerous to cut off electricity to one plant or another. Consequently, local interests prevailed over state interests, which became evident when both domestic and international suppliers of fuel strictly demanded payments for their product, exerting both economic and political pressure. The executive is completely unprepared to solve this complex problem, which has been amply evidenced by the twin companies popularly dubbed Sirka, the source added. Currently, these plants operate at below 50% capacity, with the idle facilities requiring nonstop maintenance. Still, no one seems to be concerned with this problem, which has acquired international dimensions. To solve it, the source claimed, a reliable funding for Sirka has to be found. Since no one seems to care, Sirka cannot afford to pay its electric bills, even for the pumps which can stop an environmental disaster for Ukrainians and its Western neighbors. Sirka debt to Lvivoblenerho for electricity alone runs to over UAH 5.5 million and is constantly growing because electricity is consumed around the clock. According to him, the National Electricity Regulatory Commission (NERC) should help solve the issue but its new head is unaware of the specifics of the dealings among enterprises, traditionally trying to bring to heel only the electricity suppliers. Obviously with this purpose, NERC decided on March 13 to cut oblenerho budgets. The entire problem should be shouldered by the state, the source believes, but the state does not allocate money to enterprises that pose environmental risks. Being deprived of a considerable portion of its receipts on the eve of its preparation for next winter, Lvivoblenerho found itself in a dead end. Unable to pay wages now, it also needs money to maintain social infrastructure and implement its labor agreement by preparing children camps for the summer vacation period.

Social tensions among Lvivoblenerho employees show no signs of letting up, one of the company’s managers told The Day speaking under condition of anonymity. According to him, the NERC chairman cannot understand that he has a state problem on his hands. “It seems to me that the person who made such a decision was politically motivated. NERC did not revoke the rule banning cut off of electricity supplies to such companies as Sirka, but on the other hand, NERC keeps pressing them for 100% payments, making no effort to secure any funding from the budget. Funding can be found only by those with access to high offices in Kyiv,” he added. “The new NERC head is not prepared to do this job and his first step in office, and the first document he signed has put Ukraine on the verge of environmental disaster. Lvivoblenerho had to assume responsibility for solving the problem and to demonstrate what the result of such a policy of passing the buck might be.”

“There is a mechanism whereby either you pay for electricity or someone else pays for you, with no third alternative possible,” Ministry for Fuel and Energy Industrial Policy Director Leonid Savchenko told The Day. According to the official, the government is drawing up a list of enterprises not subject to cutoffs due to environmental risks involved, even if they are deadbeats. The list will include both Sirka plants, Mr. Savchenko believes. Incidentally, the state budget allocates stand-by funding for environmental emergencies for Rozdil and Yavoriv Sirka branches, he added. The funding is lower than Sirka wants or needs, but there is not enough money in the state coffers, he thinks. Sirka should be able to provide extra money from its production revenues, and if it does not earn any it should declare itself bankrupt,” he concluded.