Before the full-scale invasion, simple mathematical maneuvers made it easy to calculate how much electricity was produced in the country, who sold it, at what prices, and where it was directed. Understanding this is crucial, especially given that up to 35% of the electricity generated in the country is supplied to citizens and small non-residential consumers at subsidized prices under the Public Service Obligation (PSO) mechanism. After all, this subsidized electricity should reach its intended destination rather than being resold to businesses later.
Since the beginning of the full-scale war, such calculations have become impossible. The state has removed any information regarding how electricity volumes for the population are currently distributed from the public domain. We conducted our own investigation, the very process of which was striking in the depth of secrecy surrounding the current PSO mechanism and the volumes of electricity that the state decided to remove from the market's legal framework.
From Transparent Auctions to Manual Control
The 2019 electricity market reform stipulated that electricity would be traded on several market segments: the bilateral contract market (BCM) for longer forward contracts for future delivery; the day-ahead market (DAM) with delivery on the following day; the intraday market (IDM) with delivery on the day of trading; and balancing segments (the ancillary services market and the balancing market (BM)). Since the structure of the Ukrainian market is highly concentrated (monopolized), the Law "On the Electricity Market" mandated that in the BCM segment, all producers must sell their electricity exclusively at auctions conducted in accordance with a special procedure defined by Cabinet of Ministers Resolution No. 499. This was done to guarantee that this "primary" BCM (from the producer) remained competitive, transparent, and free from manipulation.
Concurrently, the Government adopted another Resolution, No. 483, which imposed Public Service Obligations (PSOs) on state-owned electricity producers to supply the population with subsidized electricity. Since the law holds supreme power, this electricity should have also been sold through exchange auctions, albeit in a separate session dedicated to this purpose. The purpose of these sessions was not to determine the price via a competitive method, as Resolution No. 483 fixed the price at which producers sold electricity to the population. Instead, the primary function was the control of commodity flows. It was precisely this public and transparent exchange information that previously helped the public identify volumes of electricity that suppliers purchased at subsidized prices for residential needs but resold to industry.
The text of Resolution No. 483 itself underwent a vast number of modifications, and in October 2021, a financial PSO model came into effect. Under this model, the state-owned Energoatom was required to sell base load electricity (standard BASE_M products) through exchange auctions to universal service providers (USPs). This volume was equivalent to the minimum hourly consumption of their residential consumers in the corresponding month of the previous year, priced at a fixed index of DAM BASE for the M-3 period. Actually, this was a tiny fraction of what remained of the commodity component within the PSO. Resolution No. 483 is primarily about compensating USPs for supplying electricity to the population at a subsidized rate. USPs are supposed to purchase their main volumes on free competitive market segments (BCM, DAM, IDM, BM), and the difference between the price for the population and the market price (determined by an established formula) is compensated to them by the JSC "Guaranteed Buyer" (GarPok). For GarPok to have the funds to pay the USPs, the main state generation companies—Energoatom and Ukrhydroenergo—are obliged to pay GarPok their share of the "service" every month. In other words, the subsidized price is actually paid for by state-owned producers.
The Era of Non-Public Orders
With the outbreak of the war, the Ministry of Energy, under the leadership of the powerful Minister of the time, Herman Halushchenko, issued a series of semi-secret orders. Only the direct participants of the PSO knew of their existence, and even then, most had not seen the documents personally.
Among the orders from February–March 2022, numbers 88, 114, 132, etc., are cited, which stipulated that during martial law, Energoatom was obliged to sell electricity to USPs under direct bilateral contracts without conducting electronic auctions. This meant that while Resolution No. 483 continued to apply, sales took place off the exchange. At the same time, market participants with whom we managed to speak indicated that such sales allegedly occurred precisely at the prices and volumes stipulated in Resolution No. 483. Others noted that the volumes of minimum consumption from previous periods had been replaced by minimum forecasted volumes based on Ministry of Energy Order No. 165. The exchange's website confirms that PSO volumes under Resolution No. 483 disappeared from auctions starting in February 2022. According to public information, the electricity supplied for the PSO through auctions amounted to 54.1 million MWh in 2020 and 39.2 million MWh in 2021.
If the price and the circle of entities were known, a reasonable question arises: why did the Ministry of Energy decide to remove these volumes from the public space? The answer given was to ensure state security, preventing the enemy from obtaining information on how much electricity the population consumes. Let us assume so. But how does this answer coexist with the information that, according to Halushchenko's order No. 27-dsk dated December 27, 2024, the exchange was already required to close all sensitive trading information on its website anyway? Unless the failure to return the PSO to the exchange is linked to a desire to hide commodity flows from the exchange itself and its regulators, the NEURC and the NSSMC, lest they suddenly find something "under the counter."
Order No. 132 and the "Market Narrowing" Scheme
And there was something to look for—and we found it, or perhaps we are just the first to speak about it publicly. The main "hero" of this mystical scheme is Ministry of Energy Order No. 132 dated March 21, 2022. A document that was originally issued as a temporary measure for the period of martial law has today turned into a convenient screen for distributing electricity in manual mode. According to this order, Energoatom and Ukrhydroenergo are obliged to sell their unsold electricity surpluses from competitive market segments to GarPok at DAM prices, which then resells them to USPs at those same DAM prices.
The most critical detail: all of this happens exclusively under bilateral contracts, without any transparent electronic auctions. The chain itself looks like this:
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First, GarPok buys up the unsold electricity surpluses from Energoatom and Ukrhydroenergo.
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After that, USPs are obliged to purchase this electricity directly from GarPok. Moreover, the volume that USPs must buy is formed based on their own data: Order No. 132 obliges USPs to provide GarPok with forecasted hourly electricity purchase volumes to supply all their consumers well in advance (by deadline D-4), and the corresponding volumes are sold to them precisely according to these forecasts.
A legitimate question arises: how can this happen in a state governed by the rule of law? Effectively, a massive chunk of supply and demand was simply taken away from the competitive segments of the market and funneled into the PSO; otherwise, USPs would have had to purchase the peaks they needed through Channel No. 3.
Explaining the logic behind this is difficult, as the sale of electricity to suppliers is still carried out at market prices formed on the DAM. You might ask, what is wrong with simply creating Channel No. 2 to guarantee that USPs are provided with physical goods? However, the scale of how the disappearance of this volume from the market led to its distortion is yet to be assessed by specialized authorities. Because, in fact, a "ghost of unforecasted wandering demand" from the USPs was created in the market. This ghost could appear in the competitive market at will, influencing the price, and when it was more profitable, it would disappear and buy up Energoatom's unsold volumes through Channel No. 2. Frankly, this is exactly how Energoatom's "unsold" volumes appeared—via the ghost of unforecasted demand.
The Figures That Speak for Themselves
The reason why it is not customary to speak publicly about this mechanism may lie in the fact that it is beneficial to many:
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Energoatom does not need to exert effort to sell its volumes on competitive market segments, since they can be guaranteed for supply to USPs at DAM prices (it can know the needs of USPs 4 days in advance);
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The DAM price itself can be formed as needed (by removing/adding supply/demand);
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USPs do not need to bother looking for resources in the market or try to buy cheaper—and why should they, if their compensation formula is fixed.
But those who lose out are the Ukrainian economy and citizens, who paid for expensive electricity in all the goods they consumed. Another group of losers includes market participants trying to survive in an entirely unpredictable market with many unknowns.
Officials love to justify such decisions by pointing to the start of the full-scale war. Indeed, in March 2022, when payment levels plummeted rapidly and organizational chaos reigned in the market, these "additions" to the financial PSO had their justification. However, the factors that led to the introduction of these changes have long ceased to exist—there is no debt owed to producers by buyers.
Exactly how much energy is distributed through these backroom channels and how many volumes actually pass "off the books"? No one fully understands this today, as transparent public reporting for these over-the-counter operations in the competitive market simply does not exist. From GarPok's website, it was possible to aggregate information showing that under Order No. 132 alone, the volumes removed from the market were:
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7.126 million MWh in 2022
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8.167 million MWh in 2023
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5.814 million MWh in 2024
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3.533 million MWh in 2025
For the first quarter of 2026, out of 15.34 million MWh of electricity generated by Energoatom, only about 49% (or 7.51 million MWh) constituted the competitive market—meaning volumes that the company sold on free market principles. The remaining volume went to cover various non-market, directive, and social obligations under rigid state regulation. This represents over a third of the company's entire production, remaining the main financial anchor for its commercial activities. On the DAM, IDM, and BM, 4.42 million MWh were realized. At the same time, if we compare market segments, the volumes on the spot DAM/IDM (4.42 million MWh) significantly exceed the volumes of bilateral contracts on the exchange (3.09 million MWh).
The market responds to this artificial deficit in the only way possible—with unjustified price increases, making our electricity already some of the most expensive in Europe.
And while the market suffocates from a lack of supply, and the entire burden of high prices falls on the economy, the Government is preparing a new PSO project. New draft resolutions are being discussed in the corridors, which impose additional public service obligations for supplying electricity to heating utilities, water utilities, and state-owned mines. It is not yet known exactly whether this PSO will possess any features of marketability or transparency, nor is it known where the Government plans to find the additional electricity for them. Are they really planning to terminate the legendary Order No. 132? As exchange data shows, the annual sales volumes of state producers in the competitive market are steadily decreasing. By the way, the PSO is not the only reason for the decrease in supply on the competitive market. At the beginning of the year, the Government obliged Energoatom to sell electricity to the TSO—Ukrenergo—at subsidized prices to compensate for technological losses.
The existence of a PSO against the backdrop of a fully liberalized competitive market is permitted under European legislation, but certainly not in a form where any talk of market liberalization or European integration remains mere declarations. It is interesting to see how the Energy Community Secretariat assesses such processes in the Ukrainian market in the context of Ukraine fulfilling its obligations under the Energy Community Treaty, and how the current PSO models are compatible with European requirements at all. It is especially important to understand how the Secretariat plans to act so that such "nuances" do not prevent Ukraine from implementing market coupling within the framework of the recently adopted law.
