HomePROJECT ACTIVITIESImprovement of Regulatory and Legislative Enabling Environments for Energy Efficiency and Clean Energy

Improvement of regulatory and legislative enabling environments for energy efficiency and clean energy

The Project includes four major activities:

  1. Improvement of regulatory and legislative enabling environments for energy efficiency and clean energy;
  2. Promotion of energy planning, investments in energy saving technologies and use of renewable energy sources;
  3. Capacity building for the government and non-government organizations with respect to energy efficiency, renewable sources and emission reduction; and 
  4. Enhancement of capacity for the Government of Ukraine in development and introduction of low emission development strategies.



Improvement of the tariff regulation system and creation of a favorable regulatory climate will allow to ensure financial resilience of the heating utilities, district water supply and sewage utilities, and will improve investment attractiveness of the communal services sector. Transparent regulatory policy incorporating the international experience will help in launching the market mechanisms for encouragement of larger amounts of investments in the energy sector, as well as will promote encouragement of the companies to manage their energy consumption, and will create incentives for both the suppliers and consumers to invest in the end-use energy efficiency.

As part of this activity, the USAID Project improves the regulatory framework necessary for reform of the municipal energy sector in order to attract financing and investments for the energy efficient projects and measures with use of clean energy. For achievement of this goal, the Project works with the relevant Ministries and agencies of Ukraine, Committees of the Verkhovna Rada of Ukraine and other state and private partners - stakeholders of this process.

Our government partners are:

·         Ministry of Regional Development, Construction and Housing and Communal Services;

·         National Energy and Communal Services Regulatory Commission;

·         Ministry of Ecology and Natural Resources;

·         Ministry of Social Policy;

·         Ministry of Economic Development and Trade of Ukraine; and

·         State Agency on Energy Efficiency and Energy Saving.

The USAID Project focuses on a number of legislative acts and norms, specifically: introduction of amendments to the building codes; draft laws and by-laws on energy efficiency in buildings, ESCO/EPC, commercial metering, housing and communal services, social protection system improvement, condominium development, etc.

The tasks which the USAID Project helps to implement on the national level include: 

Improvement of Tariff Regulation System:

In close cooperation with the National Energy and Utilities Regulatory Commission (NEURC), the USAID Project assists Ukraine in improvement of the tariff regulation system for the sectors of heat supply, district water supply and sewage through improvement of the effective regulation system ("cost plus") and introduction of the new regulation system (on the principles of incentive regulation). To this end, the USAID Project experts and NEURC specialists are working on development of the new legislation and improvement of the legislation in effect, and this must ensure reduction of the utilities’ losses and create incentives for them to reduce inefficient expenses and increase investments in the indicated sectors. This activity includes: assistance in developing new procedures for formation and setting of tariffs and related documents (procedure for approving borrowings from IFIs, procedure for accounting for heat energy losses, etc.), development and improvement of legislation on incentive tariff setting (development of amendments to the methodology for the evaluation of assets, improvement of the procedure for tariff formation based on the principles of incentive regulation, etc.), research into best practices and international experience, as well as development of the recommendations for Ukraine on two-tier tariffs; accounting for exchange rate differences and quality indicators in tariffs, including identifying the key quality indicators; introduction of the monitoring system for services quality and ensuring transparency in making decisions on tariff setting.

As of 11.15.2017, significant progress has been achieved on this task. In particular, 8 NEURC Resolutions on incentive regulation were adopted: 4 for the heating sector, 4 – for the district water supply and sewage sector. They will come into effect after their publication in “Uriadovyi Kurier” newspaper. 

Also, the work on test tariff calculation on the principles of incentive regulation is being conducted, as well as support is given to the NEURC and SPFU for introduction of final amendments to the methodology of asset evaluation and preparation of final methodological recommendations on development of the long-term investment programs. 

Improving Social Safety Net Policies:

In cooperation with the Ministry of Social Policy, the USAID Project ensures the improvement of the social safety net for low-income consumers of the housing and communal services. For this purpose, the USAID Project analyzes the best international practices, conducts analytical research, and provides expert support in the preparation of the relevant documents and specific recommendations to the Government and partner cities. These recommendations include the improvement of the targeted subsidy system for the vulnerable groups of population, as well as incentives for energy saving by the households which receive social aid. This policy must create incentives for the population to engage in the energy efficient measures, as well as improve the targeting of subsidies and introduce their monetization.

As of 15 November 2017, the USAID Project on the basis of analysis of the housing subsidy program, has: 

•analyzed social norms for use of the housing and communal services, and developed recommendations on their improvement;

•developed the Concept of incentives for energy saving by the households receiving subsidies to pay for the housing and communal services; and

•developed the Concept on monetization of subsidies to pay for the housing and communal services.

The USAID Project consultants participated in development and preparation of substantiations for the Resolutions of the Cabinet of Ministers of Ukraine:

•procedure for calculation and repayment to the state budget of unused amounts of subsidies to compensate expenses on payment for the district heating (heat supply), cold and hot water supply and sewage, gas and electricity supply services for individual heating – Approved by the CMU Resolution # 300 of 26 April 2017 “On Introduction of Amendments to Some Resolutions of the Cabinet of Ministers of Ukraine”;

•changes in the social norms for use of the services of district heating and individual heating with natural gas or electricity, approved by the CMU Resolution # 51 of 6 February 2017;

•procedure for identifying maximum amount of expenses to pay for the services on management of a multi-apartment building, expenses for management of a multi-apartment building, according to which subsidies to population are provided – approved by the CMU Resolution # 1022 of 28 December 2016;

•changes in the social norms for use of the services of electricity supply when separate electricity metering by time periods is available – approved by the CMU Resolution # 842 of 28 October 2015;

•amendments to the Regulation on procedure for appointment and providing to population of subsidies to compensate expenses on payment for the housing and communal services, purchase of liquefied gas, solid and liquid stove fuel – approved by the CMU Resolution # 106 of 02.28.2015 “On Improvement of the Procedure for Providing Housing Subsidies”; and

•procedure for setting social housing norms and social norms for use of the housing and communal services, on payment for which the state provides benefits and establishes subsidies – Resolution # 409 “On Setting State Social Standards in the Housing and Communal Services Sector” was adopted on 08.06.2014.

Improving Regulatory Reporting and Creation of Regulatory Accounting System:

The USAID Project experts and NEURC specialists are improving together regulatory reporting of the heating, district water supply and sewage utilities (NEURC licensees), and are introducing the regulatory accounting system that promotes establishment of the unified data base of the reporting indicators. The new regulatory reporting will allow to introduce the unified principles for formation of the reporting indicators for NEURC licensees, will help the NEURC in identifying the level of cost coverage with tariffs and will allow to create the basis for introduction of the national benchmarking system and transition to incentive regulation. As of 11.15.2017, two NEURC Resolutions that were developed within the framework of the Project came into effect: NEURC Resolution # 717 of 05.30.2017 "On approval of the Rules for organization of reporting filed with the National Energy and Utilities Regulatory Commission by the subjects of business in the heating, district water supply and sewage sectors " (enacted on 09.14.2017) and NEURC Resolution # 1223 of 10.10.2017 "On approval of the Procedure (Rules) for organization and maintenance of accounting by the licensed types of activities by the subjects of business in the heating sector” (enacted on 11.10.2017). It is expected that similar accounting document will be adopted for the district water supply and sewage sector in November 2017. Before the end of the Project, the NEURC together with the Project consultants will develop the new forms of regulatory reporting and accounting rules for the licensees in case of application of incentive tariffs for the heating, district water supply and sewage sectors. 

Development and Introduction in the NEURC of Benchmarking System and System for Quality Monitoring in the Heating, District Water Supply and Sewage Sectors:

The USAID Project supports the NEURC in development and introduction of the communal services quality monitoring and the system for comparative analysis (benchmarking) of performance of the heating, district water supply and sewage utilities - NEURC licensees, as well as related incentives which depend on the quality of services and performance results. 

This task includes preparation of the methodology for services quality monitoring, development of the relevant tools for the automation of services quality monitoring (both on the level of a utility and the NEURC), and of the reporting forms for collecting information on the quality of services, creation of the methodological fundamentals for the national benchmarking system, i.e., development of the recommendations on the clustering of the utilities, identifying the set of key performance indicators, approaches to benchmarking, recommendations on publicizing of the benchmarking results and use of its results in regulatory activities (also in identifying and setting of the target indicators used in incentive regulation). 

As of 11.15.2017, the methodologies on services quality monitoring and tools for automation of services quality monitoring were officially presented to the NEURC, and consultative assistance was provided in development of the reporting forms on quality in the district water supply and sewage sector that were adopted by the NEURC Resolution # 226 of 02.23.2017 (enacted on 08.23.2017).

Strengthening of NEURC Institutional Capacity and Improvement of Professional Knowledge Level of Specialists of the NEURC and Utilities - NEURC Licensees 

One of the priority directions of cooperation between the USAID Project and the NEURC is conducting of the training events (seminars, round tables, etc.) both separately for the NEURC specialists, and joint events for the NEURC representatives and representatives of the heating, district water supply, and sewage utilities from the USAID Project partner cities. The plan of these training events is formed on the basis of questioning of the NEURC specialists, and includes trainings on pricing, accounting and taxation, investment issues, technical aspects of the heating system functioning, introduction of heat energy generation from the alternative fuels, work with the consumers, etc. Some seminars are conducted with involvement of the international consultants covering international experience and the practice of incentive regulation and benchmarking introduction, etc. The USAID Project experts conducted 10 training seminars in 2016 for 512 participants. 2017 Plan envisages seven training events. As of 11.15.2017, six seminars have already been conducted, their participants were 361 person.

Draft Laws and By-laws on Energy Efficiency in Buildings, ESCO/EPC, Commercial Metering, Housing and Communal Services, Condominium Development

Significant progress has been achieved in this area:

•Law of Ukraine “On Introduction of New Investment Opportunities, Guaranteeing Rights and Lawful Interests of Subjects of Entrepreneurial Activities for Conducting Large-Scale Energy Modernization” was adopted on 04.09.2015 

•Law of Ukraine “On Peculiarities of Exercising Ownership Rights in Multi-Apartment Buildings” was adopted on 05.14.2015 

•Law of Ukraine “On Energy Efficiency of Buildings” was adopted on 06.22.2017 

•Law of Ukraine “On Commercial Metering of Heat Energy and Water Supply” was adopted on 06.22.2017 

•Law of Ukraine “On Housing and Communal Services” was adopted on 11.09.2017 

Also, the USAID Project specialists as of 11.15.2017 are involved in development of the by-laws adoption of which is envisaged by the Law of Ukraine “On Commercial Metering of Energy and water Supply”, such as:

•Methodologies for distribution between the consumers of the amounts of communal services consumed in the building; and 

•Procedure for acceptance of the metering unit for consumer registration.

Conducting Information Campaigns on the Advantages of Energy Efficiency, Use of Alternative Energy Sources, Social Protection of the Population under Conditions of Growing Tariffs

A powerful information campaign conducted by the USAID Project in all its partner cities is strengthening every year and has become a strong driver for changing Ukrainians’ attitude to energy conservation, implementing energy efficiency measures, the use of alternative energy sources, etc. For instance, specialized events on the national and municipal levels (press briefings, trainings for journalists, forums, conferences, Sustainable Energy Days, etc.) are conducted with Project support across Ukraine. Also, the Project works on creating and disseminating numerous brochures, leaflets, posters and infographics. These materials not only tell about energy efficiency and clean energy sources, but also provide answers to the most important and current issues – why tariffs grow, how to receive subsidies, how to determine the subsidy amount, and how to control energy consumption. Also, special billboards and city-lights are created by the Project every year for its partner cities.

The USAID Project and its partners create and actively disseminate their own TV program, called “Your Home”. The first season of the program aired on 16 national and regional TV channels. A high level of its popularity prompted the Project to create the Program’s second season. It is currently enjoyed by viewers of 35 Ukrainian TV channels with an audience of 4.5 million and 3 million Facebook users. In addition, the USAID Project creates public service announcement videos for viewing on national and regional TV channels, and attracts the attention of the viewers to the economic use of energy, the implementation of energy efficiency measures in multi-apartment buildings, the use of alternative energy sources, and the establishment of the condominiums.

In order to provide exhaustive expert answers and tips to the populace, a special Hot Line on Energy Saving was created in June 2016. It explains how to insulate your home, how to conserve energy, how to establish a condominium, and which banks provide loans for energy efficiency improvements in the residential sector. About 1,500 Ukrainians have already received advice from the Project through the hot line. 

USAID Municipal Energy Reform Project


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