On April 18, the Auction Committee agreed to introduce a mechanism for the formation and deposit of security for the fulfillment of obligations under bilateral contracts by bidders at the UEEX in accordance with the Procedure for Holding Electronic Auctions for the Sale of Electricity under Bilateral Contracts, approved by Resolution of the Cabinet of Ministers of Ukraine No. 499 dated June 5, 2019 (hereinafter - the Procedure).

This was preceded by the problem of non-fulfillment of electricity purchase and sale agreements, which, in particular, occurred in March 2025. The main reason was a significant difference between the prices under the bilateral contracts and the prices prevailing on the day-ahead market, which were much lower. This phenomenon has raised concerns about market stability, contractual discipline, and has generally jeopardized the reliability of energy supply.

The said Procedure stipulates that the guarantee fee shall be paid by buyers to the account of the auction organizer to 1) ensure the conclusion of bilateral contracts based on the results of the and 2) fulfill obligations under them. Since the buyers’ security deposit has so far covered only the risks of non-signing the sale and purchase agreement, the Procedure amended the Auction Rules to ensure that the guarantee fee also covers the fulfillment of obligations under bilateral contracts.

Thus, from the guarantee fee provided for by the Procedure, a guarantee fee will be allocated to guarantee the fulfillment of obligations under bilateral contracts concluded as a result of electronic auctions for the sale of electricity in the amount of 5 (five) percent of the value of the volume of electricity. In the near future, the auction participants will also be able to use bank guarantees as part (up to half) of the guarantee fee to ensure fulfillment of obligations under a bilateral electricity sales contract.

Taking into account the above, all auctions for the sale of electricity under bilateral contracts announced from 04/21/2025 will be held in accordance with the updated Regulations, i.e. with the application of a guarantee fee for the performance of the contract, which will be retained until the obligations under the relevant purchase and sale contract are fulfilled. At the same time, as stipulated by the Resolution, the maximum guarantee fee for the conclusion of the contract may not exceed 20%.

Accordingly, the performance guarantee fee will effectively act as a delivery margin and encourage buyer participants to comply with the terms of the contract and partially compensate sellers’ losses if prices on the short-term market are lower than those under the bilateral contract.

Also, please note that you should not confuse a guarantee fee with an advance payment. An advance payment is a form of prepayment for goods or services to be delivered or rendered in the future in accordance with the terms of the contract. Instead, collateral is a mechanism to ensure that the parties properly fulfill their contractual obligations, which is used to prevent a possible breach of contract (default).

"The refusal to fulfill the signed bilateral contracts on the electricity market is not only an economic problem, but also a serious challenge for the stability of the entire energy system of Ukraine. To solve this problem, it is necessary to take a comprehensive approach to the issue: to strengthen responsibility, improve control tools, ensure effective regulatory oversight and develop a legal culture on the market. Based on the best international practices, the mechanism for managing contractual default risks has now been significantly improved and we will continue to work with the market to further improve it. This is the only way to guarantee the reliability, transparency and investment attractiveness of the Ukrainian energy sector," commented Oleksii Dubovskyi, Chairman of the Exchange Committee of Ukrainian Energy Exchange LLC, on the changes being implemented.

The informational webinar of UEEX LLC “Changes to the mechanism of formation and payment of guarantee collateral by participants of auctions for the sale of electricity under bilateral contracts” for participants of auctions for the sale of electricity under bilateral contracts will be held on 22.04.2025 at 12:00. We invite everyone to register by following the link to get more information about the innovations.