"Tariffs should not be a tool of social policy": why electricity price hikes are only a matter of time and a necessary step to heal the energy market

After the heating season ends, electricity prices for household consumers and tariffs for other utility services are likely to increase. This is stated in the NBU’s new inflation report for January, UNN reports.

DetailsThe document states that the need to restore electricity generation and distribution facilities, as well as gas production infrastructure, after extensive damage increases the likelihood of adjusting utility tariffs. This, in turn, will affect the dynamics of administratively regulated prices.

The NBU does not rule out that electricity and other utility tariffs will increase after the heating season06.02.26, 16:58 • 55146 views

Commenting on the NBU’s Inflation report for January 2026, which suggests a possible increase in electricity prices after the heating season, Andriy Zakrevsky, Deputy Director of the Association of Energy and Natural Resources of Ukraine, explained the logic of maintaining current tariffs in a comment for UNN.

We kept tariffs for a very simple reason. When the full might of the Russian army is aimed at destroying the Ukrainian population and housing, we warned international partners, including the IMF, that we would not raise prices for the winter to help people and not create an additional lever for the strikes that the Russians are making.

At the same time, he stressed that the situation could change.

It must be understood that next year we may find ourselves in a situation where there is nothing to rely on. Our housing stock is being destroyed, cities are being destroyed, and they are trying to make Ukrainians leave their land.

According to him, the decision not to raise tariffs was exceptional.

Not increasing the price of electricity for the average Ukrainian was fair and understandable to everyone. During the war, no one even demanded to raise prices. There were talks, but nothing more.

He also compared the current situation with previous years.

Previously, the International Monetary Fund always spoke in the fall about the need to raise electricity prices. Now no one has even raised this, because it was clear that this was helping the Russians.

At the same time, the expert stressed that if the war continues, the tariff issue does not disappear.

If the war continues, the price of electricity becomes a risk again. Either our donors and partners must cover these costs, or we must raise prices, because there will be nothing to buy conditional transformers with. Everything depends on the partners.

However, Sviatoslav Pavliuk, Executive Director of the Association “Energy Efficient Cities of Ukraine”, expressed a different opinion in a comment for UNN. He explained how electricity imports affect the price and why the current model is unsustainable. 

How much does electricity actually cost for the population?According to the expert, the real market value of electricity, which significantly exceeds the tariff actually paid by the population, can already be seen in Ukrainians’ bills.

The bills show a total electricity price of about 10 hryvnias per kWh, but the consumer pays only part of this amount. The rest is compensated through various mechanisms – tariffs of transmission and distribution system operators, as well as through so-called PSO (public service obligations).

The question is not whether to raise the electricity tariff. The question is whether to reduce or abolish the cross-subsidies that exist today. The bills already state that the real cost of electricity is about 10 hryvnias per kilowatt-hour, but the consumer pays only 4-5 hryvnias. The rest is paid by other market participants – “Energoatom”, “Ukrhydroenergo”, “Ukrenergo”, business. Formally, these are not budget funds, but in fact, they are the same state money.

Cross-subsidies instead of the marketSviatoslav Pavliuk emphasizes: the key problem is not the tariff itself, but the cross-subsidization system that distorts the market.

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Due to this model, the population does not see the real price of electricity, and the state is forced to constantly compensate for the difference through indirect means. As a result, these are the same budget funds, only distributed through complex and opaque mechanisms.

Imported electricity: many times more expensiveThe expert pays special attention to electricity imports, which Ukraine is forced to resort to due to the destruction of energy infrastructure.

According to him, in the case of full market pricing, the cost of electricity can reach about 15 hryvnias per kWh even “at the entrance”. After adding transmission, distribution, and VAT tariffs, the final price exceeds 20 hryvnias per kWh.

At the same time, there is virtually no competition in the market – there is a shortage of resources, and the consumer is forced to buy electricity at the price that is available.

Why bills may “skyrocket” after the warThe expert warns: the current model is temporary and artificial. If, after the war, the state sharply abandons subsidies, bills can rise very quickly and painfully for the population.

At the same time, he emphasizes that tariffs should not be a tool of social policy – for this, there are subsidies. It is targeted assistance, not understated tariffs, that allows protecting vulnerable segments of the population without destroying the industry’s economy.

Tariffs are not a tool of social assistance – for this, there are subsidies. When we lower the price for everyone, we subsidize inefficient consumption and deter investment. Perhaps basic consumption should remain affordable, but everything above the norm should be paid at market price. This encourages people to invest in energy efficiency, their own generation, and storage.

Sviatoslav Pavliuk points out that other countries in the region, particularly Moldova, which has a significantly weaker economy than Ukraine, have already gone through a similar path. Despite this, the country was able to switch to fuller market tariffs, combining them with mechanisms of social protection for the population.

Moldova is an even poorer country than Ukraine, but they somehow survived it. They went to full tariffs, while introducing targeted support for people. People were told the truth. In our country, everyone is afraid to tell the truth, and we continue to subsidize absolutely inefficient consumption.

Investments bypass the populationDue to low tariffs for household consumers, investments in energy are directed mainly to the commercial sector. Businesses install generators, solar power plants, and batteries, while there are practically no investments in the residential sector – at the current electricity price, it is economically unprofitable.

According to Pavliuk, this conserves inefficient consumption and hinders the country’s energy modernization.

Any investments that are currently taking place in the energy sector are not going into the segment for the population, but exclusively into the commercial sector. Businesses can afford to install generators, solar power plants, batteries, and thus reduce their dependence on the grid. For the population, no one invests, because at a price of about 4.6 hryvnias per kilowatt-hour, electricity does not economically stimulate any investments.

Possible future modelAs one of the possible options, Sviatoslav Pavliuk allows for the introduction of a differentiated approach to tariff setting: a basic consumption volume of about 80 kW per month can be paid at the current preferential tariff of about 4.6 UAH per kW, while all consumption above this volume – at market price, which can currently be 12-15 UAH per kW. According to him, such a model allows maintaining affordable electricity for minimal household needs and at the same time stimulates a reduction in excessive consumption, investments in energy efficiency, the installation of own generation and energy storage systems.

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