The opportunity will be there, but the decision is unlikely: whether gas and electricity tariffs will rise in the near future
6 August 14:46
“Prices for gas, electricity and heating will rise in Ukraine next year”. Headlines like these in the recent news have probably made many Ukrainians tense. At least those who are used to reacting too emotionally to headlines. As it was already clear from the news text that these were just more predictions. So what can happen to the tariffs and, most importantly, when exactly, "Komersant Ukrainian" found out.
The National Bank of Ukraine shared its forecast that energy tariffs might rise in 2026 in its July Inflation Report. Let us quote the key fragment.
“The current tariffs for gas, heating, and hot water are not expected to be revised this year. However, the difficult situation in the energy sector and fiscal consolidation are likely to lead to a gradual adjustment of these tariffs in the coming years. In particular, it is assumed that they will begin to be gradually brought to economically justified levels in 2026. However, uncertainty about the timing and magnitude of the adjustment of energy tariffs poses a significant risk to the inflation forecast. Further postponement of decisions to increase tariffs will lead to lower inflation, but will accumulate quasi-fiscal imbalances and worsen the financial condition of state-owned energy companies. At the same time, the risks of instability in the energy market will increase, the investment potential of the industry will deteriorate, and price pressure will only be postponed to the future. On the other hand, a sufficiently rapid and significant increase in energy costs to eliminate imbalances in the energy sector will increase inflationary pressure in the relevant period and will require an increase in subsidies for the population,” the NBU said in its Inflation Report.
This leads to two obvious conclusions. First, it is not so much about tariffs as about the impact of decisions on them on inflation. And, second, there is no categorization or unambiguity. Only expectations, assumptions, and forecasts.
And yet… To get a sense of the accuracy of such forecasts, let’s quote the July 2024 Inflation Report: “It is expected that starting from 2025, tariffs will be gradually brought to their economically justified levels.”
Tariffs and their justification
It was not even the timing of the possible tariff revision, but the ambiguous phrase about bringing tariffs to “economically justified levels” that first of all raised questions among some experts. What are these “economically justified levels”? Volodymyr Omelchenko, director of energy programs at the Razumkov Center, explains.
“The formula about bringing tariffs to the level of economically justified levels does not make any sense. Because economically justified prices do not exist in a market economy. What do economically justified oil prices on world markets mean? Each consumer considers one price to be reasonable, and each energy producer considers another price to be reasonable. The government may consider a third price reasonable. Depending on the interests of the players, each has its own reasonable price. That is, in a market economy, there is a market price,” the expert notes.
Electricity tariffs: an option for revision – October 2025
In the NBU’s Inflation Report, electricity tariffs, by the way, were not included in the list of those that will remain unchanged this year. The report states: “The current tariffs for gas, heating and hot water supply are not expected to be revised this year.” That is, there is no mention of electricity tariffs. Does this give reason to believe that there is a risk of their revision this year? Daria Orlova, an electricity market analyst at ExPro, answers the question.
“I don’t think electricity tariffs will be revised this year. Perhaps the NBU put it this way because gas tariffs are fixed until May next year, and the moratorium on housing and utility tariffs is in effect, if I’m not mistaken, until the end of martial law. And the current electricity tariff for households is valid until the end of October 2025. That is, it will definitely not change until the end of October. But then there will be an option to revise it. Although I doubt that the tariff will be increased,” the expert believes.
As a reminder, at the end of April this year, the Government adopted a resolution to extend the provision on the imposition of special obligations on electricity market participants, which stipulates that until the end of October 2025, citizens will continue to pay for electricity at the same tariff of UAH 4.32 per kWh. Daria Orlova explains how this tariff differs from the market price.
“The market price reaches UAH 7-8, and now it may rise slightly. The difference with the current tariff for households is quite large. However, Ukrhydroenergo and Energoatom can compensate for this tariff for households through the PSO mechanism. It costs these two companies about UAH 150 billion a year. That is a significant amount, but they can compensate for it. And there are no debts in the market because of this tariff for the population. I would also mention the political factor here. The option of raising the tariff will arise just before the heating season, and in Ukraine, as a rule, during such periods, guided by political considerations, we try not to raise tariffs. That is, if there is an increase, it will be possible after the end of the heating season. We will definitely not come to the market figure with the next increase. It may be some kind of gradual increase,” says Daria Orlova.
Gas tariffs: an option for revision – April 2026
uAH 7.96 per cubic meter is the price of gas for households. And it has been like this for years. As you know, the government has recently extended this fixed gas tariff for households for another year, until April 30, 2026. Are there any grounds for further revision of this tariff? The opinion of Volodymyr Omelchenko, Director of Energy Programs at the Razumkov Center.
“As for gas, there is no question of revising it now, as the tariff is sufficient and covers the costs of domestic gas. And the cost of production, including the investment component, is not so high, it does not exceed 5 thousand hryvnias, including all the costs of distribution and main gas pipelines. That is, there is still a reserve. Perhaps, if the government implements the IMF plan, some gradual increase may occur during 2026-27 to reach the market tariff for the population with the simultaneous application of targeted subsidies to the population. This is possible,” the expert states.
However, Mykhailo Svyshcho, an analyst at ExPro Agency, reminds that, unfortunately, not everything is so obvious with domestic gas.
“On the one hand, it is true that the population is supplied with domestically produced gas, but now, given the damage caused by Russian attacks at the beginning of the year, and given that we had small gas reserves in storage at the end of the last heating season, we are essentially in a situation where domestically produced gas does not cover the country’s natural gas needs, primarily for the population and heating companies. Accordingly, Naftogaz is forced to import natural gas to cover these needs, and it should be understood that gas is imported at significantly higher prices than it is supplied to the same population,” emphasizes Mykhailo Svyshcho.
But, according to him, this does not mean that tariffs will be revised in the near future.
“In general, the current tariffs for utilities, in particular for heating and natural gas, are significantly lower than market ones. At least for heating, they are below the level that should be there so that district heating companies can function properly and pay for the natural gas they receive. However, I really have little faith that we will see an increase in heating and natural gas prices until the war is over. For heat, we have moratoriums on raising tariffs. For natural gas, there are no such restrictions, but we have Naftogaz, a state-owned company that supplies natural gas to most household consumers, and it has annual tariffs. The current annual tariff of UAH 7.96 per cubic meter is valid until the end of April next year, so there will definitely be no tariff revision until then,” emphasizes Mykhailo Svyshcho.
He reminds that today the market price for gas is approximately UAH 25 per cubic meter. However, both the Ukrainian government and international partners, represented by the IMF, which advocates market pricing for natural gas, understand that Ukrainian household consumers are currently unable to pay market prices for natural gas. However, in the medium term, Mr. Svyshcho believes that we should come to market prices.
“This may not be a simultaneous transition, but a more gradual one. That is, every year Naftogaz can gradually increase its annual tariff. If we talk about the price that can theoretically be, I think that even in the conditions of war, but not in 2025, perhaps in 2026, options for a slight increase in natural gas prices to, say, 10 hryvnias per cubic meter will be considered. But if such a decision is made, it will not be a market decision, but a political one,” the expert states.
The implementation of such an economic and political plan may also face problems. This is emphasized by Volodymyr Omelchenko, director of energy programs at the Razumkov Center.
“The big difficulty lies in the fact that next year there may be a political process – we are talking about the elections of the Verkhovna Rada, the president, and local authorities. And this will hinder the adoption of plans that envisage bringing tariffs for households closer to market levels. This is extremely unpopular. Therefore, I think that such a plan will be difficult to implement,” the expert emphasized.
As a result, we have yet another proof that forecasts are not a very reliable thing. Even if they are formulated by the National Bank. And even more so if the realization of the forecast is affected by many risk factors. And not only financial and economic ones.
Author: Sergiy Vasilevich
