NARUC commissioned VIS, under a USAID-funded project, to provide technical assistance to the Ukrainian energy regulator NEURC to develop a methodology for evaluating and approving proposed rehabilitation and replacement projects for ageing gas distribution pipelines.
Based on international research and direct engagement with selected EU regulators, VIS assessed practices, criteria and indicators used for the evaluation of relevant investments. Together with NEURC, VIS formulated a tailored methodology for Ukraine, that incorporates financial and cost-benefit analysis to determine whether proposed projects are justified. A key feature of the new approach is the consideration of alternative solutions to cater for gas distribution customers’ needs, such as CNG supply, for areas with few customers and low demand, thus allowing NEURC to avoid approving unjustified and costly pipeline replacements. Finally, VIS proposed financing mechansims for economically justified projects, within and outside the tariff system, to help address the significant capital expenditure needs of distribution companies.
Targeted capacity building sessions (case studies, numerical examples) were delivered to NEURC staff to support the implementation of the methodology.