Today, Ukraine's social security system is unable to properly protect consumers from the fallout of liberalizing the country's energy markets. Despite clear international commitments to increase social protection for vulnerable consumers, Ukraine has failed to identify such vulnerable groups and a mechanism for protecting them in law. On the contrary, the country's leadership is delaying changes to the social security system, which remains untargeted and ineffective.

This means that certain vulnerable groups of consumers are likely to feel the negative impact of energy market liberalization. At the moment, rates for most consumer categories are regulated by the state and are several times lower than the commercially viable level. Thus, at the first stage of gas market and electricity rate reforms, residential rates and rates for certain other categories of consumers (budget-funded institutions, community enterprises) will rise significantly.

However, these negative effects cannot be a reason to stop liberalizing energy markets. All consumer groups, including the general population, will lose in the long run if Ukraine continues to avoid reforming its energy market and social security system. The quality of services and the power infrastructure will gradually deteriorate and the level of unproductive public cost will only grow.

In fact, social guarantees for vulnerable consumers should be included in the energy and social programs of individual members of the Energy Community. The negative impact of rate hikes on these groups can be reduced and even entirely eliminated. Reducing overall spending on the broader population through objective reviews of those who have the right to assistance will allow the government to save more funds, which can then be redirected to protect targeted groups when rates go up.

ICPS analysts are preparing a paper analyzing policy intended to protect vulnerable social groups, which they will soon present publicly. All interested parties will be invited to discuss the analysis of the problems and approaches to resolving them, including government officials, business, civil society, political parties, and the expert community.

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