"A new way to kilowatt": how electricity tariffs turned into a cash register for "Midas"

When the government says that raising tariffs will save the energy system, in payments it looks like another experiment: how much more can you squeeze out of people before they notice that the money is not going to transformers at all. The investigation of the Temporary Investigative Commission of the Verkhovna Rada and expert analysis show: the increase in electricity tariffs in 2023–2024 was not so much about “restoring the energy sector” as about creating a cash flow that later fed the “Midas” corruption scam.

The ZN.UA article demonstrates that the legend of "economically justified tariffs" falls apart at the first attempt to check the numbers: the cost of electricity of Energoatom and Ukrhydroenergo turned out to be significantly lower than the final tariff, and the excess profits were strikingly higher than can be explained by concern for the energy sector.¹ The parliamentary TSC report adds heavier artillery: the tariff increases in May 2023 and May 2024 were carried out without proper economic justification, and the "inflated" depreciation and manipulations with the PSO created approximately UAH 100 billion in surplus, part of which, according to the investigation, became financial fuel for the "Midas" case.^{1 2}

Tariffs that were "supposed to save" the energy industry

The official story looked noble and familiar: tariffs were being raised to restore networks after Russian strikes, to finance repairs, modernization, and electricity imports to avoid blackouts.¹ This version was readily repeated by both officials and "friendly" commentators, and automated responses based on artificial intelligence picked it up as consensus wisdom - they say, there is simply no other way out.¹

The problem is that the numbers insist on the opposite. According to the TSK report, the tariff for the population was raised to UAH 2,64 per kWh from June 1, 2023, and to UAH 4,32 from June 1, 2024, while the cost of producing the “nuclear-hydroelectric cocktail” for household consumers was about UAH 2,53 per kWh, and the full cost of electricity for Energoatom, taking into account overestimated depreciation, was only UAH 1,63 per kWh.^{1 2} In other words: the tariff "for the people" was significantly higher than what real costs required, even if we believe the officially calculated, already "inflated" cost price.

Price vs. tariff: what hides manipulations

One of the key points emphasized by the author of ZN.UA is the confusion between the concepts of "price" and "tariff."¹ Price is a market category, it is formed by demand, supply and competition (if anyone allows it at all). Tariff is an administrative tool, a political and economic lever that the state can "twist" depending on its goals: to support individual industries, fill the budget, reduce social tension or, as practice shows, provide a resource for schemes.

That is why the talk about "gradually bringing tariffs to an economically reasonable level" that came from the NBU and the government seems, at the very least, incorrect.^{1 4} A tariff, by definition, is not a pure market value - it always reflects a political compromise and balance of power. So when officials refer to "objective economic necessity" as a natural element, it is more an attempt to hide behind terms than to honestly explain who exactly wants to earn, how much, and from what.¹

"Cheap light" in Ukrainian: the lowest tariff, but no bills

The official narrative about the “lowest tariff in Europe” has been a favorite mantra of energy officials for years: they say that Ukrainians pay pennies, so any increase is just a step towards “normality.”¹ If you compare the bare numbers, it really looks convincing: according to European statistics, in 2023, households in Belgium paid about 38–43 euro cents per kWh, in Ireland – 37–38, in Germany – over 40, while in Ukraine until June 2023 the tariff was 1,56 UAH, and then 2,64 UAH per kWh – approximately 6 euro cents.^{1 5}

But as soon as we add income to the equation, the picture changes dramatically. Calculations provided by ZN.UA show that Belgians and Germans paid about 10% of the average salary for 1000 kWh, Irish people paid 9%, while Ukrainians paid about 15% of the average salary in 2023.^{1 5} After raising the tariff to UAH 4,32 per kWh, this figure for Ukraine jumped to approximately 19% of the average salary in 2024, making the "cheapest electricity in Europe" one of the most burdensome for a citizen's wallet.¹

PSO: how voluntary-forced "cheapness" became a golden bottom

The key to the whole structure is the "special obligations" (SEO) imposed on producers. By Cabinet Resolution No. 483 of June 5, 2019, Energoatom, Ukrhydroenergo, universal service providers, distribution system operators, and Ukrenergo were obliged to sell a significant portion of the electricity they produce to the public at a fixed, lower price.^{1 6} For nuclear and hydropower engineers, it looked like this: Energoatom had to provide at least 60% of its output at a preferential price, Ukrhydroenergo – 20%, and the rest was allowed to be sold at market price, compensating for losses from PSO and even making a profit.¹

It is this “leftover” that becomes the source of excess profits. The TSK report shows that the average production price of the electricity “cocktail” for the population from these two companies was about UAH 2,53 per kWh, while on the wholesale market the cost of electricity reached UAH 7,80 per kWh (excluding transportation and distribution).^{1 2} The difference between a "cheap" resource for the population and market sales for other segments created an ideal field for making money - legally within the framework of the PSO, and in fact - based on tariffs that the population perceived as an "inevitable payment for the war."^{1 2}

100 billion "in the world": the mathematics of superprofits

The TSK report describes in detail what the arithmetic of this scheme looks like. In 2023, the population consumed 31,627 million kWh, of which 27,719 million kWh was provided by Energoatom, and 3908 million kWh by Ukrhydroenergo.² After the tariff was increased to UAH 2,64 per kWh, the average weighted final price for households had a structure where the production component was about UAH 1,93 per kWh, the rest was for transmission, distribution, supply, and taxes - but thanks to the PSO, producers still had the opportunity to sell part of the resource on the market at a higher price.^{1 2}

According to TSK calculations, in 2023, Energoatom and Ukrhydroenergo, thanks to this design, earned approximately UAH 33 billion more than what was necessary to cover costs, and in 2024, after increasing the tariff to UAH 4,32, another approximately UAH 65 billion.^{1 2} In total, about UAH 100 billion in two years, which turned the PSO from a social protection mechanism into a source of a gigantic financial resource, control over which became a matter of political and corruption survival for many figures in the energy sector.^{1 2}

Depreciation as a "black box" of the tariff

Another piece of the puzzle is depreciation. Formally, it is supposed to compensate for the gradual wear and tear of fixed assets: stations, units, turbines, and networks. In fact, as an analysis of Energoatom's financial statements shows, depreciation has become an ideal place for "silent" tariff increases.^{1 3} According to TSK, the company's full cost of electricity production increased 2,5 times in five years, while depreciation charges more than quadrupled, while the volume of real capital investments remained at a level close to 2020 levels.^{2 3}

The Tax Code of Ukraine mentions depreciation dozens of times, but does not provide a clear formula or algorithm for its calculation, leaving wide room for interpretation.¹ In practice, this means: if you want to increase the tariff, “adjust” the depreciation deductions, referring to inflation, the need for modernization, or “future investments.” For the average consumer, this looks like an abstract “tariff component,” for an accountant, like a convenient pen on a calculator.¹

"Midas": when gold appeared out of thin air

Law enforcement agencies describe the Midas case as a large-scale corruption scheme in the energy sector, which involved overstating the cost of purchases, rollback contracts, and withdrawing funds through controlled structures – all this against the backdrop of rhetoric about "protecting the energy system from Russia."^{1 7} The TSK investigation actually reveals the economic source of this scam: the excess billions collected from the population due to inflated tariffs were in no hurry to become new power transmission lines or modernized units - instead, they "settled" in the accounts of enterprises and were diluted in dubious purchases.^{1 7}

The Commission states: no evidence has been found that the resources accumulated through tariff increases were systematically used to restore destroyed energy facilities (except for individual projects in the nuclear and hydropower sectors).^{1 2} Instead, significant amounts of unrealized capital investments and accumulation of funds were recorded, which became the basis for the schemes that now appear in criminal proceedings under the code name "Midas" - more than symbolic for the story, where everything that the defendants touch turns to gold, but certainly not for the consumer.^{1 7}

TSC without teeth: when parliament "recommends" rather than demands

The most bitter part of the TSK report is not the numbers, but the conclusions about responsibility. The commission directly writes that the increase in electricity prices for the population in May 2023 and May 2024 took place without proper economic justification, and the size of tariffs was determined through artificial accounting manipulations with the aim of their maximum possible increase.^{1 2} It also notes the absence of any “useful” use of the accumulated resources for the systematic restoration of the energy infrastructure and records the complete absence of political, administrative, or criminal accountability.^{1 2}

Despite this, the draft resolution of the Verkhovna Rada based on the results of the TSC's work is limited to "recommending" the Prosecutor General's Office, the National Police, the BEB, the State Bureau of Investigation, the NABU, and the SBU to ensure a proper pre-trial investigation.² In other words, the parliament, which should give direct instructions and make political demands, politely asks law enforcement agencies to pay attention to the fact that tens of billions of hryvnias in tariffs are behaving suspiciously.²

Why there is no "economic necessity" to increase the tariff in 2026

Against the background of the facts presented, the TSC's conclusion looks uncompromising: in light of the revealed manipulations and excess profits, there is no reason to talk about "another" increase in electricity tariffs for the population in 2026.^{1 2} On the contrary, a logical step would be to review the tariff structure, adjust the overestimated depreciation, ensure transparency of the PSO, and direct the already accumulated funds to the actual restoration of networks and generation, rather than to replenish the accounts of enterprises and the pockets of those involved in criminal cases.^{1 2}

The argument about the "impossibility of subsidizing" also looks weaker if we recall that almost UAH 100 billion of surplus was formed not due to a real economic need, but due to the desire to "inflate" the tariff for household consumers.^{1 2} According to the logic of a fair energy policy, this money should have become an insurance cushion for the system in times of war, not a tool for high-profile scams.¹

What this means for the wallet and politics

For the average Ukrainian, this whole story boils down to a simple question: what exactly is he paying for in his bill and does he have any protection from the “appetite” of energy monopolies and their curators. The TSK investigation and ZN.UA analysis show: the electricity tariff has become not only a reflection of the war and infrastructure losses, but also an indicator of how easy it is to create an almost invisible but huge-scale feeder in a state of emergency.^{1 2}

For politicians, this is also a test of maturity. If, after exposing Midas-level schemes, the system again limits itself to “recommendations” and “negotiations on future increases,” it will mean that tariffs have finally become an instrument not only of fiscal but also of corruption policy.^{1 2} If the parliament and the government finally dare to move from "citizen surveys" to real decisions - from reviewing the tariff structure to personal responsibility - then perhaps a kilowatt will really start to cost as much as electricity costs, and not someone's greed.^{1 2}

Sources

1. ZN.UA: “What is a kilowatt today, or Where did the money for the “Midas” scam come from?”
2. Report of the Temporary Investigative Commission of the Verkhovna Rada on Tariff Policy in the Energy Sector (analysis based on open presentations and legal reviews)
3. JSC "NNEK "Energoatom"": financial statements and data on the cost of electricity production (public reports of the company)
4. NBU: public statements and inflation reviews regarding energy tariffs
5. Eurostat / Statista: data on electricity tariffs and average wages in EU countries
6. Resolution of the Cabinet of Ministers of Ukraine No. 483 of 05.06.2019 on special obligations (PSO) in the electricity market
7. NABU and media publications regarding the Midas corruption case in the energy sector