Are DSOs required to verify the validity of a supplier's notice regarding the disconnection of a consumer's electricity supply?

Since the start of Russia's full-scale war against Ukraine, the country's energy system has faced significant challenges. Constant shelling of energy infrastructure and consumer facilities, combined with temporary occupation, forced many electricity suppliers to terminate contracts with their customers. These market shifts required an immediate regulatory response from the state.

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To address the situation, the Ministry of Energy of Ukraine issued Order No. 104 on March 4, 2022, "On Settlements in the Electricity Market," which stipulates that consumers whose electricity supply has been terminated by their current provider are temporarily transferred to a Universal Service Provider (USP):

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In accordance with paragraphs 1 and 2 of the aforementioned Order, for the duration of martial law in Ukraine and for 30 days thereafter, electricity consumers who were not being supplied by a "supplier of last resort" as of March 1, 2022, and whose supply is terminated by their current provider, shall be transferred to the electricity supplier designated with the special obligations of a Universal Service Provider.

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The electricity supplier designated with the special obligations of a Universal Service Provider shall begin supplying electricity to such a consumer on the day following the termination of supply by the previous provider.

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Pursuant to paragraph 4 of Order No. 104, the transfer of a consumer to a Universal Service Provider is carried out by the distribution system operator by updating the records in the electricity supplier commercial metering point registers.

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However, some Universal Service Providers contested these transfers, arguing that there were no legal grounds for modifying the commercial metering point registers.

What does the law say?

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The procedure for changing an electricity supplier is defined by the Law of Ukraine "On the Electricity Market," the Retail Electricity Market Rules (REMR), and the Distribution System Code (DSC).

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Under Article 46, Part 3, Paragraph 14 of the Law of Ukraine "On the Electricity Market," the distribution system operator (DSO) is required to terminate power supply to a consumer upon the request of an electricity supplier in accordance with the procedure defined by the Distribution System Code.

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In accordance with paragraph 11.5.12 of the Distribution System Code, an electricity supplier has the right to request that the DSO terminate power supply to a user (electricity consumer) with whom the supplier has a contract. In the request, the electricity supplier must, among other things, provide the data identifying the relevant electricity consumer (EIC code) and the reason (basis) for terminating the supply. The DSO is not entitled to demand justification for the reason (basis) for termination if it falls under the cases defined by the Retail Electricity Market Rules. In cases not provided for by the Retail Electricity Market Rules, the DSO has the right to reject the supplier's request, notifying the supplier within 2 business days of receiving the request.

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In accordance with clause 3.2.15 of the Retail Electricity Market Rules, in the event of the expiration or early termination (at the supplier's initiative) of an electricity supply contract, the supplier must notify the consumer, the relevant distribution system operator(s), the supplier of last resort in whose service area the consumer's electrical installations are located, and the commercial metering administrator no later than 20 calendar days before the intended date of contract termination and cessation of supply, specifying the date on which electricity supply to the consumer will cease.

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Therefore, based on these legal provisions, a distribution system operator (DSO) has no right to demand that an electricity supplier justify the reason or grounds for terminating power supply.

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What does judicial practice say?

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In case No. 910/10268/23, a universal service supplier filed a lawsuit challenging the actions of a DSO regarding the transfer of certain consumers to it under Order No. 104. The plaintiff argued, among other things, that the previous supplier had no grounds to terminate the contract with the consumer, and therefore the transfer was carried out in violation of the law.

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In its ruling dated March 6, 2025, the Supreme Court stated that "taking into account the provisions of clauses 3.2.15 and 2.2.2 of the Code, the courts reasonably rejected the plaintiff's arguments regarding the defendant's failure to verify the impossibility of electricity supply to consumers by previous suppliers. The courts noted that these provisions do not grant a distribution system operator the right, during the termination of a contract between a supplier and a consumer, to interfere in the contractual relationship of the previous supplier, to conduct a legal assessment of a contract to which it is not a party, to challenge the legality of its termination, or to declare actions regarding the termination/cancellation of an electricity supply contract illegal. The procedure for terminating such contracts (between previous suppliers and consumers) could have been challenged by each of the consumers involved as a party to such a contract in separate proceedings. However, the plaintiff did not provide such evidence to the case file."

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The court also emphasized that Order No. 104 is a special regulatory act that mandates DSOs to transfer consumers to a universal service supplier in the event of a cessation of supply. Accordingly, the universal service supplier's claim was denied, as the transfer of consumers was carried out in accordance with current legislation.

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This case once again confirms that under martial law, the state's primary objective is to ensure a stable electricity supply. Legislation does not empower DSOs to demand justification for the reasons or grounds for terminating power supply. The Supreme Court has upheld this position, providing legal certainty for all electricity market participants on this matter.

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