Legal aspects of electricity supplier operations

The electricity supply sector in Ukraine is one of the most strictly regulated and requires a deep understanding of regulatory requirements. The Fedotov & Partners legal team supports electricity supply companies of all sizes—from enterprises created for their own needs to suppliers with over 1,000 customers. Legal support for energy businesses helps companies operate confidently amidst constant regulatory changes. In this article, we will examine the legal aspects of an electricity supplier's operations: from obtaining a license and meeting regulator (NEURC) requirements to legal relations with consumers. By reading our article, you will learn about the requirements for companies operating in the electricity supply sector, the rights and obligations of suppliers and consumers, how to comply with market rules and retail electricity market regulations, and the consequences of non-compliance.

Legal aspects of electricity supplier operations

Regulatory framework. Electricity supplier operations in Ukraine are based on the requirements of the Law of Ukraine "On the Electricity Market" and numerous bylaws. Supplying electricity to end consumers is a licensed business activity, meaning no company can sell electricity to consumers without obtaining the appropriate license from the state regulator. This regulator is the NEURC (National Energy and Utilities Regulatory Commission). The NEURC sets licensing conditions, approves market rules, and monitors compliance with regulatory requirements by electricity suppliers. Specifically, the Law obliges electricity suppliers to adhere to licensing conditions and other legal acts regulating market functioning. This includes compliance with wholesale and retail market rules, grid codes, and other regulations.

Market liberalization and competition. Since July 2019, Ukraine has implemented a full-scale competitive retail electricity market. Previously, monopoly supply was carried out by oblenergos (local energy companies) and a few independent suppliers using non-market pricing, but now consumers have the right to freely choose their supplier. This has led to the emergence of dozens of new players; currently, the list of electricity suppliers in Ukraine includes hundreds of licensees, ranging from small local suppliers to nationwide companies. The full list of active electricity suppliers is published in the NEURC licensing register, and anyone can verify whether a specific company holds a valid license. Competition between suppliers stimulates service improvements and more flexible commercial offers for consumers, but for the companies themselves, it means higher requirements for legal literacy and regulatory compliance.

Defining electricity supply activities. According to legislation, an electricity supplier is a business entity (a legal entity or an individual entrepreneur) that sells electricity to end consumers based on a contract. In other words, the supplier purchases electricity on the wholesale energy market (via direct bilateral contracts or on the exchange) and sells it to consumers for their own use. It is important to understand the difference between an electricity supplier and other energy market participants:

• Electricity producer – generation facilities that produce electricity (power plants).
• Transmission System Operator (NPC Ukrenergo) – responsible for high-voltage grids and dispatching.
• Distribution System Operators (DSOs) – "oblenergos" that handle electricity distribution through local grids to end consumers.
• Electricity suppliers – companies that enter into contracts with end consumers for the sale of electricity and are also authorized to buy and sell on the wholesale market and engage in the import and export of electricity. Electricity suppliers use the grids of the TSO and DSOs to deliver energy to consumers.
• Electricity traders – a separate type of licensee that buys and sells electricity on the wholesale market and may engage in imports and exports, but do not supply consumers (i.e., they do not have direct contracts with end consumers). Trading requires a separate license.
• Universal Service Providers (USP) are state-designated electricity suppliers mandated to serve households and small businesses at regulated tariffs within a specific region.
• Supplier of Last Resort (SLR) is a specialized electricity supplier that provides temporary power to consumers who have suddenly lost their supplier (e.g., due to bankruptcy or license revocation). The SLR ensures that consumers are not left without power, though tariffs are typically higher and supply is time-limited.
• Settlement Administrator, Market Operator, Guaranteed Buyer are other wholesale market participants who do not interact directly with consumers but ensure the functioning of electricity trading and financial settlements.

Thus, the electricity supplier acts as the link between the wholesale market and the end consumer, bearing responsibility for the commercial side of supply (contracting, payment for transmission services, customer service), while the physical delivery is provided by distribution and transmission system operators (DSO and TSO).

Regulatory framework. The main regulatory acts for the activities of electricity suppliers can be structured as follows:

• Laws of Ukraine: "On the Electricity Market" (defines the legal foundations for market operation, as well as the rights and obligations of participants).
• NEURC Resolutions: Licensing conditions for conducting business activities in the supply of electricity to consumers (establishes requirements for licensees and the list of documents required to obtain a license), Retail Electricity Market Rules (governing the relationship between suppliers and consumers in the retail market), Market Rules (wholesale), Transmission System Code, Distribution System Code, Commercial Metering Code for Electricity and others.
• Cabinet of Ministers Resolutions: for example, the Regulation on the Imposition of Public Service Obligations (PSO) on market participants to ensure public interests (establishing pricing rules for universal service suppliers, compensation mechanisms, etc.).
• Standard Contracts: NEURC approves standard contract forms, including mandatory standard agreements with distribution system operators and the transmission system operator.

An electricity supplier must not only be familiar with these regulations but also strictly adhere to them. Non-compliance risks sanctions from the NEURC, ranging from formal notices and fines to the suspension of a license. Below, we examine in detail the rights and obligations of a supplier and how to ensure full regulatory compliance.

Rights and Obligations of an Electricity Supplier

The activities of electricity suppliers are regulated in minute detail: the law and market rules define what a supplier is permitted to do (rights) and what they are required to do (obligations). Let’s look at the main ones in simplified terms.

Rights of an Electricity Supplier

The Law "On the Electricity Market" (Art. 57) grants electricity suppliers the following key rights:

• Buying and selling electricity on the market. Suppliers are free to purchase electricity from any producer or other market participant on the wholesale market (via bilateral contracts or exchanges) and sell it to their customers. They may also import or export electricity (subject to technical capacity) in accordance with legal requirements.
• Choosing counterparties. Suppliers independently choose who to enter into bilateral electricity purchase agreements with, based on competitive principles. No one can force a supplier to purchase electricity from a specific source—the market operates freely.
• Grid access. Suppliers have the right to non-discriminatory access to transmission and distribution networks to supply their customers. In other words, system operators—Ukrenergo and DSOs (Distribution System Operators)—are required to ensure the supplier is connected to the grid and that electricity is transported to consumers on non-discriminatory terms, provided the supplier has completed all necessary procedures (such as signing transmission and distribution agreements).
• Receiving payment. Suppliers have the right to receive timely and full payment from customers for electricity supplied and services rendered. Customers must pay their bills according to the terms of their contracts, and suppliers, in turn, may take contractually defined measures in the event of non-payment (such as charging late fees or initiating disconnection for debt, provided proper procedures are followed).
• Initiating disconnection for debt. If a customer significantly violates payment terms or other essential contract conditions, the supplier (under certain conditions and after providing notice) has the right to request that the distribution or transmission system operator disconnect the customer's power supply. This right is limited: vulnerable consumers (such as certain social infrastructure facilities) cannot be disconnected, and disconnections must follow established procedures (including notifying the debtor in advance, providing a grace period for payment, and obtaining confirmation from the DSO).
• Access to information. Electricity suppliers have the right to receive necessary information regarding market operations from the market operator and the transmission system operator (TSO)—such as data on consumption volumes, imbalances, and tariff information—in accordance with market rules and regulations set by the Regulator. This allows them to effectively plan their purchases and sales.
• Other rights. Suppliers may claim damages from counterparties (customers or partners) for breach of contract; seek protection of their rights through the courts or the NEURC; adjust commercial offers and prices (while adhering to customer notification procedures); and offer additional services to consumers, among other actions, provided they are not prohibited by law and comply with contractual terms.

Example: Supplier "X" has entered into an electricity supply agreement with a consumer. If the consumer fails to pay their bills beyond the period specified in the contract (e.g., 30 days after the invoice date), the supplier has the right to first issue a notice of potential disconnection. In the event of continued non-payment, the supplier may initiate disconnection by submitting a formal request to the Distribution System Operator (DSO). This does not apply if the consumer belongs to a category protected from disconnection during the heating season or is classified as a vulnerable consumer. Only after proper notification and the expiration of the required notice period will the operator physically disconnect the debtor from the grid. In this way, the supplier exercises its right to terminate supply to a non-paying customer, which encourages payment discipline.

Responsibilities of an Electricity Supplier

The list of an electricity supplier's responsibilities is quite extensive. The primary duties are defined by the Law on the Electricity Market and the Retail Electricity Market Rules:

• Compliance with licensing conditions and legislation. This is a fundamental duty: a licensee must fulfill all requirements set out in the Licensing Conditions for Electricity Supply and other market regulations. For example, the Licensing Conditions require the supplier to maintain a website with specific information, and the supplier is obligated to ensure this. Similarly, the law requires the licensee to submit financial reports to the regulator.
• Execution of necessary agreements. To operate in the market, a supplier must enter into several agreements: a transmission service and imbalance settlement agreement with the Transmission System Operator (Ukrenergo), agreements with regional Distribution System Operators (DSOs) where their customers are located, an agreement with the Market Operator (to participate in the day-ahead and intraday markets), and other agreements required by the rules. Without these, a supplier cannot physically provide electricity, making their execution a direct legal requirement. The supplier must also comply with the terms of these agreements, such as adhering to technical power supply schedules and following payment rules for distribution and transmission services.
• Volume planning and balancing. The supplier is responsible for the balance of electricity supplied to its customers. It must forecast consumption daily, prepare hourly electricity supply schedules for the day ahead, and submit them to the system operator. If actual consumption deviates from the forecast, imbalances occur, for which the supplier bears financial responsibility. The supplier is required to pay for these imbalances at the Transmission System Operator's rates, which are often higher than market prices. Therefore, accurate planning is not just a duty but a significant financial risk.
• Timely payment for electricity and services. The supplier is obligated to pay on time for all electricity purchased on the market for its customers, as well as for transmission, distribution, and dispatch services provided by other market participants. Essentially, the supplier acts as a financial intermediary: it collects funds from consumers and must transfer them to producers and system operators. If the supplier fails to pay, systemic debts can arise, threatening market stability, which is why the NEURC strictly monitors payment discipline.
• Maintenance of special accounts. By law, a supplier must open current accounts with a special usage regime at an authorized bank. These are escrow-style accounts through which electricity payments flow, ensuring that funds received from consumers are distributed among market participants (such as the TSO) according to established priorities. The supplier is prohibited from using these funds for other purposes until they have been distributed to their general current account.
• Informing consumers. The supplier must transparently inform its clients about all supply terms and metrics. Specifically, consumer invoices must include a link where the customer can find information regarding the environmental impact of electricity production. The invoice or its attachments must also include the supplier's contact information for inquiries and safety reports. Additionally, upon a consumer's request, the supplier must provide data on their electricity consumption for recent periods; this is essential when switching suppliers so that the new provider can estimate the required volumes.
• Timely issuance of a final bill when switching suppliers. If a consumer decides to switch to another supplier, the previous supplier is required to send a final bill no later than 6 weeks after the switch. This is a European standard adopted in Ukraine to ensure that the departing consumer settles their account fully and does not continue receiving bills for months. The new supplier begins billing from the date of the switch, while the previous one closes all outstanding matters within 6 weeks.
• Handling consumer complaints. The supplier is required to accept and review consumer inquiries, complaints, and claims regarding electricity supply. In accordance with the procedures established by the Regulator, the supplier must provide reasoned responses within specified timeframes. Such inquiries may concern electricity quality, billing accuracy, power outages, and more. Inadequate handling of these inquiries may result in fines or other measures imposed by the NEURC.
• Ensuring quality and compensation. The supplier must provide services of appropriate quality and adhere to established electricity supply quality standards. While the network operator is primarily responsible for the technical quality of electricity (voltage, frequency), the supplier is also accountable to the consumer for compliance with contractual terms. If the supplier violates service quality standards (e.g., by issuing invoices late or providing inaccurate information), they must compensate the consumer in accordance with the contract and NEURC resolutions.
• Maintaining separate accounting. Suppliers providing universal services or acting as a "supplier of last resort" are required to maintain separate accounting for costs and revenues related to these state-regulated areas versus those operating under market prices. In other words, cross-subsidization between regulated activities and competitive ones is prohibited; everything must be transparent.
• Providing information to other market participants. Upon request, the supplier must provide system operators or other participants with the information necessary for them to perform their functions (e.g., data for balancing, tariff calculations, information on the share of energy sources, etc.) in the volumes defined by system codes and regulations.
• Reporting to the Regulator. Another key obligation is to provide the NEURC with information and reports on operations upon request. The Regulator collects regular reports (quarterly, annual) on supply volumes, the number of consumers, service quality, financial performance, and more. Failure to submit reports or late submission constitutes a violation of licensing conditions.

You can read more about the obligation to report trading operations in our article: "The new procedure for reporting trading operations and what changes it brings for market participants".

As we can see, there are many requirements. They cover all aspects of operations, from technical planning to customer communication. This is beneficial for consumers, as the supplier is clearly regulated and accountable. For companies, however, it means they must establish internal control processes and hire competent personnel (energy experts, traders, lawyers, accountants) or engage external consultants to meet all these criteria.

Example: Supplier "Y" obtained a license and began operations, but over time stopped updating price and contract information on its website. Customers began complaining that the tariffs on the site were outdated. During a scheduled inspection, the NEURC discovered that the supplier's website did not contain current information and that some mandatory data was missing. This is a violation of licensing conditions. In such a case, the electricity supplier faces a fine from the Regulator. Following the inspection, the company was fined, for example, 85,000 UAH for failing to comply with website functionality and consumer information requirements. The supplier was forced to pay the fine and immediately rectify the shortcomings to avoid more severe sanctions (a repeat violation could lead to license revocation).

It should be noted that 85,000 hryvnias is the minimum fine amount. There are cases where the Regulator (NEURC) imposes significantly larger fines on wholesale energy market participants.

Read more about fine amounts in our article: "Insider information, manipulation, and a 459 million UAH fine. Details on the wholesale energy market" (https://www.fedotovpartners.com/post/insayderska-informaciya-manipulyuvannya-i-shtraf-459-mln-grn-detali-pro-optoviy-energorinok)

 NEURC oversight and liability

Regulatory oversight. The NEURC continuously monitors the activities of licensees. There are scheduled inspections (typically once a year or less frequently, according to an approved plan) and unscheduled inspections (in the event of complaints or identified issues). During an inspection, the Regulator's representatives analyze almost every aspect of a supplier's operations: whether documents are correctly prepared, whether the office and staff are in place, whether the website meets requirements, whether all contracts are executed, and whether reporting and contributions are submitted and paid on time, how consumer inquiries are handled and so on. The list of items for inspection is defined in the Control Procedure approved by the NEURC. In particular, special attention is paid to whether the supplier's website is functioning properly and whether up-to-date information is posted there, as mentioned above. If violations are identified during the inspection, they are recorded in an audit report. The supplier has the right to provide explanations or rectify some violations during the inspection itself (for example, by immediately submitting missing reports, which may mitigate liability). Based on the inspection results, the NEURC decides on sanctions.

Potential sanctions. For violations of license conditions or regulations, the Regulator may apply the following measures:

• Order (directive): a requirement to rectify violations within a specified timeframe.
• Warning (caution): an official notification regarding the inadmissibility of future violations.
• Fine: a financial penalty, the amount of which depends on the violation (up to a maximum of 1.7 million UAH per violation, according to the methodology).
• License revocation: a measure of last resort, applied if violations are severe or unrectified, and the licensee's operations pose a threat to the market or consumers.

In practice, the NEURC is quite active in fining electricity suppliers. For example, in June 2025, the Regulator imposed a 1,700,000 UAH fine on one supplier for failing to comply with license conditions—specifically, the company failed to ensure the presence of a responsible manager during a scheduled inspection, thereby violating established procedures. The fine must be paid to the state budget within 30 days. Another example: in 2024, several companies were fined for improper consumer notification and the absence of up-to-date contracts on their websites. Such cases demonstrate that the NEURC monitors not only finances but also service quality.

Our publications on this topic:

"Successful support for electricity and natural gas suppliers during NEURC inspections!" 

"Effective protection of client interests during scheduled NEURC inspections!"

Liability to consumers. In addition to sanctions from the regulator, an electricity supplier is also liable to its clients. If a consumer suffers losses due to the supplier's fault, they may seek compensation. For example, if production stops and losses occur due to an unlawful disconnection (when the supplier mistakenly issued a disconnection order or failed to fulfill its obligations, leading to a shutdown), the supplier may be required to compensate for these losses through the courts. Similarly, if a supplier overcharges on a bill, the consumer has the right to demand a recalculation and a refund of the overpayment. Disputes between consumers and suppliers are resolved either through direct negotiations/claims (pre-trial procedure) or through the courts. In Ukraine, there is also a procedure for consumers to file complaints with the NEURC regarding supplier actions—the Commission may review the complaint and take response measures.

Therefore, compliance with the rules is not just a formality, but a matter of a supplier's financial stability and reputation. Companies should regularly conduct internal compliance audits: checking that all necessary documents are in order, that staff are familiar with procedures, and that clients are satisfied. Many suppliers engage FEDOTOV & PARTNERS to conduct compliance audits before the NEURC arrives to avoid heavy fines. As the saying goes, it is easier to prevent a problem than to solve it later under pressure from the Regulator.

Who is eligible to obtain an electricity supply license?

Requirements for license applicants. An electricity supply license can be issued to any business entity that meets the licensing requirements. There are no restrictions regarding the legal form: it can be a limited liability company (LLC), a joint-stock company (JSC), or even a sole proprietorship. The key is to fulfill the established criteria. The licensing conditions (NEURC Resolution No. 1469 of December 27, 2017) define a number of organizational and technological requirements for a license applicant. Among the main ones are:

• Availability of premises for customer service. The applicant must have the use of (through ownership or lease) non-residential premises equipped as an office where electricity consumers can reach out. This ensures the company's physical presence and the ability for clients to receive offline consultations. The licensing conditions do not strictly regulate the size or location of the premises, but it must be sufficient for conducting business (for example, it cannot be a "shell company" without an office).
• A dedicated website. Having an individual company information website is a strict requirement of the licensing conditions. Without a functional website, the NEURC will simply not consider a license application. Furthermore, the site must be populated with specific information: it must contain supply rules, standard contracts, tariffs, payment terms, the rights and obligations of the consumer and the supplier, regulatory acts, contact details for responsible persons, a report on electricity sales, and more. In effect, the website is the supplier's storefront and primary information resource. The NEURC verifies its compliance with requirements when issuing a license.
• Compliance with competition laws. The company's founders and beneficiaries must not be subject to prohibitions provided by law. In particular, the applicant must provide information that its activities are not controlled by residents of an aggressor state (as of 2022–2025, this is relevant regarding Russia and Belarus). This requirement was introduced to prevent hostile capital from entering the critical energy market. There must also be a transparent ownership structure (with ultimate beneficiaries identified).

In general, a newly created company without experience can obtain a license, but it needs to prepare well: rent an office, create a high-quality website, and gather all the documents. The age of the company or the amount of authorized capital is not directly regulated; you can start from scratch, even with minimal capital (10,000 UAH or less for an LLC). However, it should be noted that after obtaining a license, the company immediately enters a competitive environment and must have the financial resources to purchase electricity in advance, cover potential imbalances, etc. Therefore, newcomers often attract investments or credit lines before entering the market.

Procedural aspects. The license is issued by the NEURC through a decision (Resolution) at its open meeting. The application can be submitted in person, by mail, or online via the electronic services portal. Review takes up to 10 business days. The license is issued indefinitely (meaning it does not need to be renewed annually) and is valid throughout Ukraine. A one-time administrative fee is charged for issuance (as of 2025, it is approximately 3,100 UAH). This fee must be paid after the decision to issue the license is made but before receiving it, and a copy of the receipt must be provided to the regulator. If the payment is not made on time (within 10 business days of the decision), the NEURC may cancel or suspend the license. Thus, obtaining a license is not just about preparing documents, but also a financial commitment.

Grounds for license refusal. The NEURC has the right to refuse a license if the applicant has submitted an incomplete package of documents or if they do not meet the established requirements; if the applicant is legally prohibited from obtaining a license (e.g., its founders are citizens of an aggressor state) or if the website is improperly set up. A refusal is issued as a formal decision and can be appealed in court. After receiving the license, the new supplier is entered into the licensing register and can officially begin commercial operations.

Our team provides a turnkey electricity supply licensing service, allowing companies to start their operations as quickly as possible and without unnecessary hassle.

Operating as an electricity supplier in Ukraine is a responsible business that requires strict adherence to legal rules and conditions. On one hand, the state has created competitive opportunities: any company that meets relatively straightforward licensing requirements can enter the market and offer its services to consumers. On the other hand, after entering the market, the supplier faces strict regulation of every step: from the structure of the website to billing deadlines. For successful operation, it is necessary to ensure constant legal compliance—updating contracts, monitoring changes in regulatory acts, and responding promptly to the Regulator's requirements. Consumers in the retail market have also become better protected—they have a wide range of rights, can freely change suppliers, and demand quality service.

Legal support is an integral part of a successful energy business. Specialists at Fedotov & Partners support the activities of electricity suppliers at all stages: from obtaining permits and licenses and drafting standard contracts to representing interests before the NEURC and resolving disputes. By turning to professionals, an electricity supplier can focus on business development, while issues of regulatory procedures, obtaining an electricity supply license, compliance with market rules, and consumer rights protection will be under reliable control. Ultimately, proper legal support is the guarantee that an energy business will operate stably, profitably, and without penalties. Knowledge and execution of the legal specifics of an electricity supplier's activities allow a company to compete successfully in the market and earn the trust of its clients. Fedotov & Partners has many years of experience in the energy sector and is ready to provide professional support to electricity suppliers to achieve this goal.

You can order our service via the link: https://www.fedotovpartners.com/services/otrimannya-licenziy

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