Czech Republic: EU accession - energy

What changes have already been made to Czech energy law?

The Act on Business Conditions and Public Administration (the "Act") implements many of the EU requirements in this area. It came into force in January 2001. The Act provides the conditions for business activities, performance of public administration and regulation in the energy sector, including electricity, gas and heat, as well as the rights of and obligations of individuals and legal entities related thereto. One of the major objectives of the new law is to prepare for the planned liberalisation and privatisation of the undeveloped energy market.

In particular, the Act contains the following major provisions:

• new legal concepts in the area of energetics in order to make Czech energy law compliant with the Acquis
• regulates the conditions in which business activities in the field of energetics can be performed including the procedures of granting licences etc.
• establishes the Energy Regulatory Office (the "Office"), as an independent state body, to exercise regulation in the energy sector. The mission of the Office is to support economic competition and protect consumers' interests in areas where competition is impossible or not yet satisfactorily developed and aims to meet all reasonable requirements for energy supply. The competence of the Office extends to the following areas:

1. granting, amendment, or revocation of a licence
2. issue of decisions on the holding of more than one licence by an individual or a legal entity in compliance with the implementing regulation
3. imposition of a supply obligation beyond the scope of the licence
4. decisions on price regulation
5. decisions on disputes arising from a failure to conclude agreements between individual licence holders and agreements with their customers; and
6. request that licence holders disclose information specified by the Office.

• special accounting principles for all licence holders
• the electricity, gas and heat energy markets are newly defined
• the Act determines market participants and includes provisions on Third Party Access ("TPA") rules for eligible customers regarding fuels or energy
• establishes the concepts of 'Electricity Market' operator, 'Transmission System' operator, 'Distribution System' operator and regulates their scope of activities
• establishes other legal concepts such as the 'Eligible Customer' and the 'Protected Customer'
• sets conditions on the construction of electricity generating plants and direct lines
• sets out the competence of the Ministry of Industry and Trade in deciding on electricity import restrictions
• sets conditions on which an electricity supply contract shall be concluded with respect to each electricity supply point; and
• an obligation on producers to generate electric energy when it is necessary to ensure the quality, continuity and reliability of supplies.

What changes to Czech energy law will come into effect on accession?

There are no specific provisions in Czech energy law which will become effective directly on the date of the Czech Republic's accession to the EU. The Czech Republic has been granted a transitional period for the building up of oil stocks (until 31 December 2005) and for the liberalization of the gas market (until 31 December 2004).

The establishment of a competitive internal energy market, partial market liberalisation and the adoption of implementing legislation to the Act have contributed to a high level of compliance with the Acquis, particularly with regard to electricity.

With regard to gas, implementing legislation remains to be completed in order to fully comply with the Acquis. The gas and electricity sectors are now generally well prepared for the competitive internal energy market through the privatisation of major players in the gas market, the restructuring of electricity utilities and the broadly cost-reflective electricity prices.

What can you do to ensure that you comply with the new law and prepare for accession?

• licence holders should make sure that they continually comply with the conditions provided by the Act as the Office is entitled to withdraw licences
• all market subjects should be prepared for the planned liberalisation of the energy market. The "governmental action plan", published in 2000, states that the whole energy market (with the exceptions mentioned above) shall be fully liberalised by 2007. This means that there will be established competition between producers and suppliers; and consumers would be able to choose the producers/suppliers providing the most competitive deals; and
• Czech gas suppliers should be prepared for increased competition in this area, particularly as gas import restrictions on gas suppliers from other Member States is soon likely to be removed.

For further information please contact Hilary McDowell.