Poland: energy law changes

Significant changes in energy law are due to come into force after new legislation was passed by Parliament and signed by the President.

The changes have been welcomed by the largest industrial plants and the Polish Power Exchange. However, other parties have criticized elements such as the extent of the obligation to trade gas on the Polish Power Exchange, the right to terminate fixed-term power supply agreements and the requirement to include an obligation to provide a timetable into connection agreements that have already been signed but not performed.

Another controversial aspect of the legislation is that it is being introduced whilst a more wide-ranging reform of energy, gas and renewable energy laws in Poland has been postponed indefinitely even though drafts of three new statutes had already been produced.

The key changes, most of which come into force 14 days after the Act is published in the Journal of Laws are summarized below.

Support for major off-takers

• Certain groups of major industrial off-takers will benefit from reduced energy prices (which will no longer include the costs of issuing certificates of energy origin for renewable energy, combined heat and power (CHP), etc).
• Instead of paying for the certificates indirectly as part of a fixed energy price in their power purchase contracts, those industrial off-takers that have consumed at least 100 GWh of energy in the preceding year and whose cost of energy consumption was at least 3% of the value of their production will now have to buy certificates directly at market price and submit them for redemption to the President of the Energy Regulatory Authority (ERA). However, it should be noted that generally the obligation to redeem certificates for CHP expired for all market participants on 31 March 2013 and a replacement system has yet to be introduced.
• The required amount of certificates will be either 20%, 60% or 80% of the volume of energy purchased by the industrial off-taker for its own consumption, depending on the cost of that energy relative to the value of its production. The higher the costs, the lower the obligation to purchase and redeem certificates.
• An ‘industrial off-taker’ is defined as an end user whose main business is hard coal mining or mining of non-iron metal ore, production of wooden products (except for furniture), paper production, production of chemicals, rubber or plastic products, products out of glass and construction ceramics, metal production or food production.

Obligation to trade gas on the Power Exchange

• Entities trading high-methane gas will be required to trade 30% of their yearly volume of gas put into the transmission system on the commodity exchange (in effect on TGE, the Polish Power Exchange). This will rise from 1 January 2014 to 40% and from 1 January 2015 to 55%.
• The obligation will not apply to entities trading abroad whose capacity allocations at the point of entry to the Polish transmission system is below 10% of the total capacity in all entry points.
• According to the President of the ERA the obligation to sell gas on the commodity exchange will create conditions for gradual withdrawal of the tariff obligation for the retail market.

Change of supplier

• The new law allows termination by off-taker of its current supply agreement even if it is for a fixed term (subject to paying the termination costs and/or any liquidated damages provided for in the agreement).
• Transmission or distribution system operators must allow off-takers to change power or gas supplier at any time within 21 days of receiving notification that agreement has been concluded with a new supplier.

Support for vulnerable customers

• Vulnerable customers will, on submitting a written request, be entitled to receive special subsidies on their gas and electricity costs from their local municipality.
• The subsidy will be up to 30% of a reference amount (to be published yearly by the Minister of Economy) based on the average gas/electricity consumption, average electricity/gas prices and the number of household occupants.

Guarantees of origin

• Guarantees of origin are being introduced. These are documents confirming to end-customers that the electricity they are buying was generated from a renewable source, and should not be confused with certificates of energy origin. The guarantees of origin may be traded separately from the related electric energy.

Certification of TSOs

• Transmission system operators are required to obtain a certificate of independence, based on their meeting criteria set out in the new legislation that are intended to implement EU Directives 2009/72/EC and 2009/73/WE into Polish law.

Timetable of interconnection

• A timetable of the connection process will now be required whenever a new energy source is connected to the transmission and/or distribution grid.
• This will give the owners of the new installations details of the timings of all stages of the connection process.
• Where the connection agreement was signed but the connection has not been made before the requirement was introduced, a timetable must still be produced and either party may terminate the agreement if the agreement has not been adjusted to reflect the new requirements within 6 months of the change taking effect.

Microinstallations and other issues

• The process of setting up a microinstallation is being simplified in a number of ways
• Microinstallations are renewable energy sources with no more than 40kW of total installed electrical capacity, connected to electrical grid of a voltage lower than 110kV or no more than 120 kW of total installed heat capacity.
• Applications to connect a microinstallation to an energy distribution company’s grid will no longer be subject to a connection fee nor required to attach documents confirming the admissibility of locating the installation in the investment area.
• In some cases, there will be no need for an interconnection agreement.
• Selling energy generated by a microinstallation will not be regarded as a business activity if it is conducted by an individual who is not running a business.
• If an individual’s microinstallation is connected to the default supplier’s grid, it must buy all the energy offered for sale for 80% of the previous year's average electricity price.
• Other amendments include changes to the provisions on suspending energy supplies, changes in various regulations regarding renewable energy sources, and new regulations on training course, certifying of installation engineers for microinstallations and small installations, international cooperation on investment projects and cooperation in the field of renewable energy.