Alert: Polish draft law on extraordinary measures to address high energy prices
Last time, we wrote to you about the proposed regulation of the Council of the European Union on an emergency intervention to address high energy prices (the “Regulation”). The Regulation, which entered into force on 8 October 2022, generally left it up to the Member States to establish the details of its implementation. Recently, the Polish government published a draft law on extraordinary measures to address high energy prices and support of certain consumers in 2023 (the “Draft Law”), which is to implement the provisions of the Regulation. The legislative work on the Draft Law is currently in progress – on 20 October the Draft Law was adopted by the lower chamber of the Polish Parliament (Sejm). Before it comes into force it needs to be approved by the upper chamber of the Parliament (Senat) (which may introduce amendments to the Draft Law) and signed by the President. The key solutions of this proposed act are summarised below.
1. Revenue Cap
1.1 The Draft Law introduces a cap on revenues obtained from the sale on the wholesale market of electricity produced from certain renewable energy sources (including wind, solar and waste) and conventional energy sources (including coal and lignite). The revenue cap will also apply to energy trading companies.
1.2 The revenue cap will not serve as a price cap, which means that the companies covered by the revenue cap will not have to adjust their prices. Instead, they will be required to provide excess revenue, calculated in accordance with the formula laid down in the Draft Law as so-called contribution to the Fund (a designated government agency) (the “Fee”). The payments will be made on a monthly basis.
1.3 The revenue cap is not a fixed amount. The Fee will be calculated taking into account the net volume of energy sold, the average daily market price of electricity and the price limit set by the Government under separate regulation. Given that the market price of electricity is defined as (i) the net electricity price specified in PLN/MWh established under an electricity sales contract or (ii) the price determined within the electricity balancing market, the Fee will be calculated individually for companies subject to its payment.
1.4 Not all energy producers will have their revenues capped. Notably, the cap will not apply to RES installations participating in the CfD auction support scheme, with respect to the energy sold under the CfD system as well as to energy generation units with an installed capacity not exceeding 1 MW. This solution effectively eliminates the risk that beneficiaries of the CfD support system will have to simultaneously give up a portion of their revenues exceeding the cap and pay the positive balance due under the auction regime. However, the Draft Law does not provide a similar exemption for energy sellers under the PPA, which means that they will also be required to pay a Fee.
1.5 In line with the Draft Law, the Polish revenue cap mechanism will remain in force between 1 December 2022 and 30 June 2023.
2. Price Setting
2.1 The law introduces a maximum price mechanism to be used in settlements with eligible customers. The maximum price will be set at approx. EUR 140/MWh in case of energy sold to households and approx. EUR 160/MWh in case of energy sold to SMEs and local governments.
2.2 The Draft Law provides a compensation mechanism applicable only to so called authorised entities, i.e., energy companies trading in electricity and applying maximum prices in settlements with eligible customers.
2.3 The price-fixing mechanism will be effective in relation to: (i) the energy sold to households from the entry into force of the Draft Law, and (ii) the energy sold to SMEs and local governments from 1 December 2022, in both cases until 31 December 2023.
The Draft Law will likely be adopted relatively soon, considering that the revenue cap obligations are set to enter into force on 1 December 2022.