Independent Regulatory Body
Quality of Service
Petroleum By-products and Natural Gas
On November 14 2001 the Portuguese and Spanish governments signed a cooperation protocol to implement the Iberian Electricity Market. This guaranteed agents in both countries equal access to the market operator and to interconnection with third countries, as well as more freedom in bilateral agreements.
The protocol follows the adoption on September 27 2001 of a new National Energy Strategy by the Portuguese Ministers Council (Programme E4, approved by Ministers Council Resolution 154/2001). The National Energy Strategy aims to increase the overall efficiency of the Portuguese electricity system, in terms of production, transportation and distribution. It is also intended to promote the use of renewable sources so that by 2010, 39% of the electricity consumed in Portugal is generated by renewables. It is proposed that up to €5 million be invested to help reach this target.
The National Energy Strategy has been amended several times by the regulator and has been implemented as follows:
- Decree-Law 312/2001 amends the regime governing national grid capacity in order to ensure that power produced by independent generators is added to the national grid. It also establishes a payment system for independent generators which varies according to the technology used and the type of management applied. The decree further provides for the payment of a fee to the local authorities for the installation of wind generation plants.
- Decree-Law 313/2001 amends the co-generation regime with respect to the operational conditions of co-generation plants, the joint management of energy and the tariffs to be paid for the electricity produced. Governmental Order 399/2002 implements some of this decree-law's provisions.
- Decree-Law 314/2001 expands the powers of the Portuguese Energy Agency, increasing its involvement in the promotion of energy efficiency and national resource usage targets.
In April 2002 the 15th Government Programme for Portugal was presented and approved by the new government. It includes an extensive and ambitious plan for the modernization of the national electricity system. The measures proposed include the following:
- increased regulation of gas and combustibles through the incorporation of a single regulatory authority, which will be empowered to intervene and prevent abusive pricing practices while at the same time promoting competition and assuring the quality and safety of services rendered;
- implementation of the Iberian electricity market;
- liberalization of the fuel prices supervised by the regulator;
- study of the eventual separation of import and distribution activities within existing concession agreements;
- support for the development of renewable energies; and
- promotion of hydroelectricity.
Ministers Council Resolution 103/2002 subsequently approved the Programme for Productivity and Economic Growth. The programme set out the following measures to increase competition and regulation in the energy sector:
- development of competition in the energy market in order to reduce the costs borne by energy companies;
- implementation of the Iberian electricity market, while protecting Portuguese interests and self-sufficiency;
- creation of the Iberian gas market, which will lead to increased choice for gas consumers; and
- regulation of the entire energy market (electricity, gas and petroleum refining) by a single authority.
Ministers Council Resolution 14/2003 appointed a team to develop the main guidelines of the Portuguese energy policy. On the basis of the work undertaken by this team, on March 19 2003 the government approved a resolution which sets out the main guidelines of domestic energy policy. The resolution is based on three strategic principles:
- ensuring the continuity of supply;
- promoting sustainable development; and
- developing national competitiveness.
The resolution specifies the following objectives included in the Government Programme for Portugal:
- liberalization of the market;
- reduction of energy intensity in products;
- reduction of energy invoices;
- improvement of the quality of service;
- security of provision and supply;
- diversification of energy sources and exploitation of indigenous resources;
- minimization of the environmental impact of energy projects; and
- reinforcement of national competitiveness.
In light of these objectives, further modifications to the Portuguese energy and natural resources legislation should be expected.
The Energy Services Regulatory Authority is responsible for the regulation of the natural gas and electricity sectors.
The authority was created by Decree-Law 187/95. Decree-Law 97/2002 subsequently extended its regulatory powers to the regulation of natural gas in accordance with the EU Gas Directive, which was transposed into national law by Decree-Law 14/2001.
The authority's powers to regulate the electricity sector were extended to the autonomous regions of Madeira and the Azores by Decree-Law 69/2002.
Governmental Dispatch 2410-A/2003 approves a new Regulation for the Quality of Service, which establishes the minimum quality standards of commercial and technical service which national grid operators must observe. The regulation has introduced the following changes to the system:
- The number of zones in which more demanding quality standards apply has been increased;
- The technical and commercial service standards have been raised;
- A system for the automatic payment of compensation in case of a failure to comply with the regulation has been introduced;
- A requirement to pay increased compensation to customers in case of a failure to meet quality standards has been introduced; and
- An investment fund for the improvement of services has been set up.
The general principle of ex aequo et bono (ie, 'according to what is right and good') now applies to customers of the public and independent electricity systems, granting them equal treatment with respect to available information and the payment of compensation for failure to comply with technical standards.
Governmental Order 399/2002 provides that, pursuant to Article 7 of Decree Law 538/99 (as amended by Decree-Law 313/2001), operators can choose to sell to the national grid either (i) all energy produced by the facility (apart from that consumed by internal equipment), or (ii) the surplus energy after the consumption needs of interconnected entities have been met.
Four governmental orders (57/2002 to 60/2002) establish the methods for calculating the payment due for energy produced by co-generation facilities.
Under Portuguese law, the establishment of co-generation facilities is subject to prior study and approval, and their operations are continually monitored. Article 23 of Decree-Law 538/99 requires that co-generation facilities be examined by an independent auditor, recognized by the Energy Directorate, in order to evaluate their operations, with particular regard to efficiency and the volume of energy that is supplied to the national grid.
The relevant authorities have approved a Guide for the Auditing of Co-generation Facilities and a Guide for the Recognition of Energy Auditors for Co-generation Facilities (Dispatch 19151/2002). These provide guidance on the energy audit procedure.
Decree-Law 68/2002 regulates the production of low-voltage electricity, which is produced by generators and solar panels. At least 50% of the electricity produced must be consumed by the producer or by connected third parties. Further, the power that is transmitted to the national grid at each connection point cannot exceed 150 kilowatts.
Governmental Order 764/2002 establishes the method for calculating the payment due for energy produced by low-voltage facilities.
Decree-Law 339-C/2001 introduced several amendments to the renewable energy regime. It established a payment system for independent generators, which varies according to the technology used and the type of management applied, and provided for the payment of a fee to the local authorities for the installation of wind generation plants.
Under the current interpretation of the law, Portugal now has one of the most interesting tariffs for energy produced from wind plants.
Decree Law 295/2002 sets out the procedures which small hydroelectric plants must follow to obtain the necessary licences for the production of hydroelectric energy.
Petroleum By-products and Natural Gas
Governmental Order 1298/2002 establishes the specifications for fuel oils sold on the domestic market.
Governmental Order 765/2002 approves the safety regulations governing the construction, operation and maintenance of pipelines which transport liquid and liquefied hydrocarbons. The order sets out minimum standards regarding the areas in which pipelines may be located, and specifies the minimum distances that must be observed between pipelines and construction or other equipment, in order to minimize the risks in case of accident.
Governmental Order 468/2002 sets out the rules for obtaining a licence for the operation of natural gas petrol stations.
For further information on this topic please contact Teresa Morais Leitão at Morais Leitão, J Galvão Teles & Associados by telephone (+351 21 381 7400) or by fax (+351 21 381 7499) or by email ([email protected]).