In brief

The Czech Republic has recently significantly amended existing legislation in the field of energy transition and energy regulation as a follow-up to the Renewable Energy Directive Recast (RED II), with the aim of counteracting unfair business practices towards consumers. The majority of these changes became effective on 1 January 2022, with the rest becoming effective later in 2022 or 2023. This is a significant step towards decarbonisation in line with EU goals and it creates many opportunities for the energy market players. Furthermore, energy brokers and energy suppliers should be alerted to the new licence requirements and consumer rights, and should update their standard consumer contracts accordingly.

Contents

  1. Refreshed transition framework and new types of support
  2. Obligatory decarbonisation in the transport sector
  3. Review of support mechanism
  4. Increase of the solar levy
  5. Heightened regulation of energy brokers
  6. Further consumer protection

Refreshed transition framework and new types of support

In particular, a revised energy transition framework has been adopted to promote the 2030 renewable energy targets, where the local government has the power to determine the renewable energy sources that the country will support for at least a three-year period.

Furthermore, new possible types of support have been enacted, in particular:

  • Support for production of biomethane
  • Support for small-scale schemes generating up to 1 megawatt (or 6 megawatts in case of wind power plants)
  • Support for sustainability of existing plants
  • Bidding support
  • Support for modernisation of power plants

The new legislation also anticipates a bidding process for supplies of renewable energies, drawing on the current EU legislation and experience in some EU member countries.

Obligatory decarbonisation in the transport sector

A gas supplier will now be obliged to ensure that the natural gas and biomethane supplied for transportation purposes will annually contain a minimal share of advanced biomethane energy, namely in the amount of 0.5% from 2023, 2% from 2025 and 40% from 2030.

Similarly, a charging station operator will now have an obligation to ensure that the electricity consumed for charging vehicles contains a minimal share of renewable energy, namely in the amount of 9% from 2023, 11% from 2025 and 15% from 2030.

Two or more gas suppliers or charging station operators may agree on a transfer of the obligation to fulfil the minimum quota.

Review of support mechanism

A new mechanism has been introduced to review the provided support in respect of the energy sources put to work between 1 January 2006 and 31 December 2015. The support will be adequate if the internal rate of return (IRR) does not exceed a threshold set by the Czech government specifically for individual renewable sources, which has to range from 8.4% to 10.6%. The Energy Regulatory Office will take an appropriate sectoral or individual measure if the rate is exceeded.

This adequacy control mechanism corresponds to the decisions of the European Commission on the compatibility of the Czech aid for renewable energy programmes. The secondary legislation that should set out the details regarding the review has yet to be adopted.

Increase of the solar levy

The new legislation also increases the levy on solar energy generated from 1 January 2022 from appliances put to work in 2010 by an additional 10%. The levy increase is adopted with the aim of counterbalancing the bountiful support that the Czech government has been providing with respect to the large number of solar appliances installed in 2010.

Heightened regulation of energy brokers

As from 1 June 2022, local energy brokers will have to hold a broker licence issued by the Energy Regulatory Office. Existing energy brokers and energy brokers that will commence their activities prior to the above deadline will need to obtain the broker licence by 31 December 2022. To obtain the licence, the energy broker will need to prove necessary educational requirements and practical experience in the energy sector. The licence will be limited to five years but will be extendable.

Energy brokers will have to act fairly and professionally and take account of consumers' rights and their legitimate interests, which they should prioritise over their own interests.

Additionally, broker contracts will need to be revised in compliance with the new requirements by 30 June 2022; otherwise, they will automatically become void.

The Energy Regulatory Office will now hear disputes between energy brokers and consumers and oversee that energy brokers comply with the law.

Further consumer protection

The new legislation vests consumers with additional rights towards energy brokers, in particular:

  • Consumers will be entitled to terminate a broker contract immediately without recourse.
  • A broker's authorisation to enter into a contract with energy suppliers may not last more than 12 months.
  • The broker will have an obligation to deliver to the consumer a written contract with the supplier without delay.

Furthermore, consumers will have additional rights towards energy suppliers, such as:

  • A consumer will have a right to terminate a supply contract entered into by an energy broker within 15 days from the first supply. Additionally, a consumer will have a right to terminate a supply contract in case the consumer loses ownership or the right of use of the respective real estate.
  • An energy supplier will have notification duties towards consumers, including the obligation to distribute a personalised notification no later than 30 days prior to the effective date of a price change, and a consumer will have a right to terminate a supply contract no later than 10 days prior to the price or contract change without recourse. In case of automatically renewable contracts, a consumer will be entitled to withdraw a contract without recourse no later than 20 days prior to the end of the term.
  • It will not be possible to enter into a time-limited supply contract for a period exceeding 36 months.