An extract from The Energy Regulation and Markets Review - Edition 10

Regulation

i The regulatorsThe regulatory authority

The administrative authorities that are responsible for determining regulatory policy are the Minister of Climate and the President of the Energy Regulatory Authority (ERA). The Ministry of Climate is currently in charge of energy and climate departments that were previously under control of the Ministry of Energy, which was liquidated at the end of 2019. The Minister of Climate is responsible for the legislative process (i.e., preparation of legislative acts that are later adopted by Parliament and signed by the President) and creating policy with respect to the energy market. The role of the President of the ERA is regulator of the activities of participants in the energy market.

The President of the ERA is appointed for five years by the Prime Minister in an open and competitive recruitment process. He or she may be reappointed only once. The regulator shall be impartial and independent of any public or private entities.

The scope of the powers and obligations of the President of the ERA is very broad. His or her general obligation is to monitor the functioning of the whole energy market, that is, all segments of the energy industry, including electricity and gas markets. He or she is entitled to grant licences to conduct business activity in Poland, and approve the tariffs for electricity, gas and heat. The President of the ERA is also responsible for managing auction systems (in the area of renewable energy, cogeneration and capacity mechanism), the purpose of which is to grant state aid for selected projects. Moreover, the President has the power to control the fulfilment of the obligations set forth in the relevant legislation and to impose financial penalties for any violations of those obligations.

Main sources of law

The main legislation setting forth the general framework for the energy sector in Poland is the Energy Law. This statute defines the basic terms regarding the energy sector and provides the rights and obligations of the main market participants, defines the powers and obligations of the administrative authorities (such as the President of the ERA), and sets forth the conditions for conducting business activities in the energy market in Poland.

However, there are many other laws regulating specific sub-sectors of the energy industry. With respect to electricity, the key legislative acts that promote clean energy in Poland are the Act on Renewable Energy Sources, the Act on the Promotion of Electricity from High-Efficiency Cogeneration, and the Act on Electromobility and Alternative Fuels, as well as the newly adopted Act on the Promotion of Generation of Electricity in Offshore Wind Farms. Also key is the Act on the Capacity Mechanism, which provides a support scheme for electricity generation. The framework for the gas industry is set out mainly in the Energy Law, but also in the Act on Mandatory Stocks of Crude Oil, Crude Oil Products and Natural Gas and on the Principles of Proceeding in Case of a Threat to National Fuel Security and Disruptions on the Crude Oil Market.

Acts of Parliament are not the only source of law regulating the energy market. When it comes to technical information or information pertaining to very specific issues, such as rules for the preparation of the tariffs for electricity, gas and heat, they are usually set out in secondary legislation. These are regulations issued by one of the government bodies; in this case, it is usually the Ministry of Climate (previously the Ministry of Energy).

Although not legally binding, one of the key pieces of legislation that presents Polish strategy with respect to the energy sector is the Energy Policy for Poland until 2040. The Energy Policy sets out the government's plans for the development of the energy market and the changes that will affect the industry.

As the energy market in Poland is regulated, one of the most important acts that create the legal basis for conducting business activities in the field are administrative decisions issued by the President of the ERA. The regulator is authorised to grant licences for energy companies that trade, inter alia, in electricity or natural gas, and to issue decisions through which he or she can impose financial penalties for violations of the Energy Law or other relevant acts.

ii Regulated activities

Conducting business activities in the energy market is subject to approval by the President of the ERA. Approval is given by means of an administrative decision – in most cases in the form of a licence for conducting the business activity (this obligation does not apply to micro and small installations as, for example, the latter need only to be entered into the dedicated register).

The list of activities that are subject to a licence is set forth in the Energy Law. The obligation to obtain a licence encompasses such activities as the generation of energy and fuels, storage of gaseous fuels, transmission and distribution of energy and fuels, and trading in energy and fuels. However, there are some exceptions; for instance, a licence is not required for trading in electricity on the Polish power exchange, which is run by Towarowa Giełda Energii SA (TGE SA).

If an energy company wishes to commence one of the above-mentioned activities, it has to apply to the President of the ERA for a licence. Unfortunately, in the past couple of years, the requirements set forth for these entities have been substantially expanded and obtaining a licence in Poland requires a lot more time and effort than in most other EU Member States.

iii Ownership and market access restrictions

There are not many restrictions imposed on energy companies willing to do business in the field of energy. However, as a licence is the key requirement for these activities, some specific limitations for licence holders and for entities applying for a licence should be mentioned.

First, a licence shall not be granted to an entity that does not have its registered office in the European Union, Swiss Confederation, a European Free Trade Association Member State or Turkey. Likewise, the President of the ERA will not grant a licence if:

  1. an energy company:
    • is declared bankrupt;
    • has been convicted of any offence or tax offence relating to the economic activity conducted by the company;
    • is not registered for paying value added tax; or
  2. an entity that has significant influence or has control or joint control over the applicant within the meaning of the relevant provisions of the Polish Act on Accounting was convicted in the past three years of any offence or tax offence relating to economic activity under the Energy Law.

Moreover, the President will only issue a licence to an applicant that has the financial resources and technical capacity to guarantee proper performance of the licensed activity and ensures the employment of individuals with appropriate professional competence.

Second, if an entity is granted a licence, it must observe the rules set therein and the statutory obligations provided mainly in the Energy Law. If an energy company violates any of these provisions, the President of the ERA will revoke the licence.

Energy companies may face further specific limitations, which vary according to the types of activities they are performing. For instance, electricity traders willing to become members of the Power Exchange must follow its internal regulations.

iv Transfers of control and assignments

Mergers or acquisitions in Poland are subject to notification to the President of the Office of Competition and Consumer Protection, which is the administrative authority responsible for supervising competition on the Polish market and assessing the concentrations.

The relevant entity is obliged to submit a complete merger notification and pay the relevant fee. The President of the Office of Competition and Consumer Protection shall issue a decision within one month of the start of the merger control proceedings. However, if the President raises any competition concerns or requires a market inquiry, the deadline can be extended by an additional four months.

The European Commission may also review mergers and acquisitions. This is the case when the merger or acquisition has a community aspect (for instance, a significant presence in the European Union).

With regard to assignments, the Renewable Energy Sources Act, in particular, provides for the possibility to transfer the right to the granted subsidy in the event of the sale of a renewable energy installation. However, the transfer will require approval from the President of the ERA. Irrespective of the foregoing, any division or merger of an entity holding a licence is subject to prior notification to the President of the ERA.