On November 10 2016 the government held its first reading of Bill 999 amending the Energy Law and other acts. The bill's main aim is to eliminate tariffs from the Polish natural gas market and remove the obligation on power companies to submit gas tariffs to the president of the Energy Regulatory Office for approval. The bill is the government's response to a European Court of Justice (ECJ) September 10 2015 ruling (Case C-36/14, European Commission v Republic of Poland).

Tariff obligation

In its ruling, the ECJ stated that Poland had failed to comply with its obligations under Article 3(1) and Article 3(2) of the EU Gas Directive (2009/73/EC) concerning common rules for the internal natural gas market and repealing EU Directive 2003/55/EC. This was due to Poland applying a tariff obligation on power companies to apply gas prices approved by the president of the Energy Regulatory Office. At present, the obligation arises under Article 47 of the Energy Law and applies to power companies that hold a licence for trade in gaseous fuel or cross-border trading in natural gas and conducting operations consisting of the sale of gaseous fuel. The ECJ noted that:

  • the tariff obligation is not time limited; and
  • Polish national law imposes no obligation on administrative authorities to check at regular intervals the need for and nature of such intervention in the gas sector.

Further, power companies must apply approved tariffs to an unlimited group of users or customers without any distinction being made between customers.

Amending bill

Bill 999 aims to ensure the progressive elimination of tariffs from the Polish natural gas market by abolishing the obligation to submit gas tariffs to the president of the Energy Regulatory Office for approval. Under the bill, the process will be divided into stages to avoid distorting market competition:

  • Stage 1 – as of January 1 2017, trading companies engaging in the sale of gas on wholesale markets at virtual points (including commodity exchanges) or through public tenders, auctions or public contracts and companies selling compressed natural gas or liquefied natural gas will be exempt from the obligation to submit their gas tariffs to the president of the Energy Regulatory Office for approval.
  • Stage 2 – as of October 1 2017, trading companies supplying gas to industrial or commercial consumers, excluding household customers, will be exempt from the obligation.
  • Stage 3 – as of January 1 2024, trading companies supplying gas to household customers will be exempt from the obligation. According to the authors of the bill, due to the fact that household customers demonstrate a low level of activity in switching gas suppliers and because of the need to raise awareness among household customers about their rights, household customers must be provided with a much longer transition period.

Further, the bill will introduce an obligation for gas trading companies to take the necessary steps to adapt all gas sale and comprehensive agreements to meet the new gas price calculation methodology requirements. Comprehensive agreements contain elements of a gas sale agreement and distribution or transmission services agreement (where the sale and distribution or transmission of gas are then performed by different parties).

At present, most agreements specify that gas prices are based on those indicated in gas tariffs approved by the president of the Energy Regulatory Office. After the bill enters into force, all agreements will have to specify other methods for determining gas prices. However, the bill does not clarify what method should be applied instead of gas tariffs.

Under the bill, in order to fulfil the obligation described above, gas trading companies will have to draft and send customers the required draft amendments for concluded gas sale or comprehensive agreements no later than two months before the planned date of their release from the obligation to submit gas tariffs to the president of the Energy Regulatory Office for approval (ie, by October 1 2017 for industrial customers and January 1 2024 for household customers). The two-month deadline will enable customers to familiarise themselves with the draft amendments and decide whether they want to terminate their agreements. Pursuant to Article 1(12) of the bill, customers will be entitled to terminate their gas sale or comprehensive agreement (whether concluded for a fixed term or an indefinite period) with one month's notice without having to incur additional costs due to early termination.

Comment

The obligation arising under Article 47 of the Energy Law to submit gas tariffs to the president of the Energy Regulatory Office for approval is perceived as one of the main barriers to entering the Polish gas market. Eliminating tariffs will hopefully increase the number of entities operating in the natural gas market.

On November 10 2016 the bill was sent to the Energy and State Treasury Committee. It is now awaiting its second reading in Parliament.

For further information on this topic please contact Grzegorz Filipowicz or Mateusz Koszel at Norton Rose Fulbright Piotr Strawa and Partners, LP by telephone (+48 22 581 4900) or email (grzegorz.filipowicz@nortonrosefulbright.com or mateusz.koszel@nortonrosefulbright.com). The Norton Rose Fulbright website can be accessed at www.nortonrosefulbright.com.

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