Amendment to Decree-Law no. 172/2006 of 23 August

It was published today the Decree-Law no. 76/2019, introducing several amendments to the Decree-Law 172/2006 of August 23, which sets the regime of electricity production, transmission, distribution and supply activities and the organization of electricity markets.

In a preliminary analysis, we highlight the following aspects:

Entry into force

Decree-Law no. 76/2019 of 3 June comes into force on the day after its publication (i.e. 04.06.2019), with the exception of article 8[1] as amended (concerning the procedure for the application of the production license), which comes into force only 45 days after its publication.

Pending processes

The legal regime applies to pending procedures, suspending them until obtaining the reservation title of reception capacity in the network. Such suspension shall not prejudice the expiration of applications in cases where a decision to carry out a prior competitive procedure for the allocation of reservation of reception capacity in the network is taken.

The above mentioned shall not apply for pending procedures awaiting reception capacity in the network, following a draw and with a security deposit already provided, in which case the injection capacity in the network will be allocated as soon as available as well as the respective production license.

Allocation of power reception capacity in the network

In view of the scarce availability of energy reception in the network and also to ensure the effective implementation of the projects by the promoters, there is a reversal of the procedure for the attribution of production license, being needed a reserve title of power reception capacity in the network that necessarily precedes the attribution of the production license.

Such title of power reception capacity is non-transferable until the issuance of the operation license.

The allocation of the reservation of reception capacity can be made through the following modalities:

1) Title issued by the network operator with reservation of reception capacity in the network to the applicant

  • Requests for this purpose shall expire immediately upon issuance of a decision to conduct a prior competitive procedure;
  • The applicant must submit a security deposit of EUR 10,000.00 per MVA of capacity reserve to be allocated, to ensure the issuance of the production license.

2) Agreement between the applicant and the network operator

  • Under which the applicant shall assume the financial costs arising from the construction or reinforcement of the network required to receive the energy produced by the power generation plant;
  • The applicant must present a security deposit corresponding to the maximum value between 5% of the costs incurred or EUR 10,000.00 per MVA of capacity reserve to be allocated, in order to guarantee the production license.

3) Title issued by the network operator following a competitive procedure for allocation of reservation of reception capacity in the network

  • By order of the member of the Government responsible for the energy area;
  • The procedure may take the form of an electronic auction open to all interested parties who meet the defined requirements;
  • Opening of the procedure by means of an announcement published in the Portuguese Official Gazzette and the procedure documents published on the DGEG website and must contain, among other elements, the procedure modality, conditions and criteria for award, remuneration, and security.

Production license

The Decree-Law foresees the non-transferability of the production license until the operation license is obtained. Competence to allocate, amend and revoke production licenses (as well as test or experimental operation) and to issue operating licenses of all power generation centers, belongs to the General Director of Energy and Geology, who is responsible for deciding and conducting the procedures, except for the competences expressly reserved to the member of the Government responsible for the area of ​​energy (e.g. extension of the term of the license).

The possibility of obtaining a production license for the installation in an existing electroproducing center of new production units using a different primary source is also foreseen in this legislation, even if the injection power in the network allocated in the initial production license is maintained. Once this request has been made, the promoter will be able to use elements already delivered within the initial licensing procedure and which remain valid. Obtaining the production license for such new units does not entails the prior allocation of reservation of reception capacity in the network in the terms indicated above.

Remuneration regime

The Decree-Law foresees the possibility of feed-in tariffs to: (i) the situations which are covered by competitive procedure as mentioned above; (ii) power plants with installed capacity up to 1MW (up to the quota limit defined annually by the member of the Government responsible for the energy area); (iii) for overpowering situations or for production units using a different primary source to be installed in an existing energy project of new production units. The above mentioned does not prejudice to the application of any feed-in tariffs already foreseen or to be defined in specific schemes.

Other aspects

  • Systematic changes: among other aspects, the licensing procedure is unified (previously divided between ordinary production and special regime production) in a single modality named as "electricity production".
  • Storage: storage activity will be defined in specific legislation, and the respective exercise conditions will be incorporated into the production license when the storage activity is not exercised autonomously.
  • Small Production Units (UPP): the Decree-Law revokes the UPP regime (provided for in Decree-Law no. 153/2014 of 20 October) and its respective regulations, being such revocation taking effect 4 months after the publication of the Decree-Law, maintaining such regime in force in the part applicable to the units of production from renewable energy sources up to 1MW and in all aspects that are not contradicted by Decree-Law no. 76/2019, the Decree-Law no. 153/2014 of 20 October and respective regulations.
  • Electronic processing: establishes the electronic procedure in terms to be regulated, namely for the delivery of applications/communications and notification of decisions.
  • Deadlines: overall, it reduces procedural deadlines for DGEG and extends deadlines for the promoter.

Considering that are some unclear aspects (e.g. repetitions, incorrect cross references and law enforcement) we believe that Decree-Law will be soon rectified.

The Decree-Law can be consulted here.