Underutilisation fee in case of permanent network contract
On 17 March 2023, an amendment to the Electricity Market Act (hereinafter EMA) entered into force, establishing a deadline for connecting a generating installation to the network, fee for failure to use generating capacity (underutilisation fee), and the prohibition to change the technology.
The underutilisation fee is imposed on the basis of subsection 871 (6) of the EMA in respect of a customer who has entered into a connection contract and who has not used the generating capacity under their connection contract within the period provided in subsection 871 (4) of the EMA. On the basis of subsection 871 (6) of the EMA, underutilisation fee is also calculated in the case of a temporary network contract.
A connection contract has been mutually performed once a certificate of compliance has been issued for the generating installation and a full network contract (hereinafter permanent network contract) has been entered into. Following the entry into a permanent network contract, which terminates the previously valid connection contract (including a temporary network contract), underutilisation fee is calculated on the basis of subsection 871 (7) of the EMA.
Due to the relevance of the topic, we present below Elering’s explanations regarding the implementation of the underutilisation fee. These explanations do not replace the explanations of the legislator and are Elering's subjective explanations on how the EMA should be complied with or how Elering is dealing with proceedings related to the law.
Calculation and implementation of underutilisation fee in respect of permanent network contracts (subsection 871 (7) of the EMA)
When does the period for calculating the underutilisation fee start in the case of a permanent network contract?
When does the period for calculating the underutilisation fee start in the case of a permanent network contract?
On the basis of subsection 871 (7) of the Electricity Market Act, the start of the period for calculating the underutilisation fee is the moment of entry into a permanent network contract, which also terminates the connection contract. For network contracts that were entered into before the 17 March 2023 version of the Electricity Market Act entered into force, the underutilisation fee is implemented after two years. The countdown of this deadline began on 18 March 2023.
The period for calculating the underutilisation fee under a network contract is two years. Does a new two-year period begin after two years have passed?
The period for calculating the underutilisation fee under a network contract is two years. Does a new two-year period begin after two years have passed?
According to the current law, the period for calculating the underutilisation fee is two years, during which the customer is required to use the maximum generating capacity under their network contract at least once. If Elering’s commercial metering devices have detected the use of maximum generating capacity at least once during the two-year period for calculating the underutilisation fee, the customer has fulfilled their obligation for the purposes of subsection 871 (7) of the Electricity Market Act and no claim for the underutilisation fee is submitted. After the two-year period for calculating the underutilisation fee has expired, a new two-year period commences during which the customer is required to once again achieve the maximum generating capacity agreed upon in the network contract entered into. Specifications to these rules are planned in the Electricity Market Act, which are expected to enter into force in 2025.
The maximum generating capacity under my network contract is 40 MVA. During the two-year period for calculating the underutilisation fee, the maximum generating capacity was 35 MVA in the first year and 30 MVA in the second year.
The maximum generating capacity under my network contract is 40 MVA. During the two-year period for calculating the underutilisation fee, the maximum generating capacity was 35 MVA in the first year and 30 MVA in the second year.
Because the period for calculating the underutilisation fee in the case of a permanent network contract is two years and the underutilisation fee is based on a year, the underutilisation fee applies for both years pursuant to subsection 871 (7) of the Electricity Market Act. If Elering's commercial metering devices have detected the use of the maximum generating capacity at least once during the two-year period (in one year of that two-year period), no invoice for the underutilisation fee is issued. If the capacity is not achieved (in both years of the two-year period), the smallest deficit is considered to be the deficit for the entire period (i.e. for both years) and the fee shall be paid for both years. In the example provided, the underutilisation fee shall be paid for both years for the 5 MVA not used (40 MVA – 35 MVA = 5 MVA). Therefore, the amount of the underutilisation fee is 5 x 38,000 euros for the first year and 5 x 38,000 euros for the second year.
I have entered into a permanent network contract, under which I have put a generating installation whose generating capacity is more than 100 MW into use. Does the 30% and 60% implementation of the underutilisation fee also apply to a network contract...
I have entered into a permanent network contract, under which I have put a generating installation whose generating capacity is more than 100 MW into use. Does the 30% and 60% implementation of the underutilisation fee also apply to a network contract...
...if I fail to achieve the maximum generating capacity under the contract?
Subsection 871 (6) of the Electricity Market Act clearly stipulates only the use of at least 50% of generating capacity under a connection contract. Accordingly, the specification only applies to valid generating capacities under a connection contract, i.e. the 30% and 60% specification for the underutilisation fee for generating installations whose net capacity is 100 MW as provided in subsection 871 (6) of the Electricity Market Act does not apply to customers who have entered into a network contract. When implementing the underutilisation fee on the basis of subsection 871 (7) of the Electricity Market Act, the market participant does not gain additional time to achieve the contractual generating capacity because the prerequisite for entering into a permanent network contract was the establishment of a generating installation that complies with the requirements and, presumably, there are no circumstances that would prevent the market participant from putting the generating capacity prescribed by the network contract into use within two years.
I have entered into a permanent network contract, and I would like to increase or decrease the generating capacity. How will that affect the implementation of the underutilisation fee?
I have entered into a permanent network contract, and I would like to increase or decrease the generating capacity. How will that affect the implementation of the underutilisation fee?
If the customer wants to decrease generating capacity under a network contract so as not to pay the underutilisation fee, a respective application must be sent to the e-mail address [email protected]. An agreement to amend the contract must be entered into before the end of the period for calculating the underutilisation fee.
In the event that a customer who has entered into a network contract wants to increase the existing generating capacity, the customer has to submit a connection application and go through a new connection procedure. In this case, the customer has both a permanent network contract and a connection contract at the same time, and the underutilisation fee is calculated separately pursuant to both contracts. For generating capacity under the permanent network contract, the calculation of the underutilisation fee continues on the basis of subsection 871 (7) of the Electricity Market Act. For generating capacity under the connection contract that has not been put into use pursuant to a permanent network contract (to the extent of the generating capacity to be added), the underutilisation fee is calculated on the basis of subsection 871 (6) of the Electricity Market Act. For generating capacity under the connection contract, the calculation of the underutilisation fee shall commence after the deadline provided in subsection 871 (4) of the Electricity Market Act.