NEWSLETTER 17/2010
Commentary
POWER PLANT INVESTMENTS - NEW RULES FOR CONNECTION TO THE POWER GRID
Reserving connection capacity and limitations of connecting new subjects - the grounds and character of the Energy Law amendments
Until 11 March 2010, when the amendment to the Energy Law from 8 January 2010 went into effect, operators of power systems had no grounds to refuse to issue connection to the gird and delivery were in place an the applicant met the formal requirements necessary to commence the procedure for establishing the connection conditions. This was the case even in a situation where the applicant was not in a position to deal with the financial consequences of the connection conditions sought. Throughtout the two-year period of validity of connection conditions, when issuing other connection terms gird operators had to reflect the assumptions of conditions alreay issued. Reserving connection capacity for entities that then failed to carry out the investments resulted in blocking grid connection capacity. As a consequence, if only part of the planned connections were realized in the given territory, an overlarge grid infrastructure was developed. In turn, a lack of distribution and transmission capacity in the power grid limited the development and connection of new entities, particularly those investing in renewable energy sources.
The Energy Law was amended in order to eliminate these unfavourable phenomena and enable effective use of available transmission capacity in the power grid.
The new provisions of the Energy Law require entities seeking to connect a power source to the grid to pay an advance against the connection fee (within 7 days fo filing the application for issuance of connection terms), to enclose with the application an excerpt and map from the local zoning plan, or if there is no zoning plan in place, a decision on conditions for construction and development of the site specified in the application (if required under land use regulations), and also require grid operators to publish information about the entities seeking connections and the grid connection capacities.
Advances against connection fees
Advances against connection fees may be charged by electricity copmanies in an amount defined in the statute of PLN 30,000 per megawatt of planned connection capacity. The advance should not exceed the connection fee, and if it does the grid operator which is to make the connection is required to refund the difference with statutory interest from the date of payment. These regulations concerning advances are intended to protect investors from excessive fees while expending the process of issuing connection conditions. However, the need to raise funds for the advance may present a siginficant barrier to the investor in carrying out the project.
The amended provisions of the Energy Law were proving particularly troublesome for companies that have already begun the investment process and filed applications for connection conditions, or have already received a decision on grid connection conditions.
Investors that held connection conditions at the time the amendment to the Energy Law went into effect (11 March 2010) were required to pay andance ny 10 May 2010 in an amount corresponding to the connection capacity awarded to them. Failure to pay the advance resulted in invalidation of the condistions issued.
The necessary localization documentation for the investment
Investors that hed filed applications before the effective date of the Energy Law amendment but had not yet received connection conditions had 180 days to pay advances and submit a local zoning plan or decision on conditions for construction and debelopment of the project site. The 180-day deadline might have proved unrealistic for many companies because it may not be practically feasible to have a revision to the zoning plan adopted, or conduct an environmental impact assessment, within 180 days. If a company fails to meet the statutory deadline for paying the advance and submitting the required documentation, the application for issuance of connection will not be considered.
Under these circumstances, the changes in the connection procedure may result in failure to implement a number of advanced projects, because the Energy Law amendment did not take account of the duration of proceedings to obtain a local zoning plan or a decision on conditions for construction and development of the site.
Małgorzata Majkowska
attorney-at-law
The Newsletter is published free-of-charge and is designed chiefly for clients of the law firm of Mikulski & Partners. The articles are written by lawyers at the firm, but do not constitute legal advice.