How to minimize supplier responsibility for electricity imbalances?

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While working with electricity suppliers, we often hear the question:

  • Can an electricity supplier collect funds from a consumer for nonconformance of electricity consumption with planned quantity like punitive sanctions?
  • How can it be possible to minimize the liability of the electricity supplier for imbalances?

In this article we are going to try to answer these questions and share our opinion on the optimum protection procedure for the electricity supplier.

Related article: The practical importance of electric energy imbalance settlement agreement on the new electricity market for the electricity suppliers

Why is minimizing liability for imbalances important to the electricity supplier?

It is the supplier who is liable to the Transmission System Operator for any imbalances in the electricity that arise during the supply of electricity. Moreover, the calculation period for payments for the unbalance of electricity is one hour.

If you look for the answer to this question in the legislation, then in article 70 of the Law of Ukraine “On the Electric Energy Market”, market participants who are responsible for the imbalances of electricity are clearly indicated. Among these participants, the Consumer is missing.

In fact, this norm of the legislation refers specifically to the liability of the supplier for electric power imbalances to the Transmission System Operator.

However, the legislation does not have a direct ban on the collection of funds from the consumer by the electricity supplier, in case the consumer does not comply with the planned hourly volumes of electricity.

Related article: Successful experience of a “turn-key ready” registration of electricity supplier as the electricity market participant

How to minimize liability for unbalanced consumers?

In the commercial proposal, which is a mandatory annex to the contract for the supply of electricity, you can specify the following:

  • Firstly, an advance payment for the planned volume of electricity consumption by the consumer;
  • Secondly, to establish a non-fixed price for electric energy, which, possibly, will be used by the consumer above the planned volume of electricity consumption and to tie the formation of such a price to the price of electricity unbalance for a specific time of day.

Related article: Obtaining ЕІС codes of type X for the electricity suppliers and traders on the electricity market

What will this format of payment for services for the supply of electricity give you?

This roadmap:

  • on the one hand, does not provide for the imposition of sanctions on consumers for evading the planned volume of electricity consumption;
  • in fact, it minimizes the financial losses of the electricity supplier that it will incur to resolve the electricity imbalances to the Transmission System Operator.

The question of imposing penalties to the Consumer for deviating from planned, approved volumes of electricity consumption remains open at present. Judicial practice, which is already starting to take shape after four months of the functioning of the new electricity market, can give an answer to it.

Our team will closely monitor the practice of the judiciary bodies in this matter and will be able to keep you informed of any news related to registration and activities in the electricity market.

If you want to start your business activity as an electric supplier or need legal assistance in your activity - give us a call!

Publication date: 20/11/2019

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