Electricity Supply License or Electricity Trading License? What To Choose?
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The new electric energy market provides a new, open model of interaction between all market participants and consumers. Thus, producers, suppliers and traders can trade in the new market.
However, in practice, the question often arises, What is the difference between a trader and a supplier? To understand the difference between these activities, it is necessary to understand the very essence of the concepts.
This will also help you to understand which license is better to choose for carrying out your activities in the electricity market of Ukraine.
You may also like: Frequently Asked Questions About Electricity Trading Activities.
The difference between the “supply” and “trading” of electricity
An electricity supplier is a legal entity that sells (supplies) electricity to the consumer (a legal entity or an individual that uses electricity for its own purposes).
A trader is actually a person that carries on electricity resale activity exclusively, i.e. it sells electricity to other participants, but not to final consumers (persons that use electricity).
You may also like: More Peculiarities Of Trading Activity
If we compare the Licensing Requirements for traders and suppliers, we can notice that the volume of requirements to traders is much smaller, i.e. the legislator defines resale of electricity as a simpler type of activity.
Hence, the question often arises, What is the peculiarity of trading, if the electricity supply activity offers a wider range of opportunities and in fact includes trading activities? After all, if you get an Electricity Supply License, you can sell electricity both to consumers and other market participants (producers, other suppliers, traders, etc.). Let’s elaborate on this issue in more detail.
Related article: Day-Ahead Market. Registration
What is the peculiarity of the Electricity Trading License?
Creation of so-called “traders” is one of the requirements set by European partners for Ukraine. Working as a trader is easier than working as a supplier. For example, there are less strict requirements to the trader’s website, less reporting, no need to communicate with consumers, etc.
Requirements for obtaining an Electricity Supply and Trading License
As for the requirements for both licences, they do not really differ much.
The key requirements for obtaining any of these licenses are as follows:
- An operating company (preferably with a VAT status, as it is required for subsequent inclusion in the Electricity Market)
- An IBAN account opened in any bank of Ukraine;
- A website designed in compliance with the Licensing Regulations. In particular, it shall include the following information:
- Regulatory and legal framework that applies to suppliers (traders);
- The company’s contact information, which can be used by counterparties / customers;
- The dispute resolution procedure (for suppliers only);
- The procedure of cooperation with the company (for suppliers only);
- The Supply Agreement and invoice clarification (for suppliers only).
Related article: Website Requirements For The Electricity License
A separate issue is personnel and technical requirements for licensees. They include:
- Employment of all employees of the company;
- Availability of appropriate hard- and software, requirements to which are already established by Ukrenergo, NPC.
As for the requirements to the company’s personnel, namely the availability of special technical or other education, the availability of special equipment or other permits, they are not mandatory for the electricity company to license its economic activity related to electricity supply or resale (trading).
Moreover, in accordance with the current legislation, even the registration of relevant KVEDs (types of economic activity), namely:
Electricity production (required for electricity producers)
Electricity transmission (required for the Transmission System Operator (TSO)
Electricity distribution (required for the Distribution system operator (DSO)
Electricity trading (required for electricity traders and suppliers)
is not required for the electricity company to obtain the License.
Today there are many myths about electricity supply and trading, and therefore it is better to consult qualified lawyers in order not to get confused and not to lose extra money and time.
We will help to distinguish reality from fiction and save valuable time for launching, investing and running a business in the electricity market.
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