Liability for Selling Electricity Without a License

In previous articles, we explored which electricity producers are required to obtain a license for electricity generation and, in some cases, for electricity supply. But what happens when a business or individual decides to sell electricity without the necessary license? What liability arises for selling electricity without a license, and what are the potential consequences for those who violate the law?

This article delves into the liability for selling electricity without a license. We will analyze the legal risks, penalties, and potential criminal sanctions that may apply to those who fail to comply with regulatory requirements. It’s crucial to understand the specific legal obligations to avoid complications and ensure lawful operations in Ukraine’s energy market.

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License for Electricity Supply and Sales: Is It Necessary?

It is essential to emphasize that for electricity suppliers and traders, selling electricity without a license is fundamentally impossible. This is because electricity trading takes place exclusively on platforms such as Ukrenergo, the Market Operator, and the Ukrainian Energy Exchange. Access to these platforms requires completing a complex registration process, including the submission of numerous documents. 

One of the mandatory documents is a resolution issued by the National Energy and Utilities Regulatory Commission (NEURC) granting the license. Even though this document may not always be physically presented, all relevant information is available in electronic registries. Therefore, bypassing the licensing requirement in this context is not an option. The situation is different for electricity producers. Many are aware that under the Licensing Conditions for Conducting Business Activities in Electricity Production, a license is required only if the generating facilities at a single site exceed 5 MW in capacity or if the total capacity of all generating facilities across multiple sites exceeds 20 MW. 

In practice, it is not uncommon for significantly smaller volumes of electricity to be generated. Many operators have installations far below the 5 MW capacity threshold but still engage in activities beyond self-consumption. These include selling energy to the grid, purchasing from the grid, storing electricity, and reselling it—a mix of activities that can prove financially beneficial.

This naturally raises a series of questions: Is such activity regulated by law? What permits and documents are required, including whether a license is needed and, if so, what type? Most importantly, what are the consequences of selling electricity without a license when it is legally required?

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Selling Electricity Without a License: What You Need to Know

Under Article 8 of the Law of Ukraine "On the Electricity Market," activities such as electricity generation, transmission, supply to consumers, energy storage, and trading may be conducted within the electricity market only if the business entity possesses the relevant license, unless otherwise specified by the law. Article 58 of the same law states that consumers are permitted to install generating units exclusively to produce electricity for their own consumption. This right is subject to the condition that the generated electricity is not sold to Ukraine's Integrated Power System (IPS) under any circumstances or at any time.

Such consumers are therefore not required to obtain a license. This means that generating electricity exclusively for self-consumption is allowed without licensing under the law. Additionally, the law provides for complex contractual arrangements with active consumers, a topic we covered in detail in this article. In all other cases, a license is typically required. So, what are the consequences of engaging in activities that require licensing, such as selling electricity, without having the appropriate license?

You might also like: Electricity Sale and Purchase Agreement: How and When to Conclude It

Liability for Selling Electricity Without a License: Administrative or Criminal?

The liability for selling electricity without a license varies depending on the severity of the violation and its consequences. In minor cases, where there is no significant harm or major violations, the offender may face an administrative fine. However, unauthorized connections to power lines, illegal consumption, or transmission of electricity can escalate the matter to criminal liability.

According to Article 164 of the Code of Ukraine on Administrative Offenses, conducting business activities without the appropriate license for activities subject to licensing is punishable by a fine ranging from 1,000 to 2,000 tax-free minimum incomes of citizens. Additionally, the law allows for the confiscation of produced goods, production tools, raw materials, and any proceeds obtained from such unlicensed activities. If theft of electricity from public networks is proven, the offender may also be subject to criminal prosecution.

How to Profit from Generating Units with Minimal Expenses

Is it possible to earn income from electricity-generating units while minimizing costs? This question likely concerns anyone already involved in the energy sector or considering entering it. Consider the following example: Individual 1 owns energy storage installations. They install batteries to store electricity, purchase energy from the market at a low price during off-peak hours when demand is low, and store it in their batteries. Later, during peak hours when electricity prices rise, they sell the stored energy. This method allows Individual 1 to profit from the difference in electricity prices at different times of the day. By taking advantage of daily price fluctuations, this approach enables earning income in the energy market with relatively low operational costs.

To successfully implement this business model and sell electricity while mitigating risks, it is essential to adhere to several legal regulations. If you are interested in starting such a business but are unsure where to begin or which documents are required, we are ready to assist you. Our legal experts can help you navigate the complexities of legal compliance for your activities, offering:

• Consultations on the applicable legal requirements.
• Assistance in preparing and obtaining the necessary licenses.
• Comprehensive support for business processes in the energy sector.

Reach out to us, and we will provide end-to-end assistance at every stage of your operations, ensuring full compliance with the law and helping you achieve maximum profitability.

Learn more about obtaining a license for electricity resale (trading activities) here.

Get the details of obtaining a license for electricity supply here.