Electric energy consumer as a market participant: counterparties, contracts, problematic issues

A consumer is a person (a legal entity or an individual) that owns or uses an electric installation connected to the electric networks in accordance with the established procedure, and consumes electric energy to meet its own needs on the basis of contracts stipulated by the current legislation.

The main regulatory documents governing the relationship of the consumer with other market participants are the Law of Ukraine “On Electricity Market”, the Rules of the Electricity Retail Market and the Code of Commercial Metering of Electricity.

Today, we will tell you how large consumers of electricity may protect their interests – for example, when organizing business activities, the operation of industrial complexes, hotels, even restaurants, you need an uninterrupted and profitable supply of electricity.

Participants of the electricity market, with which the consumer interacts, and their main functions

The consumer interacts with the following market participants:

The Distribution or Transmission System Operator (hereinafter referred to as the SO).

It performs physical transportation of electrical energy to the consumer’s electrical installation. Controls the modes of electricity consumption. Performs interruption and resumption of power supply. Compensates the flow of reactive electrical energy, which is harmful to the power system.

The Power Supplier (hereinafter referred to as the Supplier).

It purchases electricity for the consumer on the wholesale market and sells it to the consumer.

The Commercial Energy Metering Service Provider (hereinafter referred to as the CEMSP).

It provides, on a contractual basis, a full range of services for the installation and operation of metering devices, monitors their condition and reads their indicators for further use in market settlements. Part of these functions (for example, reading and transmission of metering devices’ indicators) can be performed by the consumer (at its discretion) independently.

As a rule, the functions of the CEMSP are performed by the SO.

The main consumer (if the operating system consumer uses the electric networks of another consumer to transport electric power).

It transmits electric energy to the consumer by its own power networks, based on the relevant contract with the SO.

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Agreements concluded by the Consumer to receive electricity

In order to supply electricity to a connected electrical installation in accordance with the established procedure, the consumer must sign the following agreements:

  • The consumer agreement on the provision of electricity distribution or transmission services. Concluded with the SO.
  • The agreement on the provision of reactive power flows compensation services (if it is stipulated by the norms of the current legislation). Concluded with the SO.
  • The agreement for electricity supply to the consumer. Concluded with the Supplier.
  • The agreement on commercial metering of electricity (if the Consumer does not perform the functions of the CEMSP on its own). Concluded with the CEMSP.

It should be added that the consumer has the right to buy electricity on the wholesale market (without involving the Supplier), subject to the conclusion of the necessary agreements.

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What problems may consumers face when receiving energy on the market?

These problems can be quite diverse and unexpected. Just a brief list of them includes:

  • Refusal of the SO to accept appeals, applications, documents, etc. or accept them without registration. Excludes assertion of consumer rights, since there is no confirmation of the application.

It is recommended to submit all documents for registration or send them by mail (with a description of the enclosure and confirmation of delivery), through the consumer’s personal e-cabinet, etc.

  • Unreasonable requirements of the SO or the Supplier at the conclusion of agreements, and the imposition of conditions not provided for by the norms of current legislation.

It is recommended that all requests, comments, etc. should be received in writing so that they can be further appealed.

  • Inattentive attitude of the consumer to the content of the documents received for signature from the SO or the Supplier. It leads to the signing of agreements with a number of onerous conditions. These conditions are not prohibited by current legislation, but disagreement with them is not an obstacle to the conclusion of agreements. Vigilance and awareness of the consumer will avoid significant financial losses in the case of their application.

As an example, the term of the agreement with the supplier. It is usually one year, and usually it cannot be terminated earlier without incurring significant penalties, which can be as high as the cost of a month’s worth of electricity consumption. Termination may be necessary if there is a significant change in the market price and if the consumer receives better offers from other Suppliers.

It is recommended that you read all documents very carefully and, if necessary, engage experienced professionals to do so.

  • Unjustified or wrongful termination of electricity supply.

It is recommended to urgently (upon receipt of the appropriate message, not after the disconnection) appeal the wrongful actions of the SO or the Supplier to the supervisory authorities with the submission of copies to the initiator of the disconnection.

  • Unreasonable demands of the CEMSP during inspection of metering units.

Since compliance with these requirements results in unreasonably significant financial expenses, it is recommended to appeal them to the appropriate supervisory authorities.

  • Unlawful or unreasonable drawing up of acts of violation by a consumer of the current electric power industry norms and making unreasonable charges for them.

It is recommended that the consumer reviews these acts and appeals against both their preparation and the charges made.

  • Incorrect determination of the amount of electricity consumption. It leads to the payment of unused electrical energy.

It is recommended to appeal the incorrect charges to their provider and then appeal them according to the established procedure.

  • Unlawful blocking of the procedure for changing the Supplier.

It is recommended to appeal against the actions or inaction of the SO to the supervisory authorities.

  • Lack of payment by the SO to the consumer for its services for the transmission of electricity to other consumers.

It is recommended to appeal the actions of the SO to the supervisory authorities and, if necessary, appeal to the court.

We offer our Clients, Consumers, both a one-time solution to the problems, and comprehensive legal support services that will help keep their hand on the pulse, and solve any issue at the time of its occurrence.

Attention! We work only with industrial consumers of electricity.

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Where can I challenge the misconduct of the SO, CEMSP and Suppliers?

The National Commission for State Regulation of Energy and Public Utilities – compliance of the SO, CEMSP and Supplier with the norms of current legislation in the field of electric power.

The State Inspection of Energy Supervision of Ukraine - compliance of the SO and CEMSP with the norms of current legislation in the context of technical issues.

Antimonopoly Committee of Ukraine - compliance of the SO and the Supplier with the anti-monopoly legislation.

UKRENERGO - on determining the volume of electricity consumption and other issues related to the accounting of electricity.

The list of problematic issues is quite long, and untimely resolution of these issues leads to significant financial expenditures as well as to an extremely unproductive waste of time.

Specialists of our company will provide legal support of the consumer in its relations with contractors, in particular:

  • Qualified assistance in case of any disputes or their prevention;
  • Review of the documents in a timely and qualified manner;
  • We ensure that you feel confident and calm in relations with counterparties;
  • Development of an individual approach in solving problematic issues;
  • Timely and reasoned opinion on the prospects for resolving the dispute in favor of the consumer;
  • Specific and clear proposals on options for a dispute settlement or prevention.

Don’t hesitate to contact us in case of doubts about the legality of actions of your counterparties in the electricity market or disputes with them. We are ready to help in a qualified, timely and prompt manner to resolve them.

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Publication date: 17/06/2022

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