How to legalize the work of your own electrical grid?

At the beginning of September 2019 our firm received a request of the enterprise from the city of Dnipro in regard to getting legal advice concerning the legalization of the activities of their own electric power grid and related equipment, which was in their possession on the basis of a right of ownership.

We decided to help them sort out the situation and provide the optimum option for such legalization.

What was the essence of the Client’s problem in terms of using the electric power grid?

In February 2017, they acquired electric power grids and neighbor transformers for use in their business activities.

However, other business entities were also using those electric power grids:

  • Consumers
  • a local distribution operator that used electric power grids to distribute electric power to consumers who had entered into an appropriate contract with them.

Thus, the Client ensured the technical serviceability of the power grids, however, they did not receive any benefits from that, including financial ones, and considerable funds were spent on the maintenance and technical serviceability of the grids.

Customer's question was as follows:

  • how to legally receive money for the fact that they provide technical serviceability and provide their own electric power grids for use to other enterprises?

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An agreement on the sharing of technological electric power grids as a solution

One of the options that will allow solving the Client’s issue is the conclusion of an agreement on the joint use of technological power grids.

Under this agreement, the Owner of electric power grids takes on the responsibility of ensuring the possibility of delivery of electric power (with ensuring quality, reliability and continuity) by its own electric power grids to the points of connection of electric power installations of the user of the grids or other enterprises, the distribution (transmission) of electric power energy provided by the User.

In turn, the User - an enterprise that uses the electric power grids of another enterprise, undertakes to pay for the services provided by  the Owner of electric power grids.

The end result: The Client, as the owner of the electric power grids, will ensure the possibility of delivery via his / her electric power grids to the points of connection of the user's consumers, for which the user will pay them a certain amount of funds, which is determined by the approved methodology.

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The second option: registration of electric power grids owned by the Client as a small distribution system.

This is possible if such a distribution system is in line with the criteria by which electric power grids can be classified as a small distribution system.

In particular, the requirements are to be met regarding the following:

  • the territory in which the distribution of electric powerity will take place;
  • the number of connected users of the distribution system and the power of electric power installations of such users;
  • an average monthly volume of distribution of electric power power.

Important! To register a small distribution system, you do not need to obtain a license for the distribution of electric power. In this case, the Owner of the small distribution system has the rights and obligations of the operator of the distribution system in relation to users of the small distribution system, the electric power installations of which are connected to its electric power grids.

As for other business entities on the market, the owner of a small distribution system will act as a consumer of electric power.

The end result: The Client will be able to receive funds directly from the users (the consumers) who are connected to their electric power grids.

Third option: obtaining a license for the distribution of electric power.

However, in this case, the Client, along with obtaining a license, assumes a number of vast obligations and liability in case of non-fulfillment. In such a situation, the payment for the services of the Client may be too high.

The end result that the Client achieved after getting legal advice provided by our lawyers

The Client was offered all the possible options for the legal use of electric power grids in order to make a profit. They are currently deciding on which option is right for them, after which they will turn over to us for work whichever option they are going to decide on.

If you want to get legal advice on the legalization of the use of electric power grids or to put into practice one of the above options - get in touch with us in any way that will be convenient for you!

Publication date: 15/10/2019

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