Amendments to the Electricity Market Act that recently entered into force motivate phantom subscribers to release the network

On 17 March 2023, the amendments to the Electricity Market Act entered into force, which obliges persons who have entered into a connection contract for the generation of electricity to start the actual transmission of electricity to the network or to pay a fee of 38,000 euros per Megavolt-ampere per year for the network capacity booked for them. If this person does not start transmitting electricity to the network and does not pay a fee, he or she will lose the opportunity to transmit electricity to the network through this connection point. The following is an overview of the major changes.   

Additional obligation to pay security upon connection of power generation equipment to power network 
In order to connect an energy generating installation with a capacity of more than 15 kilowatts to the electricity grid, 38,000 euros per Megavolt-ampere shall be paid to the network operator as security according to the amendments which enter into force (subsection 87¹ (1)). In doing so, the security need not necessarily be paid in cash, but the guarantee letter of the credit institution may also be submitted as a security (subsection 87¹ (2)).   

The network operator shall return the security after the installation connected to the electricity network has commenced the production of electricity. A network operator shall not return a security if the generation of electricity through the equipment has not commenced within one year in the case of solar power generation, within three years in the case of offshore wind farms and within two years in the case of other technologies as of the completion of the connection point or the expiry date of the connection contract by the network operator.   

The requirement for a security does not apply if a person applying for connection of an energy generating installation to the power network has paid at least 70 per cent of the connection fee or if an application for connection is submitted to the apartment building for connection of the generating installation to the network.

The amendment entered into force on 17 March 2023. The amendment shall be applied to applications for connection submitted at the date of entry into force and to contracts for connection in the direction of production entered into and which are under execution 60 days after entry into force of the amendment, i.e. on 16 May 2023 (subsection 111³ (14)). 

Charges for current phantom associations entered into force 
If a market participant who has entered into a connection contract in the direction of production has not used its capacity under the connection contract for one year in the case of solar energy, three years in the case of offshore wind farms and two years in the case of other energy sources after the conclusion of the connection contract, it shall pay the network operator a fee of 38,000 euros per Megavolt-ampere per year to the extent of the capacity not used according to the changes of the producer (subsections 87¹ (4) and (6)). This amendment will also concern those subscribers whose connection point has already been completed.

However, if the capacity booked on the basis of the connection contract exceeds 100 megawatts and this capacity has been used for at least 50 per cent during the first year, a fee of 30 per cent shall be paid to the network operator in the first year after the completion of the connection point and 60 per cent in the second year of the network operator’s fee, i.e. 38,000 euros per unused Megavolt-amperes. Later, in such cases, the network operator’s fee will apply to the extent of 100.  

In addition, fees in the same amount and under the same conditions became applicable to persons who have also concluded a network contract in addition to the connection contract. In such a case, the person who entered into the network contract shall pay the network operator a fee in the same amount if he or she has not used their production-directional capacity under the network contract during the last two years. 

Both charges are also subject to the rule that in the event of non-payment of the fee, the contract terminates, which means that in the event of non-payment of the fee arising from the connection contract, this connection point cannot be used for future transmission of electricity to the network and in the event of non-payment of the fee arising from the network contract, the capacity prescribed in the network contract will not be allocated to the person in the future (subsection 87¹ (9)). In addition, there is one exception for both charges, namely that the network operator must extend the time limit for the start of electricity production if the start of electricity production has not been demonstrated to be possible for reasons beyond the control of the producer. There was initially no such exemption, but it was added after the Chamber of Commerce and other stakeholders made a corresponding proposal.   

For new network subscribers, network operator fees will apply from 17 March 2023. For current subscribers who do not transmit electricity to the network, as well as for those who have submitted an application for connection, the obligation to pay fees on the connection contract shall apply one year after the completion of the connection point or the time limit for the completion of the connection contract by the network operator in the event of connection for the production of solar energy, three years after connection for the production of offshore wind energy and two years after connection for the production of electricity from other energy types (subsections111³ (15) and (16)). In the area of restrictions imposed for the purpose of ensuring national security, the obligation to pay the fee shall apply as of 1 January 2026 for solar energy, as of 1 January 2028 for offshore wind and as of 1 January 2027 for other forms of energy, provided that the restrictions imposed for the purpose of ensuring national security have been removed in the area. 

The obligation to pay the fees arising from a network contract shall apply to the network members by now two years after the entry into force of these amendments, i.e. on 17 March 2025 (subsection 111³ (17)). This means that if, at the time of entry into force of the amendments, i.e. by 17 March 2023, the person who entered into the network contract has not commenced the transmission of electricity to the network by 17 March 2025, the person shall pay a fee to the network operator. 

The prohibition on changing the electricity production technology indicated in the connection application became effective   
While it is currently possible to apply for the construction of a connection point for the production of solar energy, but later to transfer electricity produced from wind power to the network via the same connection point, then upon entry into force of the amendments, such a situation is prohibited (subsection 87¹ (5)). Among other things, the prohibition on changing technology also means that a production device must not be converted from a construction work with negligible spatial impact within the meaning of the Planning Act into a construction work with significant spatial impact. 

For new entrants, the ban on changing technology will enter into force when the amendment enters into force, i.e. from 17 March 2023. For the contracts concluded to date, the prohibition on changing technology will enter into force on 1 August 2023 (subsection 111³ (13)).   

Should you have questions regarding the amendments of the Electricity Market Act to enter into force soon, please contact the lawyers of the Chamber by writing to juristid@koda.ee.