Non-domestic LV consumers entering the free market: supply is guaranteed by existing suppliers for at least a year ahead

LOW-Voltage NON-HOUSEHOLD CONSUMER ENTERY INTO THE FREE MARKET: SUPPLY IS GUARANTEED BY CURRENT SUPPLIERS FOR AT LEAST A YEAR AHEAD

Author: EMI Date: 08-07-2020

As we have written in our previous publication, amendments and supplements to the Energy Law (_{promulgated in SG, 57/2020., in force as from 26.06.2020}) in effect as from the end of June, will take low-voltage non-household consumers away from a regulated market and bring them to a free market by way of a normative and administrative means.

What do legal amendments foresee? According to the texts adopted (mainly §14, 15 and §18 of the Transitional and Final Provisions of the Law on Amending and Supplementing the Energy Law), as from 1 October, low-voltage non-household (business) customers will have to use electricity at a price negotiated in the free market. That is to say that for these customers the Energy and Water Regulatory Commission will endorse regulated prices for electricity supply from an end-supplier only for the time span of 01 July 2020 – 30 Sept 2020. After that customer supply will not be discontinued, it will proceed but by a different provider at different prices – from a trader in the liberalised market or eventually – by a last resort supplier.

What will happen if a low-voltage non-household customer fails to find a trader by 01 Oct 2020? In case a LV non-household customer has not concluded a contract with an electricity trader at free-market prices by 30 Sept 2020, electricity supply will not be discontinued; the current provider – end-supplier – will commit to continue the supply but in the capacity as a license holder under Article 39, para 1, item 5, i.e. a license to trade.

In this case what will the conditions of supply be? As stipulated in the amendments, this type of supply will apply for a transitional period – from 01 Oct 2020 at the earliest to 30 June 2021 at the latest. Trade relationships will be based on a model contract concluded, the template of which has to be approved by EWRC by 31 August 2020.

What will such a model contract contain? The model contract will regulate the rights and obligations of parties (end-supplier with a license to trade and a LV non-household consumer who has not, as yet, switched to a standard free-market trader), conditions on electricity supply and contract termination (as mentioned earlier – not later than 30 June 2021). In the course of draft-law discussions, EWRC requirement to intervene with respect to prices under these contracts, namely, to approve also a supply price cap, have been dropped. In the promulgated texts, the Regulator will not have a say as regards determining prices under model contracts.

In the interim stage, until a model contract is concluded, the provider – end-supplier – will ensure electricity supply, provided, however, that the customer pays promptly all due amounts in relation to the supply.

How will LV non-household customers learn about the forthcoming changes in their supply? Through the procedure, once legal amendments enter into force, the four end-suppliers have a 30-day period to notify LV business customers that from 01 Oct 2020 they can no longer be their providers, and to publish on their web-page a list of their non-household customers who cannot remain their customers as from 01 Oct 2020.

What will happen from 01 July 2021 on? As of 01 July 2021, customers who have not selected a supplier – trader in the free market, will be supplied with electricity under the terms of Article 95a of the Energy Law, namely, from a last resort supplier. Up to 01 July 2021, according to the legal texts, there should be a full liberalisation of the wholesale electricity market.

Are there guarantees that electricity supply will not be discontinued during the LV non-household customer migration process from a regulated to a free market? Yes, there are guarantees. Such guarantees are provided by the legislator via the end-suppliers that are well-known to this group of customers.

Probably non-household consumer entry into the free market brings forward numerous questions and concerns among small business customers, mainly among those operating in the services sector.

However, are there actual risks associated with such a massive, state-administered process, which, following the same manner of free-market entry of medium-voltage non-household consumers back in 2012, represents the second wave of national retail electricity market liberalisation?

In case the customer is complaint, for at least a year ahead, supplies are guaranteed by the current end-suppliers in the regulated market, being in one of the three roles:

up to 30 Sept 2020 – in the capacity as end-supplier at regulated prices;
from 01 Oct 2020 to 30 June 2021 – in the capacity as end-suppliers with a license to trade at free-market prices;
from 30 June 2021 – in the capacity as a last resort supplier, which is a commitment of an undefined duration on the part of the respective license-holder.

However, throughout this entire period, the right of the customer is in full validity, and an earlier selection of a standard free-market electricity trader is recommendable.