32.4 Regulatory changes in the electricity market
Due to the crisis situation in the electricity market, the legislator decided to introduce regulations that temporarily introduced exceptional solutions for electricity prices and electricity tariffs in 2023. On 18 October 2022, the Act on special solutions to protect electricity consumers in 2023 in connection with the situation on the electricity market of 7 October 2022 (hereinafter the “Households Act”) entered into force and on 4 November 2022, the Act on emergency measures to reduce electricity prices and support certain consumers in 2023 of 27 October 2022 (hereinafter the “Extraordinary Measures Act 2023”) entered into force. According to the Households Act, in 2023, a power company carrying out the business of electricity trading was obliged to apply, with respect to household customers, prices equal to those contained in the in force on 1 January 2022 for individual groups up to specified consumption limits. On the other hand, once the Act Amending the Household Act of 16 August 2023 entered into force, the consumption limits for each category of customers were increased by an additional 1MWh. Once the consumption limits dedicated to household customers were exceeded, a maximum price of 693 PLN/ (price excluding VAT and excise duty) would be used for settlements with household customers in accordance with the Extraordinary Measures Act in 2023. This meant that electricity prices had been established in legal regulations and, therefore, in 2023, tariffs approved by the President of the did not directly affect electricity prices for households.
In addition, under the Extraordinary Measures Act, in 2023, the maximum electricity price for other eligible customers was set at PLN 785/ (price excluding VAT and excise duty). After the Act Amending the Household Act of 16 August 2023 entered into force, the maximum price was, as for households, PLN 693 per . This price, in principle, applied from 1 December 2022, but it was also in force in a different amount from 1 October 2023 to 31 December 2023. The indicated limit of the maximum price for eligible customers also applied to electricity sales agreements that were concluded or amended after 23 February 2022 and where the maximum price also applied to settlements for the period from the date of conclusion or amendment of such agreements until 30 November 2022. Power companies were obliged to successively reimburse the amounts resulting from the application of the maximum prices until the end of 2023.
Power companies engaged in the business of electricity trading, in accordance with the implemented regulations, were entitled to compensation for the application of electricity prices in settlements with household customers in the same amount as on 1 January 2022. Such compensation was the product of electricity consumed at the electricity connection point, up to the maximum consumption limits entitling consumers to pay the 2022 prices, and the difference between the electricity price resulting from the electricity approved by the President of URE for 2023 and the electricity prices approved in the 2022 . In turn, for the application of the maximum price of PLN 693/ in settlements with household customers, trading companies were entitled to compensation in the amount of the product of the amount of electricity consumed in a given month and the difference between the reference price and the maximum price, for each electricity connection point. The reference price was the price of electricity resulting from the electricity approved by the President of URE for 2023. Compensation was also due for the use of maximum prices in settlements with other eligible entities. In this case, as a rule, the reference price for the payment of compensation was calculated on the basis of the prices of electricity in power exchange contracts and the prices of electricity purchased for sale to eligible customers, plus the cost of redemption of certificates of origin and a margin.
The mechanisms introduced in the Household Act and the Extraordinary Measures Act in 2023 should, in principle, compensate trading companies for the price reduction.
In accordance with the provisions of the Act of 7 December 2023 on amending laws to support consumers of electricity, gaseous fuels and heat, which came into force on 31 December 2023 (the Act for 2024), the mechanisms for freezing prices and the maximum price were extended until 30 June 2024.
After 1 December 2022, the financial position of the PGE Group was also affected by the provisions of the Extraordinary Measures Act 2023, which introduced the obligation for electricity generators and electricity trading companies to make monthly contributions to the account of the Price Difference Payment Fund. A contribution to the Fund was the product of the volume of electricity sold and the positive difference between the volume-weighted average market price of electricity sold and the volume-weighted average price cap of electricity sold, as specified in the Regulation of the Council of Ministers of 8 November 2022 on the manner of calculating the price limit.
A different method of calculating the price limit was defined for individual generation sources:
- in the case of lignite- and coal-fired power generation units, the price limit took into account, among other things, the unit cost of fuel consumed, the cost of CO2 emission allowances, the efficiency of power generation units, the margin and a certain level of investment and fixed cost allowance of PLN 50/MWh,
- for units producing energy from renewable sources, the price limit was determined by comparison to the reference price indicated in Article 77(3)(1) of the Renewable Energy Sources Act, whereby for hydroelectric power plants, the price limit was 40% of the reference price.
For electricity trading companies, on the other hand:
- for energy sold to end-users, the price limit was the product of the volume-weighted average price of electricity purchased on a given day and a margin defined as 1.035 or 1.03 (plus the unit cost of redemption of certificates of origin),
- for energy sold to customers other than final consumers, the price limit was the product of the volume-weighted average price of energy purchased on a given day and the margin defined as 1.015 or 1.01.
From 1 January 2023 onwards, trading companies calculate the amount of the contribution to the Fund for a given calendar month to which the settlement relates, taking into account the volume of electricity sales, the market price and the price limit for the 3 decades of that month, i.e. from the 1st to the 10th, from the 11th to the 20th and from the 21st to the last day of a month. Until 31 December 2022, the contribution to the Fund was calculated separately for each day of the month.
On 1 March and 1 September 2023, amendments to the provisions of the Extraordinary Measures Act governing the rules of making contributions to the Fund came into force.
The amendment concerned, among other things, the extension of the catalogue of revenue items that constituted the basis for calculating the contribution to the Fund. As a result, the amount of contributions transferred by the PGE Capital Group increased.
In connection with doubts concerning the interpretation of the provisions and the qualification of revenue from additional cash settlements, which should be taken into account in the calculation of contributions to the Fund, PGE S.A. applied to the President of the Energy Regulatory Office for an individual interpretation confirming the applied interpretation of the Act, as a result of which revenue from selected agreements should not be taken into account in the calculation of contributions to the Fund. The President of the did not share the Company’s opinion. PGE S.A., disagreeing with the adverse decision of the President of the , appealed against it to the Regional Court in Warsaw.
In 2023, the contribution due to the Fund amounted to PLN 6,569 million (decrease in the financial result). In turn, compensation income for 2023 amounted to PLN 7,658 million. Revenue from compensation is independent of the amount of contributions to the Fund. As described above, the amounts of compensation received by the sales companies were intended to compensate for the losses these entities had suffered due to the price freeze. The contributions to the Fund, on the other hand, limited the margins realised by individual energy companies to the specific levels indicated in the regulations.
The above values concerning due compensation are estimates determined in accordance with the best knowledge available to the PGE Capital Group as at the date of the preparation of these financial statements. The system of contributions to the Fund for the 2023 settlement periods had not been closed before 31 December 2023. Contributions to the Fund will also have to be transferred in 2024 for sales effected in the last weeks of 2023. In the Act for 2024, the legislator did not decide to extend the obligation to make contributions to the Fund to 2024, which means that the last month for which a contribution to the Fund should have been paid was December 2023.
Regulation of the Minister of Climate and Environment of 9 September 2023
On 11 September 2023, the Regulation of the Minister of Climate and Environment of 9 September 2023, amending the Regulation on the manner of shaping and calculating tariffs and the manner of settlements in electricity trading, was published and came into force on 19 September 2023. This regulation reduced electricity bills for household consumers by an average of more than PLN 125 in 2023, provided that one of the listed conditions was met. Power utilities conducting business activities related to electricity trading were obliged to make the reduction at the latest in the last electricity invoice in 2023.
On 31 December 2023, taking into account the number of recipients who met at least one of the conditions set out in the regulation, revenue was reduced by PLN 535 million (of which PLN 230 million was an estimate).