7.1 Sales revenue

SIGNIFICANT ACCOUNTING PRINCIPLES
Revenue from contracts with customers Revenue is recognised in the manner reflecting the transfer of promised goods or services to a customer in the amount reflecting remuneration to which the Group expects to be entitled in exchange for the specified good delivered or service provided. The Group recognises revenue from a contract with a customer only when all of the following criteria are met: the parties to the contract have approved the contract (in writing, orally or in accordance with other customary business practices) and are obliged to perform their respective obligations; the Group can identify each party’s rights regarding the goods or services to be transferred; the Group can identify the payment terms for the goods or services to be transferred; the contract has commercial substance; it is probable that the entity will collect the remuneration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. At contract inception, the Group assesses the goods or services promised in the contract with the customer and identifies as a performance obligation each promise to transfer to the customer either: a good or service (or a bundle of goods or services) that is distinct; or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. The Group recognises revenue when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to the customer. An asset is transferred when the customer obtains control of that asset. Control of an asset refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, an asset. The Group transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:· the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs, the Group’s performance creates or enhances an asset (for example work in progress) that the customer controls as an asset is created or enhanced; or the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. For each performance obligation satisfied over time, the Group recognises revenue over time by measuring the progress towards complete satisfaction of that performance obligation. The objective when measuring progress is to depict the Group’s performance in transferring control of goods or services promised to a customer (i.e. the satisfaction of the Group’s performance obligation).
When (or as) a performance obligation is satisfied, the Group recognises as revenue the amount of the transaction price that is allocated to that performance obligation. The transaction price includes some or all of the amount of variable remuneration only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable remuneration is subsequently resolved. Revenue is recognised net of the goods and services tax, excise tax, as well as other sales taxes, fees discounts and rebates. The entity considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of remuneration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

SIGNIFICANT ACCOUNTING PRINCIPLES

Revenue from contracts with customers
Revenue is recognised in the manner reflecting the transfer of promised goods or services to a customer in the amount reflecting remuneration to which the Group expects to be entitled in exchange for the specified good delivered or service provided.
The Group recognises revenue from a contract with a customer only when all of the following criteria are met:

the parties to the contract have approved the contract (in writing, orally or in accordance with other customary business practices) and are obliged to perform their respective
obligations;

the Group can identify each party’s rights regarding the goods or services to be transferred;

the Group can identify the payment terms for the goods or services to be transferred;

the contract has commercial substance;

it is probable that the entity will collect the remuneration to which it will be entitled in
exchange for the goods or services that will be transferred to the customer.

At contract inception, the Group assesses the goods or services promised in the contract with the customer and identifies as a performance obligation each promise to transfer to the customer either:

a good or service (or a bundle of goods or services) that is distinct;

a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.

The Group recognises revenue when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to the customer. An asset is transferred when the customer obtains control of that asset. Control of an asset refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, an asset. The Group transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:·

the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs,

the Group’s performance creates or enhances an asset (for example work in progress) that the customer controls as an asset is created or enhanced; or

the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

For each performance obligation satisfied over time, the Group recognises revenue over time by measuring the progress towards complete satisfaction of that performance obligation. The objective when measuring progress is to depict the Group’s performance in transferring control of goods or services promised to a customer (i.e. the satisfaction of the Group’s performance obligation).

When (or as) a performance obligation is satisfied, the Group recognises as revenue the amount of the transaction price that is allocated to that performance obligation. The transaction price includes some or all of the amount of variable remuneration only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable remuneration is subsequently resolved. Revenue is recognised net of the goods and services tax, excise tax, as well as other sales taxes, fees discounts and rebates.
The entity considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of remuneration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

Revenue from wholesale of electricity

Contracts for the sale of electricity concluded on the wholesale market are reported to the Transmission System Operator (TSO) as a notification of the volume of electricity declared per each hour which the Group is obliged to provide as a supplier or ensure its provision and the client is obliged to accept. Both the settlement price and volume of electricity per each hour are set out in OTC (Over the Counter) contracts signed or – in the case of sales on the Polish Power Exchange – determined on the basis of transactions recorded electronically. Revenue from the sale of electricity on the exchange is recognised on the delivery date.

The actual electricity supply takes place through the Balancing Market, where the Transmission System Operator ensures reliability of data concerning the supplied volume of energy and deviations in volume from the previously notified work schedules (the so-called ESC: Energy Sale Contracts) are settled at prices resulting from the mechanism of operation of the Balancing Market. Settlements of the Balancing Market are executed with the Transmission System Operator every decade, whereas settlements of wholesale sales on the Polish Power Exchange are carried out with the Warsaw Commodity Clearing House, which is the guarantor of settlements of transactions entered into on the Polish Power Exchange, they are executed on a daily basis in accordance with the Warsaw Commodity Clearing House’s regulations. For OTC Contracts, settlements are performed in accordance with the provisions of such Contracts, i.e. on a decade or monthly basis.
Revenue from sales of heat

Revenue is measured at the currently applicable prices of heat and rates, subject to the approval of the President. Heat prices relate to the heat capacity ordered, the heat energy sold and the heat carrier in terms of heat generation, while the variable and fixed rates relate to heat distribution and transmission. Revenue invoiced for the sales of heat is the product of the rates described above and sales volumes.

Quantitative heat sales are derived from readings of metering and billing systems. Readings are taken on specified working days of each calendar month, including dates close to the end of a month. Therefore, for the purposes of financial reporting, sales volumes are adjusted for the period between the last reading date of a month and the end of that month.

Revenue from the sales of heat is recognised when heat is delivered in accordance with meter readings, including adjustments.

Revenue from sales of electricity distribution services

The volume of revenue from the sales of electricity distribution services is based on sales documented by invoices, adjusted by the reassessment made of non-invoiced sales of electricity distribution services in a given period. Adjustments of sales are made at least at the end of each quarter.

Revenue from a distribution service is recognised at the time the service is performed, based on the readings of the metering and billing systems, taking into account adjustments of consumption.

Sales revenue does not include the value of fees collected on behalf of third parties for which the Group acts as payer, i.e. the transitional charge, the RES charge, the co-generation charge and the capacity charge.

Revenue from sales of electricity and gaseous fuel

The Group earns revenue from the sales of electricity and natural gas to end users. Revenue from the sales of electricity is recognised on the basis of the sales month indicated in invoices.

Due to the continuous character of energy supplies, for the purposes of proper recognition in the account books, the Group adjusts sales revenue (invoiced sales) by the amount of energy supplied but not invoiced in a given period. Adjustments of electricity sales are carried out at the end of each month.

The calculation of the value of adjusted sales is made separately for each energy consumption point and separately for individual price components and types of charges. Adjustments of electricity volumes are calculated based on the average daily energy consumption for a given consumption point, determined on the basis of the following:

data from energy sales invoiced in the latest billing period,
forecast daily consumption of electricity and natural gas

Adjustments of electricity volumes for a newly acquired electricity consumption point (with no history of electricity consumption in the billing system) are determined on the basis of the volume declared by the customer.

In the case of electricity consumption points billed on the basis of forecast invoices, adjustments make sales realistic by recalculating the charges for the forecast amount of electricity according to the current rates applicable in the forecast period.

Receivables from reassessed sales as at 31 December 2023 are shown in note 24.1.1 to these financial statements.

Revenue from the capacity market

Under the Capacity Market Act, power suppliers may offer the Operator (OSP S.A.) a capacity obligation for a specific delivery period in capacity auctions. A capacity obligation is an obligation of a capacity supplier to remain ready during the delivery period to supply a specified volume of electricity to the system by a capacity market unit and to supply a specified volume of electricity to the system during emergency periods.

Operating lease revenue

Operating lease revenue is recognised in profit or loss for a given period on a straight-line basis over a lease term, unless another systematic basis is more representative of the distribution of decreasing benefits derived from the use of a leased asset over time.

The undiscounted lease payments to be received annually in the subsequent periods are presented in the table below.

Maturity dates	Year ended 31 December 2023	Year ended 31 December 2022
up to 1 year	69	59
from 1 to 2 years	63	52
from 2 to 3 years	58	51
from 3 to 4 years	54	48
from 4 to 5 years	53	45
over 5 years	860	697

Sales revenue for 2023 broken down by category

The table below presents a reconciliation between the disclosure of revenue broken down by category and information on revenue that the entity discloses for each reportable segment.

	Conventional Power Generation	Heat Generation	Renewable Power Generation	Distribution	Railway Power Engineering	Trade	Circular Economy	Other Activities	Adjustments	Total
Revenue from contracts with customers	47,956	12,004	2,827	9,327	4,587	66,155	376	350	(56,779)	86,803
Revenue from recognised compensation under the Electricity and Gaseous Fuels Pricing Act	1	120	–	1,199	141	6,197	–	–	–	7,658
Revenue from recognised compensation pursuant to the Act on preferential purchase of the solid fuel for households	–	–	–	–		958	–	–	–	958
Revenue from support for high-efficiency cogeneration	–	584	–	–	–	–	–	–	–	584
Revenue from auction support for RES	–	–	(27)	–	–	–	–	–	–	(27)
Revenue from PPA compensation	–	(109)	–	–		–	–	–	–	(109)
Operating lease revenue	12	27	6	64	–	6	–	2	(20)	97
TOTAL SALES REVENUE	47,969	12,626	2,806	10,590	4,728	73,316	376	352	(56,799)	95,964

The total revenue amount includes approximately PLN 489 million in sales transactions whose value was not ultimately established as at the end of the reporting period. The PGE Group estimates revenue and the most significant estimates relate to:

re-estimate of revenue from the sales of electricity, gaseous fuel, distribution services in the segments of Trade, Distribution and Railway Power Engineering,
reduction of revenue resulting from the Regulation of the Ministry of Climate and Environment on reduction of electricity bills by an average of PLN 125,
estimate of revenue from support for high-efficiency co-generation in the Heat Generation segment.

Lease payments recognised as income in 2023 amounted to PLN 97 million (PLN 86 million in 2022). The Group did not achieve revenue from operating lease relating to variable lease payments that do not depend on any index or rate.

The table below presents revenue from contracts with customers broken down by category reflecting how economic factors affect the nature, amount and timing of payments as well as the uncertainty of revenue and cash flows.

Type of good or service	Conventional Power Generation	Heat Generation	Renewable Power Generation	Distribution	Railway Power Engineering	Trade	Circular Economy	Other Activities	Adjustments	Total
Revenue from sales of goods and products, without excluding taxes and fees	47,905	11,948	2,784	10,759	4,297	64,348	164	–	(54,297)	87,908
Taxes and fees collected on behalf of third parties	(10)	(4)	–	(1,497)	(156)	(138)	–	–	–	(1,805)
Revenue from sales of goods and products, including:	47,895	11,944	2,784	9,262	4,141	64,210	164	–	(54,297)	86,103
Sales of electricity	43,629	7,048	2,291	11	1,837	27,942	–	–	(20,873)	61,885
Capacity market	2,203	218	259	–	–	30	–	–	–	2,710
Sales of distribution services	17	23	–	8,817	1,542	74	–	–	(352)	10,121
Sales of heat	135	4,513	–	–	–	14	–	–	(18)	4,644
Sales of energy origin property rights	–	72	214	–	–	–	–	–	(27)	259
Regulatory system services	1,698	3	14	–	–	–	–	–	–	1,715
Sales of natural gas	–	–	–	–	–	927	–	–	(698)	229
Sales of other fuels	–	–	–	–	168	6,147	–	–	(3,146)	3,169
Sales of CO₂ emission allowances	68	54	–	–	–	29,071	–	–	(29,043)	150
Other sales of goods and materials	145	13	6	434	594	5	164	–	(140)	1.221
Revenue from sales of services	61	60	43	65	446	1,945	212	350	(2,482)	700
TOTAL REVENUE FROM CONTRACTS WITH CUSTOMERS	47,956	12,004	2,827	9,327	4,587	66,155	376	350	(56,779)	86,803

Type of good or service	Conventional Power Generation	Heat Generation	Renewable Power Generation	Distribution	Railway Power Engineering	Trade	Circular Economy	Other Activities	Adjustments	Total
Revenue from sales of goods and services transferred to the customer over time	47,682	11,805	2,564	8,828	3,379	28,987	–	–	(21,941)	81,304
Revenue from sales of goods and services transferred to the customer at a particular point in time	274	199	263	499	1,208	37,168	376	350	(34,838)	5,499
TOTAL REVENUE FROM CONTRACTS WITH CUSTOMERS	47,956	12,004	2,827	9,327	4,587	66,155	376	350	(56,779)	86,803

Sales revenue for 2022 broken down by category

The table below presents a reconciliation between the disclosure of revenue broken down by category and information on revenue that the entity discloses for each reportable segment.

data restated	Conventional Power Generation	Heat Generation	Renewable Power Generation	Distribution	Trade	Circular Economy	Other Activities	Adjustments	Total
Revenue from contracts with customers	36,449	7,435	3,425	6,746	45,887	353	316	(28,139)	72,472
Revenue from recognised compensation under the Electricity and Gaseous Fuels Pricing Act	–	–	–	–	543	–	–	–	543
Revenue from recognised compensation pursuant to the Act on preferential purchase of the solid fuel for households	–	–	–	–	131	–	–	–	131
Revenue from support for high-efficiency cogeneration	–	231	–	–	–	–	–	–	231
Revenue from auction support for RES	–	–	(30)	–	–	–	–	–	(30)
Revenue from PPA compensation	–	2	–	–	–	–	–	–	2
Operating lease revenue	11	22	6	57	5	1	1	(17)	86
TOTAL SALES REVENUE	36,460	7,690	3,401	6,803	46,566	354	317	(28,156)	73,435

The total revenue amount includes approximately PLN 66 million in sales transactions whose value was not ultimately established as at the end of the reporting period. The PGE Group makes estimates of revenue the most important of which relate to revenue from the sales of electricity, gaseous fuel and distribution services in the Trade and Distribution segments, as well as revenue from support for high efficiency in the Heat Generation segment.The table below presents revenue from contracts with customers broken down by category reflecting how economic factors affect the nature, amount and timing of payments as well as the uncertainty of revenue and cash flows.

Type of good or service data restated	Conventional Power Generation	Heat Generation Renewable	Power Generation	Distribution	Trade	Circular Economy	Other Activities	Adjustments	Total
Revenue from sales of goods and products, without excluding taxes and fees	36,362	7,387	3,364	8,207	44,487	162	20	(26,178)	73,841
Taxes and fees collected on behalf of third parties	(8)	(5)	–	(1,515)	(73)	–	–	–	(1,601)
Revenue from sales of goods and products, including:	36,354	7,382	3,364	6,692	44,414	162	20	(26,178)	72,240
Sales of electricity	33,434	3,969	2,849	15	22,520	–	–	(8,870)	53,917
Capacity market	2,142	211	276	–	29	–	–	–	2,658
Sales of distribution services	13	15	–	6,374	46	–	–	(77)	6,371
Sales of heat	89	2,901	–	–	13	–	–	(14)	2,989
Sales of energy origin property rights	1	75	246	–	–	–	–	13	335
Regulatory system services	220	91	16	–	–	–	–	–	327
Sales of natural gas	–	–	–	–	1,041	–	–	(465)	576
Sales of other fuels	–	–	–	–	8,568	–	–	(4,357)	4.211
Sales of CO₂ emission allowances	263	67	–	–	12,200	–	–	(12,221)	309
Other sales of goods and materials	192	53	7	303	(3)	162	20	(187)	547
Revenue from sales of services	95	53	31	54	1,473	191	296	(1,961)	232
TOTAL REVENUE FROM CONTRACTS WITH CUSTOMERS	36,449	7,435	3,425	6,746	45,887	353	316	(28,139)	72,472

Timing of transfer of goods or services data restated	Conventional Power Generation	Heat Generation	Renewable Power Generation	Distribution	Trade	Circular Economy	Other Activities	Adjustments	Total
Revenue from sales of goods and services transferred to the customer over time	35,898	7,187	3,141	6,389	23,649	–	–	(9,426)	66,838
Revenue from sales of goods and services transferred to the customer at a particular point in time	551	248	284	357	22,238	353	316	(18,713)	5,634
TOTAL REVENUE FROM CONTRACTS WITH CUSTOMERS	36,449	7,435	3,425	6,746	45,887	353	316	(28,139)	72,472

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7.1 Sales revenue

Revenue from wholesale of electricity

Revenue from sales of electricity distribution services

Revenue from sales of electricity and gaseous fuel

Revenue from the capacity market

Operating lease revenue

Sales revenue for 2023 broken down by category

Sales revenue for 2022 broken down by category