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Legal status of supplier of last resort

2005.08.31

The TPA principle ( Third Party Access) can be defined as the obligation of companies to provide system access to sellers and customers, which is executed by an independent public authority. From the theoretical and legal point of view, this is a limitation of individual rights and interference of public authorities in the freedom of economic activity taken in the public interest.

On the other hand, for those that do not want the TPA principle on the electric energy market or will not be able to make use of it, lawmakers provided the institution of Supplier of last resort. This name in the energy law regulations (Art. 3 Item 29) denotes an energy company with a license to sell electric energy, providing full services to electric energy recipients in households, that does not make use of the seller selection right (respectively, a full service is defined as a service rendered in accordance with an agreement including provisions of a sale agreement and an energy transfer or distribution service agreement).

The supplier of last resort (emergency) institution is then provided for households that are not interested in changing the curtrent status quo regarding suppliers and conditions of electric energy supplies. In accordance with Art. 4j and 5a Clause 4 of the energy law, Polish lawmakers have decided that making use of the energy supplier selection is a right, not an obligation of a household. However, Polish regulations do not explicitly determine whether entrepreneurs can also make use of services of suppliers of last resort. The content of Art. 5a Clause 1 of the act determines that a supplier of last resort is not obliged to conclude agreements with companies. In this case, we should refer to the directive 2003/54/EC of European Parliament and Council as of June 26, 2003 on common principles of internal electric energy market, repealing the directive 96/92/EC that enables Member States to take independent decisions regarding the obligation of contracting suppliers of last resort provided in local regulations. In accordance with the directive, the Member States’ obligation of providing common service by suppliers of last resort relates to all recipients being households, while SMEs only if Members States recognise it as suitable (according to the directive, SMEs are companies employing less than 50 people with annual turnover or balance sheet not exceeding 10 million euro).

Therefore, it seems that Polish lawmakers have not used the possibility provided in this scope by the Community regulations and determined that only household recipients can make use of services of suppliers of last resort, not granting the right to everyone else including SMEs. This conclusion is based on Art. 3 Item 29 of the Polish Act.

This solution can be considered as controversial. A question arises if, for example, it is intention for many small trade workshops to maintain the possibility of making use of services of suppliers of last resort, at least in the transitory period. It is already widely known that withdrawing from services of supplier of last resort and selection of an energy supplier on the free market can be profitable to those recipients that have well-specified demand for electric energy and whose activity allows for planning energy consumption accurately. Apart from the costs of appropriate measurement and employment of relevant services, the selection of energy suppliers also results in taking the market risk. Are SMEs ready to such significant changes? Only time will tell.

Analysing the legal status of suppliers of last resort, it is worth noting that, in accordance with provisions of Art. 3 Item 29 of energy law, the function of a supplier of last resort can be performed by companies with licenses for electric energy production, but with no licenses for electric energy turnover.

It is also important that the statutory provisions regarding suppliers of last resort are based on the solution quite rarely applied in civil law (expressed in energy law in Art. 5a Clause 1 and 2), i.e. introduction of contracting obligations:

  • by a supplier of last resort – with an electric energy recipient in a household that does not make use of the right to select a seller and connected to the system of a energy company indicated in the license of a given supplier of last resort; 
  • by a energy company that deals with transmission or distribution of electric energy – with a supplier of last resort , regarding conclusion of an electric energy transmission or distribution service agreement, to provide electric energy to a recipient in a household to whom the supplier of last resort is obliged to provide full services.

However, the duties set on a supplier of last resorts are fully based on the directive 2003/54/WE according to which Member States can impose the obligation to provide public services on energy sector companies, taking into account the general economic interest.

Michał Głowacki