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Concern for the interest of electricity customer - the market (still) regulated

The ERO President acting for the strengthening of competition on the electricity market and taking into consideration the customers interests, clearly and consequently presents conditions, in which electricity enterprises will be released from the obligation to present electricity tariffs for approval, which is sold to household customers (so called group G).

In the opinion of the ERO President prices of energy in the household segment should be released in the end, though the exemption from presenting tariffs for approval is not yet possible. Already published in January 2008 in The Road map to release prices for all electricity customers, the ERO President pointed out the conditions for the liberalization of the electricity market. These conditions, in general, have not been fulfilled until now. The realization of conditions mentioned in the document also depends on activities of other administrative bodies and institutions responsible for the functioning of the electricity sector as well as competition and customer protection, and on the electricity enterprises themselves.

Due to the above, the ERO President recommends the preparation of government program to release energy prices for household customers, which describes the activities and the schedule of its realization.

Circumstances for the price release

In the opinion of the ERO President, the sale of electricity without the obligation to present tariffs for approval will only be possible, when three major conditions are fulfilled.

The first one is the change of rules in the electricity market, leading to the increase of electricity trade liquidity on the wholesale market, as well as objectivization of electricity pricing. The principal change of this state is possible to happen, when the volume of trade increases through electricity exchanges. In the opinion of the ERO President the project of the amendment to the Energy Law in its present shape does not guarantee the proper level of electricity trade liquidity, as the public tender procedure foreseen in the amendment, may not allow tenderers in practice, to keep control over the electricity trade.

The second condition, which has to be fulfilled is to provide security to the customers over excessive risk, including especially the risk of unjustified price increase. Improvement in this field can happen after the implementation of rules of the bill concerning the amendment to the Energy Law, which was directed for the parliamentary works as well as the introduction of solutions supporting the economically weak customer, protecting the customer against, so called, electricity poverty.

The third condition to free the market is to strengthen the possibilities of the ERO President to influence the shape of market relations as well as to retain certain electricity enterprises, especially those with a significant market share. In the current legal status, after releasing the electricity prices, the ERO President would not have effective tools to enable him to obtain real influence on the functioning of the electricity market and counteracting threats to the right functioning of competition mechanisms as well as the security of electricity supply. Domestic legal regulations concentrate on, unfortunately, market regulation in the situation of full price control. In the opinion of the ERO President there are no regulations, which allow effective decision making, focusing on preventing situations, where the electricity enterprises conduct activities, which could threaten the proper functioning of the competition mechanisms on the market.

Diagnosis of the market situation

The market is not transparent enough - the lack of clear and consolidated rules for public electricity trade. The greatest part of it (around 90%) is sold through bilateral contracts, which regulations are not known to all the players on the market (the contracts are not open) or can be established one-sided by the electricity seller in the frame of tenders. Only a small number of transactions took place on the exchange (about 1,8% of consumption in 2008), where the rules are approved by the Polish Financial Supervision Authority and are open to everyone. Moreover, in the situation of great market concentration, bilateral sale results in the lack of access to electricity for recipients, which come from outside the capital groups.

The sensitive customer category has not been defined by any act, which makes it very difficult to estimate the group, which needs support, and to create and implement help programs. As a consequence there is a lack of financial support system for the customer group requiring real help.

Electricity customers do not have the full knowledge concerning the possibility to change the supplier. It is strictly connected with the little activity of the electricity suppliers in reaching customers with their offer (in the situation of properly working competition mechanisms on the market, it is the electricity supplier, which should be the main source of information for the customers). So, it is still necessary to undertake all possible actions to educate and inform, with the aim of greatly strengthening the customer awareness in the scope of rights, they are entitled to and the duties. Significant barrier in taking decisions about the change of supplier is the lack of guarantee possibility to conclude a comprehensive agreement with a new supplier, which also allows payment for electricity and its distribution on the basis of one invoice. The solution to this problem would meet the customers’ expectations for whom the change of a supplier should not be difficult and it should become the subject of parliamentary works concerning the amendment of the Energy Law.

Another problem is also the lack of a single pattern of, so called, general distribution agreement. Such an agreement stipulates the conditions of suppliers functioning on the territory of the operator as well as the cooperation with such an operator. What comes next, to be able to change the electricity supplier, you must have a signed general distribution agreement with the distribution system operator, to whose network the customer is connected. Presently there is not one single pattern for general distribution agreement, which could be accepted as compulsory by the distribution system operators and electricity suppliers and which would allow for quick and efficient conclusion of such agreements, without the necessity to conduct time-consuming negotiations.

Taking into consideration the above circumstances, the release of electricity market for customers in the household group, in a responsible way, is not possible at the moment.

The energy market is in most segments released. Enterprises were released from the obligation to present tariffs for approval already in 2001. From January 2008 tariffs are not approved for sale to the industrial customers groups. Transmission and distribution as a natural monopoly area will remain tariffied. Group G constitutes the last group of customers, for which electricity prices remain under control. The volume of sales in this group constitutes about 25% of the total volume of electricity sale.

The ERO President, on the basis of Act 49 of the Energy Law, can release the enterprise from the duty to approve electricity tariff, if it finds that the enterprise operates on a competitive market. The release from this duty can concern as well part of the activity of that enterprise. The release can take place ex officio or at the request of the enterprise.

07.09.2009

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