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Amendment to the Energy Act Lex OZE II and it’s impact

28. 6. 2023

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bpv BRAUN PARTNERS

The Czech government has approved the bill amending acts including the Energy Act (Act No. 458/2000), the Act on Supported Energy Sources (Act No. 165/2012), and other related acts. The bill is known to the public as Lex OZE II (hereinafter “Lex OZE II” or the “Bill”).

Lex OZE II introduces a number of changes including the following:

License for electricity production only for sources over 50 kW

The Bill proposes cancelling the obligation to have a license completely for power plants connected to the power grid with an installed capacity of under 50 kW. The Energy Act currently requires a license even for plants with installed capacity of under 50 kW producing electricity for the customer’s own use where another plant belonging to the license holder is connected at the same offtake point. That would change under the new legislation so that power plants with installed capacity of under 50 kW (regardless of designation) would be operated without a license.

The customer will be able to negotiate the billing period with the supplier

Lex OZE II would introduce a concept under which a trader (or producer) of electricity and gas could agree with customers on a billing period that is a different length than the period for which the distribution grid operator delivers (via the market operator) data on consumption to the trader (producer).

According to the explanatory report this proposal results from more and more customers with continuous measurement. These customers are usually billed monthly for electricity use and VAT without the option of contractually agreed advance payments divided up over a long period in order to equal out the differences in consumption during that period (e.g. seasonal fluctuations in gas use). The proposed legislation would address this shortcoming.

Community energy and energy communities (“EC”)

One of the most important new developments in the Lex OZE II is the legislation regarding community energy through two types of communities: (i) the energy community and (ii) communities for renewable resources (hereinafter jointly the “Communities”).

Communities are meant primarily to share electricity among a larger number of subjects (members) within a certain geographically defined community and thus lower costs. In addition to electricity production, Companies may also distribute, supply, consume, aggregate, and store energy, provide energy efficiency services or provide electric vehicle charging services. Communities are not intended to generate profits.

For Communities to work, they will also have the right to access measured and evaluated data on electricity supply and consumption. The data center will be of great importance for settling electricity sharing, which is mainly intended to ensure large-scale data exchanges after the entry of the Community into the market (see below).

Communities can take the legal form of an association, cooperative or other similar corporation (the explanatory report specifically mentions s.r.o.) and its members can be natural persons and for-profit or non-profit legal entities.

The Lex OZE II bill currently anticipates two types of membership in Communities: (i) membership of effectively controlling members with voting rights (i.e. subjects that will take an active part in managing the Community) and (ii) membership of other members without voting rights. In order to prevent Communities from being controlled by “big players”, the bill proposes a restriction in exercising voting rights within the Community, wherein one subject will be able to exercise voting rights for a maximum of 10% of all shares (in practice this would mean that if one entity holds 25% of all shares in the Community, it will only be able to vote as if it had 10%).

A Community would have to be registered with the Energy Regulatory Office (the “ERO”). Registration would be subject to a fee of CZK 2000. Until June 30, 2026 the ERO is to stipulate a maximum of 1000 offtake points within one shared group, and after that date the limit will be at the ERO’s discretion.

Increasing regulated fees for ERO activities

The bill anticipates increasing the upper fee rate for ERO activities in the power industry from CZK 2.50 to 4.40/month per offtake point and in the gas industry from CZK 1.40 to 2.60 per MWh.

At the same time the fee paid for each offtake point will become part of the newly conceived price for non-network infrastructure. This will result in an increase in the regulated portions paid in the price of electricity.

New obligations for the distribution grid operator in connecting sources

Lex OZE II should also contribute to greater transparency in the process of connecting new power plants to the distribution grid, such as by introducing the legal obligation for the distribution grid operator to inform users of connection options on its website.

A key change is the proposal to codify the distributor’s obligation to provide the applicant with a written explanation and estimated date and approximate conditions of future connection if the distributor is unable to connect a new source due to insufficient capacity or threat to the safety and stability of the distribution grid.

Re-modification of Section 35 on ex offo proceedings under Act No. 165/2012

The current wording of Section 35 of the Act on Supported Energy Sources authorizes the State Energy Inspectorate (the “Inspectorate”) to commence ex offo proceedings within three years of publishing the results of the sector proceedings even if no risk of overcompensation was identified during the audits for the sector to which the power plant belongs. Under Lex OZE II, the Inspectorate would have the option of commencing ex offo proceedings only for power plants that have combined operating support and investment support, regardless of whether the risk of overcompensation was found in the sector to which the power plant belongs.

The Chamber of Deputies is now set to discuss the bill. Given the great number of comments that have already been made during the interdepartmental commenting process, we can expect the wording of the bill to undergo significant changes. We will keep you informed of the most important changes and the final wording of the bill.

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