ELECTRICITY TARIFFS

To function properly, any modern building requires electricity. In Poland, electricity is still derived mostly from the burning of fossil fuels, particularly coal, which affects its price. Although the country’s electricity market was liberalised in 2007, prices for consumers, i.e. household users, were not: they are determined on the basis of so-called tariffs. In this article we explore what electricity tariffs are. We also take a look at what rights consumers have vis a vis electricity companies.

I.  Electricity tariff: What is it? How is it created? Is it a model agreement?

Electricity tariffs have their legal basis in the Energy Law.[1] Among the stated objectives of the Energy Law are: counteracting the negative effects of natural monopolies; taking proper account of environmental protection requirements and multilateral agreement obligations; or balancing the interests of energy companies and those of users of energy and fuels. Achieving this latter objective, in particular, requires the introduction of model agreements and tariffs that are vetted by an independent regulator with appropriate powers.

According to the Energy Law, a tariff is a list of prices and charges, and associated terms and conditions, that an energy company charges users. With respect to electricity, the tariff determination process is as follows. A licensed electricity company – the supply of electricity requires a license – designs tariffs and submits them for approval by the President of the Energy Regulatory Office (URE). The URE President examines whether the tariffs are consistent with all the legal requirements and reflect justified costs only, and decides to approve or reject them. The submitted draft tariff proposes prices for user groups for a given period, in most cases a year. (The URE President can approve a tariff for a longer period – up to three years – upon the request of the electricity company, provided that the prices and charges in it are not higher than in the previous tariff, and subject to certain other conditions.) Tariff proposals must be submitted no later than two months prior to the expiry of the current tariff. The URE President has the power to demand the submission of tariff proposals for approval. So it is not possible to supply and charge households for electricity without a binding tariff. Approved tariffs are published in the Bulletin of the URE President.

Thus, an energy tariff is a document that, on the one hand, is an electricity price list; but on the other hand, it also contains wider provisions that become binding for all of the company’s users once the tariff is approved by the regulator. These other provisions include, notably, division into user groups, or conditions under which specific prices apply. The prices themselves are not determined unilaterally and arbitrarily by electricity companies, but must take account if ministerial guidelines. Under the Energy Law, the competent minister in charge of energy affairs[2], after consulting the URE President, lays down, in the form of a regulation, detailed rules for the determination and calculation of electricity tariffs and for financial settlement in the trade in electricity, taking into account the following: the state’s energy policy; the need to cover electricity companies’ justified costs, including the costs of their development; protection of users from unjustified price and charge increases; improving the efficiency of supply and use of electricity; equitable treatment of users; elimination of cross-subsidisation[3]; and transparency of prices and charges[4].

II. The electricity consumer and their rights

The consumer enters into an agreement with an electricity company that defines the price at which the electricity is acquired based on the tariff approved by the regulator. Such an arrangement is based on the assumption that full liberalisation of electricity prices would be harmful to consumers, whose interest has to be protected by the state. So part of the URE President’s task is to reconcile diverging interests.

Although the Energy Law uses the term consumer, legal practice has established that it means household user. The consumer is free to choose the electricity supplier. They can enter into one of three types of agreement: electricity sale agreement, electricity supply/distribution agreement, or comprehensive electricity sale and supply/distribution agreement. Each consumer is assigned to a tariff group. A tariff group is a group of users who are charged the same prices and terms for the sale or supply/distribution or comprehensive sale and supply/distribution of electricity.

Consumers are assigned to tariff groups according to the amount of justified costs required to supply electricity to them, based on the following criteria: grid voltage at the point of supply; ordered capacity; method of financial settlement; number of settlement time zones; and electricity consumption. The consumer is entitled to apply to switch tariff groups once in 12 months, and in the case of a change in prices, within 60 days of the new tariff coming into effect. Importantly, the terms and conditions of switching tariff groups are laid down in the electricity sale agreement/electricity supply/distribution agreement/comprehensive agreement.

The Energy Law also regulates the complaints process, and envisages a catalogue of consumer rights[5]. Thus, the electricity company is obliged to: receive reports and complaints from users about electricity supply on a 24/7 basis; immediately remove any disruptions in the supply of electricity caused by grid failures; inform users, upon request, of the expected time of supply restoration after a grid failure; give users at least five days’ notice of planned outages and their duration; or inform users free of charge about methods of financial settlement and current tariffs.

To recapitulate, the price that the consumer pays for electricity is calculated based on a tariff, i.e. a model agreement used by the electricity company that was approved by the URE President. The consumer is entitled to a number of rights, including e.g. to request a change of price. However, the criteria for assigning consumers to tariff groups (with their prices and conditions) are also subject to prior regulatory approval.

By Jan Akimenkow, trainee attorney at law

Originally published in PMR Construction Insight: Poland, No. 2 (275), February 2024

[1] Cf. The Energy law act of 10 April 1997.

[2] Currently, the Minister of Climate and the Environment.

[3] Charging a group of users higher prices to fund reduced prices for another group.

[4] Cf. Regulation of the Minister of Climate and the Environment of 29 November 2022 on the determination and calculation of electricity tariffs and on financial settlement in the trade in electricity.

[5] Cf. Regulation of the Minister of Climate and the Environment of 22 March 2023 on detailed conditions of the functioning of the electrical power system.