Thursday with energy: What if the seller terminates the contract with the RES generator?

There are increasing signals from the environment of generators in micro- and small-scale RES installations that trading companies are terminating concluded contracts for the sale (repurchase) of electricity, the settlement of which is based either on the average quarterly price published by the President of the ERO or on a fixed price. In some cases, generators in micro-installations are directly offered to use the net-billing system. What can generators do in such cases and what rights are granted to them by the Law on Renewable Energy Sources (“RES Law”)?

1. Settlement with the micro-installation generator – obligations of the obligated seller

At the outset, it is worth emphasizing that not every micro-installation generator is a prosumer. In addition to the circle of entities that do not meet the criteria in the definition described in Article 2, point 27a of the RES Act, an entrepreneurial generator can determine for itself which settlement system it will opt for. While such an entitlement is not obvious at first glance, according to Article 41(1)(3), a micro-installation generator is not required to use either a net-billing or net-metering system. Billing based on the average quarterly price published by the President of the ERO or another price agreed with the selected seller, i.e. bypassing the rules of the RES Act, is allowed. What is important here is that the following entities are obliged to conclude a contract for the sale of electricity generated in a micro-installation:

1. 1. 1. An obligated seller with a prosumer (Article 40(1a) of the RES Act),
      2. An obligated seller with a generator who is an entrepreneur (Article 41(1)(1) and (3) of the RES Act),

In turn, in the following cases, a micro-installation generator may request billing under the RES Act:

1. 1. 1. If he has the status of a prosumer – in a net-billing or net-metering system (if the RES installation was commissioned before March 31, 2022),
      2. If he is an entrepreneur – in the system from point 1) or in the system of the average quarterly price published by the President of the ERO.

In the case of concluding an agreement with a so-called seller of choice, only a prosumer generator may request to conduct settlements based on the net-billing or net-metering system. Entities without prosumer status are left to use the offer provided by the seller.

In summary, a micro-installation generator can:

1. 1. 1. Use either net-billing or net-metering – if he has prosumer status and enters into a contract with an obligated seller or seller of choice. Net-metering is available for installations where generation first took place before March 31, 2022,
      2. Use billing at the average quarterly price published by the President of the ERO – if it is an entrepreneur and does not use net-billing or net-metering,

      3. Use contractually agreed settlements with the seller – then the generator should make appropriate declarations about not using statutory settlement systems.

2. Settlements with the generator in a small installation – when must the obligated seller conclude a contract?

The obliged seller conducts settlements not only with prosumers. According to the RES Act, there are several situations in which the obliged seller is required to conclude an agreement with a generator in a small installation, as long as its capacity does not exceed 500 kW. The following cases are mentioned:

1. 1. 1. when the installation has a capacity of less than 500 kW and was commissioned before July 1, 2016. (Article 42(1)(1) of the RES Act) – the settlement price is the average quarterly price published by the President of the ERO;
      2. when the installation is powered solely by biogas and has a capacity of less than 500 kW – the clearing price is the average quarterly price published by the ERO President;
      3. when the installation participates in the auction system and has a capacity below 500 kW – the clearing price is determined on the basis of the TGEbase index;
      4. when the installation has a capacity of less than 500 kW and participates in the FiT system – the settlement price is determined on the basis of the TGEbase index;

In other cases, the settlement of electricity generated in a small RES installation and returned to the grid is made according to the arrangements indicated in the contract.

3. Seller terminates contract – what to do?

Each micro and small-scale generator should first verify its status under the RES Act, i.e. determine what rights described above it is entitled to and to whom it can exercise them (seller obliged or seller selected).

Of course, it is also worth checking whether the statement of termination of the contract was properly submitted, that is:

1. 1. 1. It was submitted by a person authorized to represent the seller,
      2. The termination date was correctly set,

The seller has the right reserved in the contract to terminate the contract without giving a reason.

It is worth noting that prosumers using net-billing and net-metering are entitled to use these systems for a period of 15 years. In this regard, obligated sellers do not have the right to change billing terms. Only a prosumer billing according to the net-metering system may change the system to net-billing, and any generator billed according to the formulas described in the RES Act may abandon them in favor of an individual billing method agreed with the seller.