Project UC84, or Revolution in Installments

The government has once again submitted for legislative work the widely commented draft amendment to the energy law (UC 84). The November version differs significantly from previous ones. Most importantly, the biggest revolution—the colored priority areas for renewable energy sources (RES)—has been abandoned. The removed elements will most likely appear in subsequent laws, but the current draft still significantly changes the rules of market operation.

The amendment is intended to streamline the connection process, increase its transparency, and make grid operations more flexible. PSE S.A. indicates that some provisions contained in UC84 constitute elements of the so-called anti-blackout package. The project aims to strengthen the energy market’s resilience to future crises and sudden price fluctuations. One of the tools serving this goal is the development of non-fossil fuel flexibility, a solution designed to stabilize the system with the growing share of RES.

The project covers almost the entire electricity market. New regulations are to secure the situation of consumers, clarify sellers’ obligations, and introduce a series of changes concerning grid operators. It’s worth noting that the final version of the project does not include provisions providing preferences for so-called local content in priority areas.

New Connection Agreements and Fixed-Price Guarantees

The amendment implements a new conceptual framework in the area of grid connections and electricity trading. It provides for, among other things, the introduction of flexible and configurable connection agreements and fixed-price guarantee agreements. The new regulations are also to align energy law with the requirements of the EU regulation on the integrity and transparency of the wholesale energy market.

Flexible and configurable connection agreements have a similar nature. In both cases, it is assumed that there may be restrictions on input or withdrawal. The difference is that under flexible agreements, these restrictions can be removed through grid expansion, but no later than three years from the completion of the entire facility. In the case of configurable agreements, unrestricted connection is not possible even despite planned grid expansion. Importantly, these restrictions may be indefinite, and the operator will not be obliged to remove them.

A fixed-term sales agreement with a fixed-price guarantee introduces additional consumer protection in the form of a prohibition on its termination by the seller before the expiration of the period for which it was concluded.

Simpler Grid Connection

The amendment introduces the long-awaited possibility of submitting applications for determining connection conditions in electronic form. Simplifications also include waiving the requirement to attach to the application an extract from the local spatial development plan and proof of legal title to the property. A proper declaration will suffice. An additional convenience is also the possibility of modifying connection conditions regarding the location of the planned investment within the municipality and municipalities directly adjacent to its territory.

Higher Costs for Investors as a Remedy for Ghost Projects

Along with simplifying the connection procedure, the amendment aims to limit the phenomenon of so-called ghost projects. For this purpose, it plans to shorten the validity period of connection conditions from the current two years to one year.

At the same time, grid connection costs will increase significantly. New fees are to be introduced, such as a fee for processing an application for issuing connection conditions in the amount of PLN 1 per kilowatt of connection capacity (maximum PLN 100,000) and security for performance of obligations arising from connection conditions in the amount of PLN 30/kW (up to 100 MW of connection capacity) and PLN 60/kW (above 100 MW of connection capacity). The upper security limit is to be PLN 12 million. Additionally, the amount of the advance payment for the connection fee will double—to PLN 60/kW of connection capacity.

Investment Milestones by Operation of Law

Another way to combat ghost projects that reserve connection capacities in the grid is the introduction of a milestone mechanism. It assumes automatic expiration of the contract if the investor does not notify the operator within a specified time about work progress. According to the draft, contracts will expire if the investor does not present a final building permit decision for the installation or for at least 80% of the installed capacity.

True Cable Pooling and Multiple Metering Points per Consumer

The project introduces expected changes in the area of connection sharing (so-called cable pooling). After the amendment, it will be possible to connect not only RES installations (as previously), but also energy storage facilities and even conventional installations. Importantly, if the connection of a new installation does not increase connection capacity, an advance payment will not be necessary. The amendment also establishes that grid codes are to apply only to new installations or those undergoing modernization.

Additionally, the project enables having multiple energy metering points (PPE) within an existing connection, provided that the total power drawn at these metering points does not exceed the connection capacity specified in the connection agreement.

Power Guard

In the case of connecting installations under cable pooling or flexible or configurable agreements, when the total installed capacity exceeds the connection capacity, the agreement must include conditions safeguarding against exceeding this capacity. Connection agreements for installations equipped with a so-called power guard are to be adjusted to the amendment’s requirements within six months from the date of its entry into force.

Sales Agreement Summaries

End consumers are to receive from sellers—no later than on the day of concluding the sales agreement—clear and understandable information about costs, benefits, and risks associated with a given type of agreement. The scope of this information is to include, among other things, data on price, available means of communication, payment methods, as well as information about the possibility of using an offer comparison tool.

Hedging Strategies

The project once again imposes on sellers the obligation to prepare hedging strategies. This document is to be developed every three years. This strategy aims to reduce the risk of unprofitability of agreements with consumers caused by changes in the wholesale market, ensure liquidity in the day-ahead and intraday markets, and ensure supply continuity.

Achieving these goals is to be possible, among other things, through concluding PPA agreements, contracts on the forward market, and transactions on the day-ahead and intraday markets.

Sellers will be obliged to submit the strategy to the President of URE by December 15. The first document is to be prepared within nine months from the date the amendment enters into force.

Colored Areas Deleted

The latest version of the draft law has removed provisions concerning the designation of colored priority areas for RES. Instead, one area has been introduced with no possibility of connecting new installations. Applications for determining connection conditions submitted within it are left without consideration. However, we can expect that the idea of colored areas will be implemented in future laws.

Dispute Resolution and Larger URE Budget

The amendment organizes the rules for resolving disputes regarding refusal to conclude a connection agreement. It introduces a clear, six-month deadline for submitting an application for dispute resolution by the President of URE.

Finally, the project also includes a requirement that at least 65% of concession fees be allocated to the implementation of the President of URE’s tasks. This represents a significant addition to the budget available to URE.

New Penalties

The project introduces an expanded catalog of penalties for sellers and operators. The President of URE will gain new control powers and the ability to impose penalties. Areas that will be affected by new penalties include, among others, violation of REMIT provisions, violation of operator obligations regarding maintaining storage registers, and charging by the seller a fee for terminating a fixed-term agreement with a fixed-price guarantee.

Summary

Project UC84 has undergone a series of changes already at the stage of work in the Government Legislation Center. In the coming months, further discussion on its final shape can be expected, despite the fact that the legislator is already delayed in transposing some of the provisions that the project is to implement. It’s worth following further legislative work related to this project, as it will likely become a reference point for subsequent energy market reforms.

Transitional provisions also remain crucial, as they regulate in detail the situation of currently submitted applications for issuing connection conditions. For matters requiring detailed analysis, contact is possible at: jan.tyczynski@mgs-law.eu.