Czech Republic: Date of commissioning – the Supreme Administrative Court does not maintain the stance of the State Energy Inspection

In a nutshell:

In the opinion of the Supreme Administrative Court, crucial for determining the date of commissioning of a RE power plant is the date on which the power plant is first connected to the electricity grid in parallel mode. Contrary to the opinion of the State Energy Inspection, the installation of an electricity meter is not absolutely crucial for the determination of the date of commissioning.

In a nutshell:

In the opinion of the Supreme Administrative Court, crucial for determining the date of commissioning of a RE power plant is the date on which the power plant is first connected to the electricity grid in parallel mode. Contrary to the opinion of the State Energy Inspection, the installation of an electricity meter is not absolutely crucial for the determination of the date of commissioning.

Already in our February 2017 newsletter, we addressed the issue of determining the date of commissioning of a RE power plant since this date is important for determining the level of funding in the Czech Republic.

The subject of the dispute was the interpretation of item (1.9) of the price decision no. 4/2009 of the Czech Energy Regulatory Office for power plants commissioned in 2010. According to the said decision, ”in respect of newly installed power plants, commissioning shall be understood to be the date on which the operator started, under an awarded licence, to generate and supply electricity to the electricity grid while enjoying support in the form of feed-in tariffs, or first started to generate electricity while enjoying support in the form of green bonuses.”

In its judgement of 30 November 2016, the city court in Prague concurred with the stance of the State Energy Inspection according to which also the installation of the electricity meter is decisive for determining the date of commissioning, since only from this date on can electricity be metered and thus the operator may claim support. Any supply of electricity before that date would constitute an unlawful feed-in, which could not be any basis for recognising a power plant as commissioned.

An appeal was filed against this judgement and was ruled on by the Supreme Administrative Court on 8 March 2018 (file no. 4 As 257/2017 - 82). In its judgement, the Supreme Administrative Court rejected the interpretation of the State Energy Inspection.

In practice, the said interpretation would extend the scope of prerequisites for determining the date of commissioning to include an additional requirement where electricity would not only have to be fed in, but also metered and, therefore, an electricity meter should be installed.

In this context, the Supreme Administrative Court also examined the line of argument as to whether the supply of electricity, without metering its amount, should be regarded as an unlawful feed-in. In this regard, the Supreme Administrative Court took a stance represented in the literature that even the first connection to the electricity grid in parallel mode as part of power plant testing could constitute a legal, non-metered feed-in to the electricity grid.

Later on, the opinion of the Energy Regulatory Authority of 27 October 2010 on item 1.9 – contrary to the decision of the first instance – was given the status of an authentic interpretation of the price decision, even though this decision is not a legally binding opinion. Even without an explicit basis of authorisation, the Energy Regulatory Authority – as a body responsible for determining the level of funding by means of a price decision – is entitled to interpret it, which in the opinion of the Supreme Administrative Court also includes the right to verify the requirements to be met. The opinion of the Energy Regulatory Authority thus confirms the purpose of and the rationale behind the decision.

In its opinion, the ERA holds that the prerequisite of supplying and feeding electricity to the grid is already fulfilled when the power plant is first connected to the grid in parallel mode.

Thus, if all other prerequisites are met, in particular if the operator holds a legally valid license for power generation, the date of commissioning may be the date of the power plant‘s first connection to the electricity grid in parallel mode. Contrary to the opinion represented by the State Energy Inspection, the installation of the electricity meter is therefore not absolutely crucial for determining the date of commissioning.

Finally, important is that this judgement sets a precedent only for cases covered by the above-mentioned old version of the definition of the date of commissioning. This applies in particular to power plants commissioned at the turn of the year 2010/2011. The year 2010 saw the strongest increase in photovoltaics. Furthermore, a new amendment to the Act on the Promotion of the Use of Renewable Energy Sources came into force in that year, which considerably reduced or completely abolished incentives for renewable energy in 2011.  Therefore, it was of fundamental importance for power plant operators to commission their power plants still in 2010. This often took place even before electricity meters could be installed by grid operators.

Already in our February 2017 newsletter, we addressed the issue of determining the date of commissioning of a RE power plant since this date is important for determining the level of funding in the Czech Republic.

The subject of the dispute was the interpretation of item (1.9) of the price decision no. 4/2009 of the Czech Energy Regulatory Office for power plants commissioned in 2010. According to the said decision, ”in respect of newly installed power plants, commissioning shall be understood to be the date on which the operator started, under an awarded licence, to generate and supply electricity to the electricity grid while enjoying support in the form of feed-in tariffs, or first started to generate electricity while enjoying support in the form of green bonuses.”

In its judgement of 30 November 2016, the city court in Prague concurred with the stance of the State Energy Inspection according to which also the installation of the electricity meter is decisive for determining the date of commissioning, since only from this date on can electricity be metered and thus the operator may claim support. Any supply of electricity before that date would constitute an unlawful feed-in, which could not be any basis for recognising a power plant as commissioned.

An appeal was filed against this judgement and was ruled on by the Supreme Administrative Court on 8 March 2018 (file no. 4 As 257/2017 - 82). In its judgement, the Supreme Administrative Court rejected the interpretation of the State Energy Inspection.

In practice, the said interpretation would extend the scope of prerequisites for determining the date of commissioning to include an additional requirement where electricity would not only have to be fed in, but also metered and, therefore, an electricity meter should be installed.

In this context, the Supreme Administrative Court also examined the line of argument as to whether the supply of electricity, without metering its amount, should be regarded as an unlawful feed-in. In this regard, the Supreme Administrative Court took a stance represented in the literature that even the first connection to the electricity grid in parallel mode as part of power plant testing could constitute a legal, non-metered feed-in to the electricity grid.

Later on, the opinion of the Energy Regulatory Authority of 27 October 2010 on item 1.9 – contrary to the decision of the first instance – was given the status of an authentic interpretation of the price decision, even though this decision is not a legally binding opinion. Even without an explicit basis of authorisation, the Energy Regulatory Authority – as a body responsible for determining the level of funding by means of a price decision – is entitled to interpret it, which in the opinion of the Supreme Administrative Court also includes the right to verify the requirements to be met. The opinion of the Energy Regulatory Authority thus confirms the purpose of and the rationale behind the decision.

In its opinion, the ERA holds that the prerequisite of supplying and feeding electricity to the grid is already fulfilled when the power plant is first connected to the grid in parallel mode.

Thus, if all other prerequisites are met, in particular if the operator holds a legally valid license for power generation, the date of commissioning may be the date of the power plant‘s first connection to the electricity grid in parallel mode. Contrary to the opinion represented by the State Energy Inspection, the installation of the electricity meter is therefore not absolutely crucial for determining the date of commissioning.

Finally, important is that this judgement sets a precedent only for cases covered by the above-mentioned old version of the definition of the date of commissioning. This applies in particular to power plants commissioned at the turn of the year 2010/2011. The year 2010 saw the strongest increase in photovoltaics. Furthermore, a new amendment to the Act on the Promotion of the Use of Renewable Energy Sources came into force in that year, which considerably reduced or completely abolished incentives for renewable energy in 2011.  Therefore, it was of fundamental importance for power plant operators to commission their power plants still in 2010. This often took place even before electricity meters could be installed by grid operators.