A. WHOLESALE ELECTRICITY TRADING

1. Background Information

The principle act regulating wholesale electricity trading in Poland is the Energy Act 1997 (Ustawa Prawo energetyczne). The Energy Act 1997 sets out the rules and conditions applicable to electricity trading, as well as production, supply, transmission and distribution. In terms of licensing there are no distinctions between wholesale trading and supply to end consumers, which means that a retailer supplier can also engage in wholesale trading, and a wholesale trader can also opt to supply electricity to end consumers.

The Economic Activity Freedom Act 2004 (Ustawa o swobodzie działalności gospodarczej) contains provisions on setting up, closing and doing business, and sets out the framework for licensing in certain sectors of the economy, including wholesale electricity trading.

2. Licensing requirements

2.1. General aspects

Under the Economic Activity Freedom Act 2004 all Electricity Traders trading in electricity in Poland or cross-border must hold a valid licence. The licence is issued by the Polish NRA (Prezes Urzędu Regulacji Energetyki) for 10 to 50 years.

2.2. Conditions for licensing

  • corporate seat (or place of residence) in the EU or the EEA, without any requirements to set up a company or a branch in Poland;
  • access to funding guaranteeing proper performance of the licensed activities;
  • technical capacity and qualified personnel;
  • a land use planning decision (if required).

2.3. Fees and additional expenditure

  • stamp duty (currently set at PLN 616).1
  • annual fee of 0.06% of revenues generated from the licensed activities, with a floor of PLN 2002 and a cap of PLN 1,000,000.3
  • a guarantee securing potential claims arising as a result of improper conduct of the licensed activity, including damages caused to the environment. Such a guarantee is not mandatory in all cases.

2.4. Timetable for obtaining the licence

The statutory term for granting a licence is 30 to 60 days. This term may be longer in some cases, eg when the authority requires additional information or in case a guarantee for third-party claims as mentioned above will have to be put in place.

3. Trading requirements

Electricity can be traded either OTC based on bilateral contracts or on the power exchange. A balancing market is also available and for some Electricity Traders participation is mandatory.

The Polish electricity wholesale market is now liberalised and pricing is based on negotiation, without any regulated tariffs.

3.1. OTC trading

Wholesale electricity trading is predominantly done via bilateral negotiated contracts. Apart from the licensing requirements described in section I. 2 above, there are no specific requirements for electricity trading through bilateral negotiated contracts.

3.2. Power exchange trading

Currently there are two power exchanges active on the Polish market: Polish Power Exchange S.A. (Towarowa Giełda Energii S.A. – PPE) and POEE Warsaw Stock Exchange Energy Market (poee Rynek Energii Giełdy Papierów Wartościowych - WSE EM).

To become a member of the PPE and trade on this exchange, an Electricity Trader needs to:

  • hold a valid permit from the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego – PFSA) for keeping exchange tradable commodities registers or accounts or to be licensed as a broker;
  • employ a commodity exchange broker (individual), authorised and enrolled on the brokers list kept by the PFSA; and
  • be a member of the Warsaw Commodity Clearing House.

To become a member on WSE EM, an Electricity Trader needs to:

  • hold a valid permit issued by PFSA for keeping accounts or registers of exchange tradable commodities; or
  • enter into a clearing agreement with a commodity brokerage house that is a member of the National Depository for Securities; and
  • employ at least one commodity exchange broker or securities broker (individual).

Alternatively, an Electricity Trader can also opt out of participating on any of the power exchanges and to trade via a commodity brokerage house.

15% of annual domestic electricity output must be sold on the power exchange and 100% of the electricity volumes released from the historic long-term power purchase agreements must be sold on the power exchange or by public auctions.

The PPE and WSE EM platforms are direct competitors, with PPE being the older and more established player on the market. It is generally forecasted that the competition between these two power exchanges is bound to increase for the benefit of the market participants.

3.3. Balancing market

The balancing market in Poland is run by the Polish TSO. Not all Electricity Traders have the obligation to participate on the balancing market. Moreover, there is no obligation to register as participant on the balancing market when trading electricity on either of the power exchanges currently active in Poland (please refer to section I. 3.2 above).

When participation is mandatory, an Electricity Trader has two options: (i) to become a balancing party, or (ii) to conclude an agreement with an established balancing party to act on the Electricity Trader's behalf taking over the balancing obligations.

4. Cross-border trading

To participate in cross-border trading using the Polish transmission network, an Electricity Trader needs to:

  • have a valid and effective agreement for transmission services defining, in particular, cross-border exchange participation conditions with the Polish TSO;
  • secure the right to use a transmission capacity allocated in an auction organised by the Polish TSO. The capacity allocated at the auction can be transferred/acquired; and
  • hold an EIC Code (an identification code for market participants active in cross-border electricity trading, which can be obtained at one of the EIC Code Offices).

5. Grid access

Access to the Polish electricity network infrastructure is based on the principle of third-party access. This means that companies transmitting and distributing electricity are obliged to grant access to its grid to all Electricity Traders on equal terms.

B. WHOLESALE GAS TRADING

1. Background information

Like for electricity, the principal act regulating wholesale gas trading in Poland is the Energy Act 1997. The Energy Act 1997 sets out the rules and conditions applicable to gas trading, as well as to production, storage, liquefaction and regasification, transmission and distribution. As with electricity, in terms of licensing there are no distinctions between wholesale trading and supply to end consumers, which means that a retailer supplier can also engage in wholesale trading, and a wholesale trader can opt to supply electricity to end consumers.

The Economic Activity Freedom Act 2004 contains provisions on setting up, closing and doing business in general, and sets out the framework for the licensing of certain sectors of the economy, including wholesale gas trading.

2. Licensing requirements

2.1. General aspects

Under the Economic Activity Freedom Act 2004 all Gas Traders trading electricity in Poland or cross-border must hold a valid licence.

There are three exemptions to this rule:

  • trading fuel gases, where the annual turnover of the Gas Trader does not exceed EUR 100,000;
  • trading liquid gases, where the annual turnover of the Electricity Trader does not exceed EUR 10,000;
  • trading fuel gases on a commodity exchange or other organised market.

The licence is issued by the Polish NRA for 10 to 50 years.

2.2. Conditions for licensing

  • corporate seat (or place of residence) in the EU or the EEA, without any requirements to set up a company or a branch in Poland;
  • access to funding guaranteeing proper performance of the licensed activities;
  • technical capacity and qualified personnel;
  • a land use planning decision (if required).

Additional conditions are set in place for cross-border trading:

  • in the interest of diversification of supply and security of supply between 2010 and 2014, the maximum share of gas imported from one country of origin cannot exceed 70% of the entire volumes of gas imported in any one year from various sources. This restriction does not apply to gas extracted in EU member states.
  • in the interest of security of supply as well, the applicant must either own storage capacities or enter into a preliminary service agreement for storing mandatory reserves of natural gas in Poland, in another EU member state or in the EEA area (for a discussion on mandatory reserves, please also refer to section II. 5 below). Failure to keep mandatory reserves of natural gas or failure to make them available can trigger the termination of the trading licence.
  • the applicant has a duty to disclose the forecasted volumes of imported natural gas and how that applicant understands to observe the obligation of keeping mandatory reserves.

2.3. Fees and additional expenditure

  • Stamp duty of PLN 616. If the licence also covers cross-border trading, the stamp duty will rise by an additional PLN 4,244.4
  • Annual fee of 0.06% of revenues generated from the licensed activities, with a floor of PLN 2005 and a cap of PLN 1,000,000.6
  • A guarantee securing potential claims arising as a result of improper conduct of the licensed activity, including damages caused to the environment. Such a guarantee is not mandatory in all cases.

2.4. Timetable for obtaining a licence

The statutory term for granting a licence is 30 to 60 days. This term may be longer in some cases, eg when the authority requires at its own discretion additional information or in case a security will have to be deposited.

3. Trading requirements

3.1. Market structure

The Polish gas market is monopolised to a significant degree. Most of the activities on the market are carried out by the state-owned company, Polskie Górnictwo Naftowe i Gazownictwo S.A. (PGNiG). PGNiG has a dominant position both in the upstream and downstream sector and is practically the only gas importer in Poland, reserving almost 100% of transmission capacity in all entry points at the Polish interconnectors.

In 2004, the state-owned company Gaz-System Sp. z o.o. was created and licenses as TSO. In 2007, six distribution companies were created, which belong to the PGNiG group.

The Polish NRA is conducting public consultations on the further liberalisation of the gas market. Based on the experiences of other member states, the programme would be based on the bulk sale of PGNiG's gas, transfer and storage capacities through a public auction. The goal of the planned liberalisation is to free-up capacities and create liquidity on the commodity exchange up to 70% of the gas available on the Polish market. The liberalisation is aimed at restructuring the market, but holding onto the long-term import obligations of PGNiG, which will probably not incentivise private players to enter the market, since the cross-border capacities will still be blocked by the long-term capacity reservations at the interconnectors.

3.2. OTC trading

Gas is traded solely by bilateral negotiated contracts. In addition to sale-purchase agreements, the so-called comprehensive agreements have a sale-purchase component, and cover connection to the grid and/or storage services.

The Polish commodities exchange market is virtually not used, and there are no gas hubs.

3.3. The balancing market

A commercial balancing market for gas trading has not been introduced yet. There are no regulations regarding the balancing obligations, other than technical requirements for keeping the system balanced.

Hence, there is no obligation to participate in the balancing market and pay the balancing penalties. Of course, it does not exclude the obligation to include the provisions of gas balancing in gas transmission agreements, which means only technical balancing.

Depending on certain conditions, the balancing benchmarks are 5% (daily balancing limit) or 15% (borderline daily balancing) of the volumes injected into the grid in a day.

4. Cross-border trading

In principle, the Polish TSO ensures access to the interconnectors within its transmission capacity, under the conditions agreed with the TSOs of the neighbouring countries, on a transparent and non-discriminatory basis.

As mentioned in section II.2.2 above, Gas Traders engaged in cross-border trading have a statutory obligation to maintain mandatory reserves either in Poland or on the territory of a member state or an EEA country. An exemption is available (and can be granted by the Minister of Economy) for those Gas Traders supplying gas to end-consumers provided some conditions are met.

5. Grid access

Like for electricity, access to the Polish gas grid is based on the principle of third-party access.

In exceptional cases, however, the Energy Act 1997 allows for the third-party access rule to be excluded.

Footnotes

1 Approx. Euro 150

2 Approx. Euro 48

3 Approx. Euro 241, 972

4 Approx. Euro 1,027

5 Ap prox. Euro 48

6 Approx. Euro 241, 972

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.