Energy efficiency – new obligations for businesses (not only energy companies) and less than three months for obligatory energy audit | Energy and Natural Resources Alert

On 1st October 2016, a new Act on Energy Efficiency (hereinafter “Energy Efficiency Act” or “new act”) entered into force, which repealed the old Act on Energy Efficiency (hereinafter the “old act”). The new act implements Directive 2012/27/EU of the European Parliament and of the Council on energy efficiency, amendments to Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC.

The Energy Efficiency Act considerably modifies the rules for the performance of pro-efficiency obligations and imposes the obligation to carry out an energy efficiency audit on all large entrepreneurs (not only from the energy industry). This article analyses the major obligations which, if not fulfilled, may result in painful penalties imposed by the President of the Energy Regulatory Office (hereinafter “President of ERO”).

It should be noted that the scope of entities covered by the new regulation is fairly broad. The first group includes the stakeholders of the white certificates system, i.e. the so-called obliged entities. Another group is constituted by the entities obliged to carry out a business energy audit, i.e. the so-called large entrepreneurs, irrespectively of the type of their business activity.

Obligation to carry out business energy audit

Business energy audit is a procedure aimed at conducting detailed and confirmed calculations concerning the proposed measures aimed at the improvement of energy efficiency and providing information on potential energy savings.

The obligation to carry out an energy audit has been extended onto all entrepreneurs within the meaning of the Act on Freedom of Economic Activity (hereinafter “Act on Freedom of Economic Activity”), except for micro, small and medium-sized entrepreneurs within the meaning of Articles 104-106 of the Act on Freedom of Economic Activity. The above, according to the Information of the President of Energy Regulatory Office No. 46/2016 means that the obligation applies to each entrepreneur that, in the last two financial years:

  1. employed, on average, at least 250 employees during the year, or
  2. achieved annual net revenue from sale of goods, products, services and financial operations exceeding the PLN equivalent of 50 million Euro, and its total assets reported in the balance sheet at the end of either of the financial years exceeded the PLN equivalent of 43 million Euro, provided that the occurrence of one of the above circumstances is sufficient.

In simplified terms, the obligation to carry out the audit applies to each entrepreneur that, in the last two financial years:

  1. employed, on average, at least 250 employees during the year, irrespectively of the financial performance,
  2. achieved annual net revenues in excess of 50 million Euro and, in the balance sheet compiled at the end of either of the last two years, reported total assets exceeding the PLN equivalent of 43 million Euro, irrespectively of the number of employees.

It is worth noting that the calculation of the average annual employment levels is done on a full-time equivalent basis and does not take into account employees:

  1. on maternity, paternity, parental, child care leave, or on leave on the terms of maternity leave,
  2. engaged for professional training purposes.

In case of an entrepreneur that operates for less than one year, the expected net revenue from sale of goods, products, services and financial operations as well as the average employment level are estimated based on data for the last period documented by the entrepreneur.

The new act does not address the question of the fulfilment of the obligation within a capital group. This means a risk that all the group subsidiaries to which one of the above circumstances applies will have to carry out an audit. Naturally, in such case it is recommended that the scope of the obligation fulfilment is agreed with the representatives of the Energy Regulatory Office.

It should also be noted that the audit obligation does not apply to an entrepreneur which has implemented:

  1. an energy management system defined in the Polish Standard applicable to energy management systems, requirements and recommendations for use, or
  2. an environmental management system, provided that an energy audit is carried out within these systems.

The business energy audit should be carried out by:

  1. a party independent of the audited entrepreneur, which has knowledge and professional experience in conducting such audits,
  2. an expert of the audited entrepreneur, provided that such expert is not directly involved in the entrepreneur’s activities being subject to the audit.

The first audit should be conducted within 12 months of the entry of the act into force, i.e. by 30 September 2017, and be followed by the notification of the President of ERO about the completed audit within 30 days of the date of its completion. Next audits are carried out every 4 years.

The time needed to conduct the audit depends on the expectations of the entrepreneur and the maintained records concerning, inter alia, energy consumption, and may take even several months. On the other hand, a failure to conduct the audit may lead to a financial penalty being imposed by the President of ERO in the amount of up to 5% of the entrepreneur’s revenue generated in the previous fiscal year. For this reason large entrepreneurs who have not yet set out to implement this obligation should not postpone it any longer.

White certificates system

According to Article 14 of the new act, each year obliged entities have the obligation to achieve final energy savings in the amount of 1.5% of, as applicable, depending on the obliged entity, the volume of sold or purchased electricity, heat, gas, or the volumes of gas imported on the basis of intra-community acquisition or imports, taking into account the applicable deductions provided for under the act.

The group of obliged entities includes:

  1. energy companies engaged in business activity concerning the generation of or trade in electricity, heat or gas, and the sale of such electricity, heat or gas to final consumers,
  2. final consumers that are exchange members or regulated market members with respect to transactions made in their own name,
  3. final consumers that are members of the exchange clearing house with respect to transactions made outside of a commodity exchange or regulated market in their own name,
  4. final consumers importing gas on the basis of intra-community acquisition or imports, with respect to gas volumes consumed for their own use,
  5. commodity brokerage houses or brokerage houses with respect to transactions made on a commodity exchange or regulated market, upon orders from final consumer.

According to the new act the obligation to achieve energy savings may be fulfilled through:

  1. implementation of a project or projects aimed at energy efficiency improvement on the part of the final consumer,
  2. acquisition of energy efficiency certificates and their presentation to the President of ERO for redemption,
  3. payment of a substitution fee according to the scope and proportion consistent with the act.

The new act defines an energy efficiency improvement project as “(…) an action aimed at introducing changes or improvements in a facility, technical equipment or installation resulting in energy savings ” The detailed list of such projects was indicated in the Announcement of the Minister of Energy concerning the detailed list of projects aimed at energy efficiency improvement.

The fulfilment of the obligation may also take place through the acquisition of energy efficiency certificates and their presentation to the President of ERO for redemption, which confirms the amount of final energy to be saved as a result of a project or multiple projects of the same kind aimed at the improvement of energy efficiency.

Meanwhile, according to the provisions of Article 11 of the new act, so-called white obligation may also be fulfilled through the payment of a substitution fee with respect to:

  1. 30 % of the obligation for the year 2016,
  2. 20 % of the obligation for the year 2017,
  3. 10 % of the obligation for the year 2018.

For the years 2016, 2017 and 2018, the paid substitution fee may exceed the above thresholds, provided that the obliged entity demonstrates that in the calendar year concerned by the obligation, the obliged entity placed – in session transactions – orders to buy property rights arising from energy efficiency certificates but, due to:

  • an insufficient number of offers for such rights, or
  • when the offered price for such rights was higher than the substitution fee per unit,
  • the obliged entity did not acquire the rights during six sessions in the calendar year concerned by the obligation.

It is worth noting that a failure to fulfil the above-described obligation may result in a penalty imposed by the President of ERO in the amount of up to 10% of the revenue of the obliged entity generated in the preceding fiscal year. Therefore obliged entities should take due care in meeting all the formal requirements related to the fulfilment of this obligation.

Possibility of obtaining white certificates for completed projects

Another important question is the possibility of obtaining energy efficiency certificates for the implementation of projects aimed at energy efficiency improvement, completed prior to 1st October 2016, but in any case not sooner than before 1st January 2014, for which no energy efficiency certificates have been issued to date (Article 57 sec. 2 of the new act).

Such certificates are issued by the President of ERO at the request of the entity for which such project was completed, or another authorised entity (holding the appropriate power of attorney). The application for the issuance of the certificate should be submitted within 12 months of the entry of the act into force, i.e. from 1st October 2016. An energy efficiency audit report should be appended to the application.

The certificates issued under the above procedure must be redeemed by 30th June of the year following the year concerned by the obligation, which means that a certificate issued in 2017 may be accounted for the performance of the obligation only for the year 2017 and should be redeemed by 30th June 2018.

Consequently, entities which completed the respective projects in the indicated time period and have not obtained any energy efficiency certificates in this regard, have the right to apply to the President of ERO for the issuance of such certificates on the basis of the new act.

Authors:

Dominik Strzałkowski, Partner, Attorney at law

Milena Kazanowska-Kędzierska, Assocciate

Paweł Michałek, Junior Associate

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