Dispute over the level of funding to be set for existing power plants in the Czech Republic initially settled – the 2017 rates decision published.

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​In a nutshell:

After the 2016 price decision was published only at the last minute and amid an open conflict between the Czech government and the Czech Energy Regulatory Office, and after the Energy Regulatory Office initially refused to publish the price decision for renewable energy plants commissioned between 2006 and 2012 also this year, the dispute between the Czech Energy Regulatory Office and the Czech government was initially settled as the Czech aid scheme for the power plants commissioned in the aforesaid period was approved under the European Commission's notification procedure. On 14 December 2016, the Czech Energy Regulatory Office advertised the price decision where also e.g. feed-in tariffs and the green bonus to be paid to all eligible power plants in 2017 were determined.

​Even if this was a legally disputable condition, the Czech Energy Regulatory Office demanded that the aid scheme should be approved by the EU Commission before the tendering procedure for incentives could be launched. As the scheme has been already approved, it can be assumed that the level of funding for the following years, which the Office is required to advertise every year at the end of September, will be now announced in time.

 

EU Commission demands a control mechanism

 The introduction of a control mechanism demanded by the EU Commission could influence the level of funding because such control mechanism would have to ensure that the level of funding for power plants is not excessive and that state aid is limited to the level necessary for achieving the state aid targets. At least, this is what follows from the European Commission's press release on approving the support schemes. The Czech Ministry of Industry and Trade announced that an audit of whether the level of funding for power plants is excessive will be conducted 10 years after a power plant's commissioning. As for power plants commissioned between 2006 and 2008 the audit should be completed by the end of February 2019.

 

It is now impossible to foresee what implications the outcome of the audit will have on the level of funding. It is rumoured that especially photovoltaic power plants enjoy excessive funding, but because the solar levy has been higher since 2011 it is questionable whether the problem of excessive funding will arise at all. Because the approval by the EU Commission, issued on 28 November 2016 under no. SA.40171, has not been given to public notice yet, we cannot conclusively assess what requirements exactly have been set on the Czech Republic.

 

By all means, it can be stated that no control mechanism or a mechanism for reducing the level of funding in case of excessive funding is currently enshrined in Czech state aid law as it stands. Should the Czech authorities come to conclude that the power plants enjoy an excessive level of funding, first the Act No. 165/2012 Coll. on supported energy sources would have to be amended.  We will keep you posted on any further developments.

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Olaf Naatz, LL.M.

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