Thursday, November 29, 2012

Energy Law in 2012

Year 2012 brought significant changes in legal norms in Slovakia. On 1 September 2012 new Energy Act became into force with main focus on implementation of the Third Energy Package by EU, aiming to achieve internal energy market in Europe with specific focus on strengthening customer rights as well supporting market competition.

Customer rights

According to the new Energy Act final customers shall have the right to switch their energy supplier within three weeks without any further costs. Contracts can be cancelled up to 14 days after signing it and in case of price change or general business terms change, consumers have the right to withdraw from a contract at least 15 days prior to the change validity.

Customers will have the right to settle accounts with their previous supplier within four weeks after changing and also the right to comprehensible data on their energy consumption and the prices of electricity and natural gas.

New definition of vulnerable customers was introduced (i.e. a person whose life depends on supply of electricity and natural gas or is seriously disabled and uses energy for heating purposes) with offer of special social tariffs.

The new Energy Act also specifies the required contents of electricity and gas supply agreements to give customers the best information about what they are actually paying for. Also the concept of universal service is introduced as required by the Third Energy Package. Under this service, electricity and/or gas customers in households and in small companies have the right to be supplied with electricity or gas of a specified quality within their territory at reasonable, easily and clearly comparable, transparent and non-discriminatory prices. Also the right to be supplied by a supplier of last resort, already reflected in the Slovak energy law before, is included.


The new Energy Act states the obligation to unbundle energy generation and supply from transmission services in the electricity and gas sectors. Electricity transmission in Slovakia is provided by the transmission system operator SEPS (Slovenská elektrizačná prenosová sústava, a.s.) which is fully state-owned and already legally unbundled from electricity production and distribution. The new Energy Act also provides for full ownership unbundling of SEPS.

Another requirement is to unbundle distribution services in a vertically integrated company meaning independence of legal entity, form, organization and decision making process not related to energy distribution.

In the case of the gas sector, in which the gas transmission system operator (TSO) Eustream, a.s. is a 100%-subsidiary of SPP (Slovenský plynárenský priemysel, a.s.), a dominant vertically integrated player in the gas sector, the ownership structure is not yet in line with the requirements of the Third Energy Package. The new Energy Act determined that the gas TSO may either be (i) fully ownership unbundled; (ii) organized as an Independent System Operator (ISO); or (iii) organized as an Independent Transmission Network Operator (ITO). While the full ownership unbundling mode is considered the default model for the gas sector, the government also had the option of changing the regime to ISO or ITO until 1 December 2012.

The government was finally advised by the Ministry of Economy to implement the ITO regime. The proposal was supported by analysis of individual options, legal background and experience from the Slovak gas market. In case it does not meet the targets set by the european directive, there is still the option to pursue ownership unbundling.

Other areas included in the new Energy Act
  • Execution of state administration in the energy sector via the ministry of economy, the regulatory office and the state energy inspection
  • The new law builds the basis for introducing and promotion of smart metering in specific categories of consumers
  • The scope of business activities subject to licensing has been changed
  • New rules on the cross-border provision of services were introduced
  • New provisions on the promotion of renewables were proposed

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