Emergency power supply
Never before has the possibility of emergency power supply, which provides measures at the EU and national level to protect consumers, been discussed more than in the last few months, since the situation on the energy markets has tightened considerably.
We have been witnessing the rise of electricity prices for a long time, and that rise has been passed on from wholesale to retail markets. The reasons for the high prices are multifaceted, but the main ones include record high natural gas prices, the rapid rise in emission allowance prices, a decline in production from renewable resources and a simultaneous increase in electricity demand.1
Rising electricity prices have a significant impact on the contractual relationships for the supply of electricity to end-customers. Many suppliers in Europe and also in Slovenia have been pushed into insolvency or have been forced to deliberately abandon their electricity sales activities and, as a consequence, to terminate their contracts for the supply of electricity to their customers. The latter were thus in a position where they had to look for another supplier. In cases where customers are unable to find a new supplier in time and are at risk of being disconnected from the grid, certain measures are in place at the EU and national level to protect them. One of these measures is emergency supply.
2. Transposition and enforcement of EU regulations
Emergency power supply is a concept of consumer protection and the concretisation of the basic electricity supply (i.e. universal service), which has been transposed into the Slovenian legal order on the basis of EU regulations.
Under EU law, distribution system operators are responsible for connecting their customers to the electricity grid and ensuring the right to be supplied with electricity of a specified quality at competitive, easily and clearly comparable, transparent and non-discriminatory prices.2 Basic supply, which must be carried out in a transparent and non-discriminatory manner, does not prevent the free choice of supplier.3
All household customers and, where Member States consider it appropriate, small businesses, must be guaranteed basic supply or access to universal service. Member States may also appoint an emergency supplier to ensure basic supply.4
3. Emergency supply in Slovenian legal order
3.1. Legal basis
In the Slovenian legal order, the concept of emergency power supply is regulated by Article 32 of the Electricity Supply Act (Official Gazette of the Republic of Slovenia, No. 172/2021, hereinafter the “ZOEE“), which replaced Article 44 of the Energy Act (Official Gazette of the Republic of Slovenia, No. 60/19, as amended, hereinafter the “EZ-1“). The conditions of emergency supply are further specified in implementing regulations, including the System Operating Instructions for the Electricity Distribution System (Official Gazette of the Republic of Slovenia, No. 7/21, “SONDSEE”).
3.2. Who provides emergency supply?
Emergency supply must be provided by the distribution system operator. This is the entity primarily responsible for operating, maintaining, developing and ensuring the long-term capacity of the distribution system to meet reasonable electricity distribution needs.5 In the territory of the Republic of Slovenia, this is the company SODO sistemski operater distribucijskega omrežja z električno energijo, d.o.o. (“SODO”).
As the concept of distributor is often confused with the concept of supplier, it should be noted that distribution does not normally involve supply (sales to customers) and that these are two separate activities. While the former is a regulated activity (public service obligation), the latter is a market activity. Emergency supply is therefore an exception, where the distribution system operator temporarily takes on the role of supplier in order to protect final customers (emergency supply is considered the switching of supplier, where the distribution system operator acts as supplier6).
3.3. Who is emergency supply for?
Emergency power supply must be provided to end-customers7 who are connected to the distribution operator’s system. The emergency supply system therefore covers both household and business customers, regardless of their size. The law, however, gives additional protection to household and small business customers. While business customers who do not meet the criterion of a small business customer8 are only entitled to automatic emergency supply under specified conditions, household and small business customers are also entitled to emergency supply at their own request.
Those business customers for whom the conditions for emergency supply are not met and who are not entitled to request emergency supply (because they do not qualify as small business customers) must find a new supplier themselves if the supply with the existing supplier is interrupted. The law does not seem to address the situation where such a business customer would not be able to switch the supplier in time, despite a sufficient degree of diligence (for example, if all suppliers temporarily refused to accept new customers for one reason or another).
3.4. When must the distribution system operator provide emergency supply?
End-customers are entitled to automatic emergency supply in the event of certain exceptional events on the electricity market,9 namely:
i) when the end-customers’ electricity supply contract is terminated due to measures resulting from the insolvency or illiquidity of the supplier;
ii) if the supplier loses its status as a member of the balance scheme, in accordance with the rules governing the functioning of the electricity market.
However, notwithstanding the aforementioned conditions, the distributor must provide emergency supply to household and small business customers even if they make a request for emergency supply.
The ZOEE expands the grounds for automatic emergency supply compared to the EZ-1. Whereas Article 44 of the EZ-1 allowed the automatic emergency supply only in the event that the end-customer’s electricity supply contract was terminated due to measures resulting from the insolvency and illiquidity of the supplier, under the ZOEE it is also possible if the supplier loses its status as a member of the balance scheme for some other reason.
The Energy Agency states that where the termination of an electricity supply contract is the result of business decisions and realised risks associated with inadequate electricity purchases that prevent suppliers from fulfilling their electricity supply contracts, the distribution system operator may only provide emergency supply at the request of customers.10
3.5. Electricity price for emergency supply
The price list for electricity for emergency supply must be made public. The price of electricity for emergency supply shall not exceed the market price for supply to a comparable customer by more than 25%.11
A range of 25% of the market price allows the emergency supplier to cover slightly higher costs associated with the sudden purchase of electricity for emergency supply, since it is more expensive for the supplier to purchase electricity on an ongoing and unpredictable basis.
The price of electricity for emergency supply is set by the distribution system operator in the amount covering the long-term cost of purchasing the electricity and the additional costs of providing and implementing the emergency supply. If the distribution system operator does not fix the price of electricity for emergency supply or fixes it contrary to the law, the price shall be fixed by the Energy Agency12 as the national regulatory authority of the Republic of Slovenia on the energy market.
The price of electricity for emergency supply represents the average market price of electricity based on the results of day-ahead trading via BSP Energetska Borza d.o.o.13 The price list for the emergency electricity supply shall be adjusted by the distribution system operator in accordance with the applicable regulations on a monthly basis, depending on the increase in electricity prices on the market, and shall be published on the distribution system operator’s website.14
3.6. Implementation of emergency supply
3.6.1. Conditions for the implementation of emergency supply
The implementation of the emergency supply is conditional on the timely payment of all outstanding obligations under the emergency supply. The distribution system operator shall warn the end-customer on each emergency supply invoice of the right to switch electricity supplier and of the higher electricity price than could be achieved on the electricity market.15
3.6.2. Notification by the market operator of the exclusion of a supplier
The market operator, as the provider of the public service obligation, shall notify the distribution system operator of the exclusion of a supplier from the balance scheme for all billing metering points of that supplier due to measures resulting from the insolvency or illiquidity of the supplier. The notification shall also state the reason for the exclusion of the supplier from the balance scheme. The distribution system operator publishes this notification by the market operator on its website.16
3.6.3. Change of supplier in the event of automatic emergency supply
The distribution system operator shall, as soon as it receives notification from the electricity market operator of the exclusion of a supplier from the balance scheme or on the date of termination of the balance affiliation, change the supplier for all the billing metering points of that supplier from the existing supplier to the distribution system operator, which becomes the new supplier for the emergency supply as of the date of exclusion from the balance scheme. In this case, the distribution system operator does not enter into an emergency supply contract.17
3.6.4. Switching supplier in the event of a request for emergency supply by the end-customer
If the distribution system operator receives a request for emergency supply from an end-customer, it first assesses the eligibility for on-demand emergency supply. If the conditions for on-demand emergency supply are met, the distribution system operator shall, within eight working days of receipt of the request for emergency supply, send to the end-customer an emergency supply contract together with the conditions for emergency supply.
If the distribution system operator does not receive the signed emergency supply contract from the end-customer, the distribution system operator shall consider that the end-customer has withdrawn its request for emergency supply. The distribution system operator shall start the switch of supplier to the on-demand emergency supply upon receipt of the signed emergency supply contract. In the event of refusal, the distribution system operator shall inform the end-customer within eight working days of receipt of the request for emergency supply of the refusal of the on-demand emergency supply.18
3.6.5. Obligations of distribution system operator
Within eight working days of receiving the notification from the electricity market operator, the distribution system operator shall send a notification to the end-customer about the exclusion of his supplier from the balance scheme.19
The distribution system operator’s notification shall contain at least:
- notification of the termination of the electricity supply contract with the existing supplier for the billing metering point of the end-customer and the start of the emergency supply;
- date of the start of emergency supply;
- notification of the terms and conditions and the price list of the emergency supply and a notice of the higher-than market price;
- notification of the method of obtaining meter readings, if obtained by the distribution system operator;
- notification of the estimated meter balance and the estimated meter balance on the day of the start of the emergency supply, and a time limit within which the system user may communicate the meter balance if they disagree with the estimated meter balance;
- notification that readings obtained from the distribution system operator or the end-customer, as the case may be, but not on the day of the start of the emergency supply will be dated on the day of the start of the emergency supply;
- informing the final customer of his right to switch supplier.
The distribution system operator shall also inform the other suppliers registered with the distribution system operator and the supplier selected by the distribution system operator to supply electricity to cover losses in the system of the notification published by the market operator.20
3.6.6. Duration of emergency supply
Emergency supply can be provided indefinitely if the conditions are met.
If the outstanding obligations for the provision of emergency supply are not settled in due time, a disconnection procedure shall follow at the individual collection and transmission point after prior notification to the system user. In the notification prior to disconnection, the distribution system operator shall inform the customers of the possibility and conditions of emergency supply.21 The system user shall comply with its obligations within the time limit specified in the notification, otherwise disconnection from the electricity grid shall follow.
The Energy Agency is responsible for resolving disputes between customers and the distribution system operator.22
The concept of emergency supply provides an emergency escape route for customers in the event of certain exceptional events on the electricity market. Due to the higher price and the resulting temporary nature of such supply, it does not disturb the market or compete with regular suppliers and thus does not violate the principle of separation of activities.23
Emergency supply prices are higher than market prices, as they are set by the distribution system operator at a level that allows the coverage of the higher costs associated with sudden and unpredictable purchases of electricity. Customers therefore usually do not opt for emergency supply themselves, but rather go through the process of switching supplier, thus securing their electricity more efficiently and cheaper.
In the light of the above, emergency supply is intended to temporarily bridge unforeseeable events, not to provide a permanent or long-term power supply. However, it is important that customers react in a timely and proactive manner to market emergencies in order to avoid the use of emergency supply and the damage that would be caused to them by a possible disconnection from the electricity grid if the conditions for emergency supply were not met.
1. Energy Agency: Information for customers in case of the termination of an electricity supply contract by a supplier and actions by the regulator. Available at: https://www.agen-rs.si/-/informacije-za-odjemalce-v-primeru-odpovedi-pogodbe-o-dobavi-elektricne-energije-s-strani-dobavitelja-in-ukrepi-regulatorja (13 March 2022)
2. Article 27(1) of Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 concerning common rules for the internal market in electricity and amending Directive 2012/27/EU (“Directive 2019/944”).
3. Article 27(2) of Directive (EU) 2019/944.
4. Article 27(1) of Directive (EU) 2019/944.
5. Cf. Article 4(12) of the ZOEE.
6. Article 222 of the SONDSEE.
7. These are persons who purchase electricity for their own use. Cf. Article 4(32) of the ZOEE.
8. Pursuant to the ZOEE, small enterprises are those with fewer than 50 employees and an annual turnover or annual balance sheet total not exceeding €10 million. Cf. Article 4(34) of the ZOEE.
9. Cf. Article 32(1) of the ZOEE.
10. Energy Agency: Information for customers in case of the termination of an electricity supply contract by a supplier and actions by the regulator. Available at: https://www.agen-rs.si/-/informacije-za-odjemalce-v-primeru-odpovedi-pogodbe-o-dobavi-elektricne-energije-s-strani-dobavitelja-in-ukrepi-regulatorja (13 March 2022).
11. Cf. Article 32(3) of the ZOEE.
12. Energy Agency: Emergency supply. Available at: https://www.agen-rs.si/poslovni/elektrika/zasilna-oskrba (13 March 2022).
13. Cf. price list of SODO for emergency electricity supply dated 1 March 2022.
14. Cf. Conditions for the implementation and provision of emergency electricity supply in the event of termination of a balance contract or in the event of a supplier’s exclusion from the balance scheme as of 1 March 2022.
15. Article 228 of the SONDSEE.
16. Article 222 of the SONDSEE.
17. Article 224(1) of the SONDSEE.
18. Article 224(2) of the SONDSEE.
19. Article 225 of the SONDSEE.
20. Article 223 of the SONDSEE.
21. Cf. Article 32(5) of the ZOEE.
22. Cf. Conditions for the implementation and provision of emergency electricity supply in the event of termination of the balance contract or in the event of the supplier’s exclusion from the balance scheme as of 1 March 2022.
23. Cf. Proposal of the ZOEE, EVA 2020-2430-0003, first reading, commentary to Article 32, page 140.