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Meet the Law | Additional Clarification from the Secretary of State of Energy on clawback

On July 30, was published on DGEG’s website, an additional clarification on the scope of the regulatory mechanism aimed at ensuring competitive balance in the wholesale market in Portugal, established by Decree-Law no. 74/2013, of June 4 (“Decree-Law”), in its current wording, commonly referred to as clawback, to complement the clarification of January 30, 2020.

In this regard, was clarified the following aspects:

  • Electricity producers covered by paragraph c) of article 1-A of the Decree-Law, who are holders of a Power Purchase Agreement (PPA) with physical delivery at a specific consumption point, whose remuneration structure is based on a fixed contractual price (as, per example, not indexed, directly or indirectly, to the daily market price of MIBEL), are exempt from payment of compensation. If the PPA contains a hybrid remuneration structure, based on a fixed contractual price and a contractual price indexed to the daily market price of MIBEL, the amount of electricity paid at the daily market price of MIBEL must be subject to the application of the compensation provided for in the Decree-Law.
  • The exemption applies regardless of whether the PPA counterparty is an end customer or an energy trader. However, it is noteworthy that if the counterparty is an energy trader, according to DGEG, it is relevant to understand the purpose given to the electricity purchased from the producer, as the commercial solution adopted is not neutral for the purposes of applying the regulatory mechanism created by the Decree-Law.
  • If the retailer concludes a PPA with an end customer, for physical delivery of electricity to a specific consumption point, whose remuneration structure keeps the contractual price fixed, although including an intermediation fee, there are no gains in the nature of windfall profits needed to be corrected by the regulatory mechanism.
  • In such cases, both the PPA concluded between the producer and the trader, as well as the one concluded between the trader and the final customer, are exempt from the payment of compensation, the energy trader being a mere intermediary between the producer and the final customer.
  • Distinctly, in cases where the energy trader places the electricity purchased from the producer on the daily market of MIBEL, in return for receiving the respective marginal price, there is an increase that assumes the nature of windfall profit in the sphere of the trader, which must be corrected by the regulatory mechanism established by the Decree-Law, with the payment of the compensation provided for therein.
  • In such cases, the energy trader must pay the compensation amount to the producer, the latter being responsible for making the respective payment to the Transmission System Operator.

 Clarifications can be found here.

Authors

Picture of Monica Pacheco
Mónica Carneiro Pacheco
Partner
Lisbon
Picture of Bernardo Cunha Ferreira
Bernardo Cunha Ferreira
Associate
Lisbon
Picture of Duarte Lacerda
Duarte Lacerda
Associate
Lisbon