Meet the Law - Legal Regime of Energy Efficiency Management Contracts to be executed between the State and energy services companies

The legal regime of energy efficiency management contracts to be executed between the State and energy services companies (Decree-Law no. 50/2021 of June 15th) was published on June 15th and revokes Decree-Law no. 29/2011, of February 28th.

This new decree-law intends to update the figure and the contractual type, as well as the contract formation procedures, with a view to the implementation of energy efficiency improvement measures and self-consumption in public buildings and equipment assigned to the provision of public services. Additionally, it intends to simplify the formation of energy efficiency management contracts, reducing the bureaucratic burden to be borne by companies and individuals willing to collaborate with the Public Administration services and bodies.

The present decree-law establishes a set of rules, on the one hand, regarding the regime of formation and, on the other hand, the execution of said contracts.

Regarding the formation of energy efficiency management contracts, the following should be noted:

• The establishment of a qualification system for energy services companies;
• The obligation of awarding entities to adopt procedures of limited bid by pre-qualification or negotiation for the execution of contracts in which the object is energy efficiency management;
• The definition of rules that must be included in the tender specifications, such as, for example, when the provision of services object of the contract includes the production of electricity from renewable sources for self-consumption, the investment in the energy production unit may not exceed 50% of the total investment to be made by the tenderer;
• The determination that the contract price shall correspond to the difference between the value, or part of it, of additional energy savings achieved by the energy services company and the value of contractually guaranteed annual energy savings for the contracting entity;
• The establishment that the award criteria shall be the most economically advantageous proposal for the contracting entity, measured in terms of the greatest energy savings for the contracting entity and reinforced, as a minimum, by factors relating to the annual energy savings for the contracting entity and the contractual duration;

Regarding the execution of energy efficiency management contracts, the following aspects, among others, are foreseen:  

• Definition of a set of elements, such as the term and the consequences of non-compliance or defective compliance with the contract, which must be included in the contract's clauses, under penalty of invalidity (nulidade);
• Rules on risk sharing, namely that the contract must imply a significant and effective transfer of risk to the energy services company;
• The term of the contract must be set in accordance with the period necessary to amortize and remunerate, under normal conditions of profitability of the operation, the capital invested by the energy services company and may not be less than 15 years;
• The regime of the assets assigned to the contract, namely clarifying that these may belong to the public contractor, to the energy services company or to third parties and, additionally, that the energy services company may hire, by rent or lease or by similar contractual figures, assets and equipment to be subject to the energy efficiency management contract, provided that the public contractor is reserved the right to access the use of these assets and succeed to the respective contractual position in case of seizure, redemption or termination of the contract.

The standard tender documents for the procedures for the formation of energy efficiency management contracts must be published by ministerial order of the members of the Government responsible for the areas of Finance, State Modernization and Public Administration and Energy, within 90 days from the date of entry into force of this decree-law.

Lastly, it is foreseen that the decree-law shall entry into force 90 days after its publication, i.e. on 13 September 2021.

The present decree-law can be consulted here.