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Meet the Law - Updates in the Energy Sector

Decree-Law no. 79/2020, of October 1st

Extension of the application of the mechanism for smoothing the cost of energy acquired from special regime producers

Due to the pandemic crisis caused by COVID-19, significant changes in basic variables for calculating electricity tariffs have emerged.

These changes have increased tariff pressure for the coming years, particularly on network access tariffs that recover transmission and distribution network cost being mostly in fixed nature, as well as cost of general economic interest (CGEI) that depend on national and European energy policy options.

In relation to the CGEI, the cost differential of the energy obtained from special regime producers with fixed tariff has been gradually reflected in the income to be recovered by the regulated companies, by means of article 73-A of Decree Law no. 29/2006, of February 15th. Such phasing has made it possible to attenuate the tariff variations that would result from the full and immediate repercussion of the differentials in question.

Due to the current context, which introduced additional and unexpected tariff pressures for the coming years, it was seen as necessary to extend the period of application of this mechanism in order to avoid an abrupt change in network access tariffs, which would undermine the stability of the tariff path achieved in recent years.

Due to what is mentioned above, Decree-Law no. 79/2020, of October 1st was now published, which amended paragraphs 1, 3, 5 and 8 of Article 73-A of Decree-Law no. 29/2006 of February 15th in its current wording (with the epigraph "Repercussion of additional costs with the obtainment of energy from producers in special regime").

The most relevant change in the referred article is the extension of the period of repercussion on the income to be recovered by the regulated companies of the tariff adjustments related to additional costs with special regime generation from December 31st, 2020 to December 31st, 2025.

Decree-Law no. 79/2020 of October 1st can be consulted here.

 

Ministerial Order no. 233/2020, of October 2nd

Revokes Ministerial Order no. 251/2012 of August 20th, which establishes the regime for granting incentives to the guarantee of power made available by the electric generating centers to the National Electric System (NES).

Decree-Law no. 172/2006, of August 23rd, as currently amended, foresees, in its article 33-A the creation of an incentive mechanism to guarantee the power made available by the electric generating centers to the National Electric System (NES).

Ministerial Order no. 251/2012, of August 20th, regulated the guarantee of power, establishing the remuneration of the availability service provided by the electric generating centers and the allocation of incentives for investment in production capacity from water sources. Such incentives were divided into two modalities: availability incentive and investment incentive. 

In 2017, with the State Budget Law (Law no. 42/2016, of December 28th) the power guarantee model in the availability incentive modality was suspended, being replaced by a market mechanism that would be regulated by Ministerial Order no. 41/2017, of January 27th. Such Ministerial Order determined an auction model to define the remuneration applicable to the safety reserve provided to NES and allowed the electric generating centers covered by the investment incentive to also participate. 

It can be seen, then, that through the publication of the Law referred to above, from the Ministerial Order no. 251/2012, only one of the two mechanisms remain, being this the investment incentive. It should also be noted that such mechanism is not compatible with the rules and guidelines of the European Union of the internal market, since the latter provides for open, transparent and non-discriminatory procedures, instead of what was provided by the Ministerial Order no. 251/2012.   

Thus, such Ministerial Order is now revoked by Ministerial Order no. 233/2020, of October 2nd, in order to make it possible to standardize the models for granting incentives to the guarantee of power by accepting the European guidelines of the internal market and the recommendations of the Parliamentary Commission of Inquiry into the Payment of Excessive Rents to Electricity Producers.

There is also room for a transitional regime. Such foresees that no investment incentives are payable for the year 2020, however, investment incentives for electric generating centers that have obtained recognition of eligibility during the year 2020 are paid until 2021. Investment incentives for 2019 are also expected to be paid by the entity responsible for the overall technical management of the NES until the end of 2020.

Ministerial Order no. 233/2020 of October 2nd can be consulted here.

Authors

Picture of Monica Pacheco
Mónica Carneiro Pacheco
Partner
Lisbon
Picture of Bernardo Cunha Ferreira
Bernardo Cunha Ferreira
Associate
Lisbon
Manuel Cassiano Neves
Associate
Lisbon
Picture of Duarte Lacerda
Duarte Lacerda
Associate
Lisbon
Manuel Branco
Trainee
Lisbon
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