Negotiation of sales/distribution agreements

The sale and distribution of electricity are carried out by two separate companies – the seller and the distributor (statutory requirement to separate the distribution business from the trading and generation business). A consumer can therefore conclude two separate agreements: a sales agreement with the seller and a distribution service agreement with the distributor. Electricity can also be supplied to the consumer under a single agreement, i.e. a comprehensive agreement, concluded with the seller. Such an agreement is commonly used in consumer trade. On the basis of this agreement, the seller sells electricity and ensures that the distributor delivers that electricity to the consumer.

The decision to buy energy from seller A, B or C has much less impact on the cost to the company than its decisions on when and how to buy, or the evolution of the regulated part of the price (distribution and taxes).

As markets mature, the types of agreements that can be made with energy sellers are changing. There is a move away from one-off price agreements to agreements that allow the final price to be set by means of multiple tranches averaging the final outcome.

In each case, the markets can offer power purchase agreements perfectly tailored to your organisation’s needs. An offer with the lowest vendor margin added to the wholesale price may not be so good after careful analysis. Are you sure that such an offer does not contain hidden costs related to volume restrictions or unfavourable payment terms? Some offers will suit your pricing and risk management needs more than others. Contact us!

• the parties to the agreement,
  • the place of delivery of the energy to the consumer,
  • the quantity of that energy, broken down by contractual period,
  • the contracted capacity, the way in which it is ordered and the conditions for changing it,
  • the price or tariff group used for settlement,
  • the conditions for introducing any change in that price and tariff group,
  • the duration of the settlement period and the possibility of its modification,
  • the method of settlement,
  • the method of determining discounts for failure to meet quality standards of consumer service,
  • the liability of the parties for non-compliance with the agreement,
  • the duration of the agreement and the conditions for its termination,
  • information on consumer rights, including how to lodge a complaint and settle disputes,
  • information on how to obtain assistance in the event of failure of
  equipment, installations or the electricity network,
  • information on where and how to consult the applicable tariffs, including the charges for maintaining the electricity system,
  • information on how to proceed in the event that the consumer becomes unable to meet their obligations to pay for the electricity or electricity-related services supplied,
• the quality parameters for electricity and the quality standards for consumer service, and the method of determining discounts for failure to meet them,
  • the liability of the parties for non-compliance with the agreement,
  • the duration of the agreement and the conditions for its termination,
  • information on how to proceed in the event that the consumer is no longer able to meet the obligation to pay for the supplied electricity or the services related to its supply.

An agreement for the provision of electricity distribution services should at least contain provisions specifying:
• the contracted capacity, the method of its ordering and the conditions for its modification,
• the amount of energy transported, broken down into contractual periods,
• the locations of energy supply to and offtake from the grid,
• the duration of the settlement period and the possibility of its modification,
• the conditions for ensuring reliability and continuity of energy supply,
• the tariff rates or tariff group used for settlement and the conditions for introducing changes in these rates and tariff group,
• the method of settlement,
• the electricity supplier chosen by the consumer,
• the reserve seller, and the consumer’s consent for the distributor to conclude an agreement of sale with that seller in the name and on behalf of the consumer, the Energy Regulatory Office
of the reserve seller, or the selected reserve seller will not be able to perform the reserve sales/complex agreement, this role will be performed by the seller ex-officio.

According to the provisions of the Energy Law, the conditions for termination of the agreement are defined by the parties in the agreement. A party to the agreement may terminate it by submitting a written statement of termination. The agreement is terminated on the last day of the month following the month in which the consumer’s statement reached the energy company (e.g. if the consumer’s statement is received by the company on 15 September, the agreement will terminate on 31 October). The consumer may indicate a later date for the termination of the agreement. In the case of:

1) an agreement for an indefinite period of time (indefinite).

The consumer may terminate an agreement of an indefinite duration at no cost by submitting a written declaration to the electricity company. However, they are obliged to pay the charges for the electricity and the distribution services provided;

2) an agreement concluded for a definite period of time (fixed term)

The consumer may terminate an agreement concluded for a definite period of time without incurring costs and compensation other than those resulting from the content of the agreement by submitting a written declaration to the energy company. Another way to terminate the contract is for the parties to conclude an agreement to terminate the agreement, in which the parties specify the date of termination of the agreement.