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Long term power purchase agreements (PPA). Status and Updates

Noemi Siman
Noemi Șiman

In the context of a strong and sustained European energy policy in the field of green energy, on June 28, 2021, the Council finally adopted its position at first reading on the European Climate Law in order to achieve the goal of climate neutrality by 2050.

However, such strategic measure has not been echoed at national level, where various aspects intended to attract and promote investments within the energy sector, especially in the field of renewable resources, remain unresolved.

Among these aspects, the legal regime of bilateral power purchase agreements (“PPAs”) concluded outside the centralized market is included. We mention in this regard that as per the Government Emergency Ordinance no. 74/2020 for the amendment and supplementing of the Law of electricity and natural gas no. 123/2012 (“GEO 74/2020”), the electricity producers were allowed to conclude PPAs outside the centralized market, under certain legal requirements. Such legal exception was intended to be applicable only for production capacities put into operation after June 1, 2020.

Although the aforementioned exception raised certain criticism among legal practitioners, it was nevertheless received with enthusiasm among economic operators. However, this momentum has been tempered since June 2020, when the Senate, the first chamber competent for the adoption of the Draft Law on the approval of GEO 74/2020, eliminated the possibility of concluding PPAs outside the centralized market. The reasons for such amendment were briefly and vaguely mentioned within the report drafted by the Committee on Energy, Energy Infrastructure and Natural Resources, being stated that electricity producers have been granted with a right which is not equally conferred to their trading partners, namely the electricity buyers. Moreover, “it is not clear why the exception applies only to production capacities put into operation after June 1, 2020 and the period for which this exemption is valid is not specified.”

Following the adoption by the Senate of such legislative version, the attention was directed to the Chamber of Deputies, the decisional chamber in this case. Thus, although the day of June 28, 2021 was meant to introduce certain changes at national level, the Committee on Industries and Services, appointed to draft the report at the level of Chamber of Deputies, decided to postpone such awaited document during the meeting that took place on the aforementioned date.

Such postponement may cause even greater disappointment given that the first parliamentary session will be closed at the end of June and the Draft Law on the approval of GEO 74/2020 is not included on the agenda for the meetings of the Chamber of Deputies intended to take place on 28, 29 and 30 June. Given the situation, it remains to be seen whether the fate of the PPAs will be decided in a potential extraordinary session of the Parliament or in this autumn.

For the time being, the favorable provisions established by GEO 74/2020 remain applicable and any legislative amendments performed within the legislative process at parliamentary level should only apply for the future. Moreover, in case the Parliament maintains its current position, the measures adopted in order to manage the effects produced by GEO 74/2020 will also be of interest.

Noemi Siman, SUCIU POPA Associate in the Energy & Natural Resources practice

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