Regulatory environment

1. introduction of a shielding allowance related to the increase in energy prices for the household consumers,
2. new obligations of the electricity supplier related to the introduction of the shielding allowances (compensation to offset energy price increases),
3. program of support for the vulnerable consumers of the electricity and gas fuels,
4. definition of energy poverty.

1. the need to send out the information on the right to submit an application for the payment of the shielding allowance,
2. development and implementation of the support programs for the vulnerable consumers,
3. a change with respect to the options available for suspending the supply of electricity.

1. extending the catalog of entities covered by the tariff protection until December 31, 2023,
2. introducing a compensation mechanism for the natural gas suppliers,
3. confirming and emphasizing in the content of the legal regulations the necessity of the tariff protection for the natural gas consumers in the multi-tenant buildings.

1. generates the risk as to the ability to cover the justified costs of the gas purchases in relation to the mechanism for setting the tariff prices and the compensation payment system,
2. generates a number of additional obligations for TAURON Sprzedaż.

TAURON Wydobycie as of December 31, 2022 is no longer a part of TAURON Capital Group.

1. allowing the Minister competent for the energy issues to specify a lower volume of the high methane content natural gas to be injected into the transmission network in 2022 and 2023 than the volume specified in Article 49b, Section 1 of the Act – Energy Law (55%) (i.e. enabling the reduction of the so-called gas exchange trading obligation).,
2. identification of the entities for which the tariff will be determined until the end of 2027,
3. obligation to develop the preventive action plans for the distribution and transmission of the gas fuels by the energy enterprises.

1. The main assumptions of the act:
2. support mechanism for the heat consumers without the coal stoves,
3. household consumers heating themselves individually and using the heat sources other than the hard coal and gas will receive a one time allowance – PLN 3 thousand in the case of the pellets, PLN 2 thousand for the heating oil, PLN 1 thousand – wood, PLN 500 – LPG gas,
4. The President of ERO, when approving the heat tariffs, is to limit their increase to 40 percent as compared to the previous year,
5. approximately 400 heat power plants subject to the tariffs will get a compensation payment from the budget.

(impact on TAURON Ciepło).

1. abolishes the so-called power exchange obligation, i.e. the obligation to sell the electricity generated on the Polish Power Exchange (TGE),
2. provides for the changes with respect to the sanctioning of the violations of the REMIT regulation, including the strengthening of both the administrative as well as the criminal liability for the electricity market manipulation and the use of insider information (insider trading).

It is not possible to directly estimate the impact of the electricity exchange trading obligation abolition on TAURON Group’s earnings.

1. freezing, in 2023, of the price of the electricity at the 2022 level for the households up to the level of the consumption of 2 MWh per year. The exceptions will be the people with the disabilities (about 2.56 million), for whom the limit will be 2.6 MWh, and the people who hold a Large Family Card (approx. 1.2 million) as well as the farmers (about 500 000), for whom the limit will be 3 MWh,
2. the introduction of a surcharge on the electricity used for the heating purposes and an incentive to conserve it.

According to the Company’s assessment, the impact of the provisions of this act on the financial results of the Company and TAURON Group should be neutral.

1. a maximum price for the electricity (785 PLN/MWh) for the eligible consumers (or 693 PLN/MWh for the household consumers) applicable until December 31, 2023,
2. a system of the compensation payments for the trading companies applying the maximum price in the settlements with the eligible consumers (calculated depending on the type of the consumer and the time when the electricity sale agreement is concluded and the time when the electricity is to be delivered),
3. the obligation of the electricity generators and the energy enterprises conducting business operations with respect to the electricity trading to transfer the so-called „charge” (write-off) to the Price Difference Payout Fund in a situation where the above mentioned entities obtain, from the sales of electricity, prices that exceed the price caps calculated in accordance with the provisions of the Regulation of the Council of Ministers on how to calculate the price cap.

The Company estimated the total amount of the charges to be transferred to the Price Difference Payout Fund in 2023 to fall in the range between PLN 1.0 billion and PLN 1.3 billion (current report no. 9/2023 of February 14, 2023).

1. costs of purchasing the electricity, including the average costs of purchasing the emission allowances,
2. costs of the substitution fee incurred, of the purchase of the electricity from the RES, as well as of obtaining and redeeming the guarantees of origin of energy (energy certificates) for RES and the energy efficiency.

1. imposes on TAURON Sprzedaż the obligation to attach to the invoice the information on the percentage structure of the justified costs of purchasing the electricity,
2. generates the additional costs for TAURON Sprzedaż stemming from the new obligation.

1. raising of the possible increase of the planned revenues under the simplified tariffs for the heat generated in the cogeneration units,
2. guaranteeing of a minimum increase (change) of the planned revenues in the tariffs of the district heating companies,
3. taking into account the increased rate of return by 1 percentage point for each reduction of the emissions by 25% in the calculation of the return on capital employed in the operations related to the heat supply,
4. linking the possibility of applying the provisions guaranteeing the limit of the planned revenues in the tariffs for heat and their increasing under the simplified tariffs after December 31, 2025, solely for the energy companies operating in the district heating system.

1. introduces changes to the tariff setting process for the district heating enterprises,
2. introduces the need to adapt the district heating systems, by the required deadline, to the definition of an efficient district heating system (TAURON Ciepło).

1. detailed conditions of the support system with respect to the subsidies, including the method to be used to determine the amount of the subsidies, the eligible costs and revenues, the method to be used to determine the benchmark price, the rules to be applied to monitor, control and verify the support system,
2. detailed conditions and procedure for granting the subsidy, including its form,
3. procedure applied to settle the subsidies,
4. conditions leading to the temporary suspension of the payment of the subsidy granted.

Pursuant to this Regulation, TAURON Wydobycie entered into the agreements under which TAURON Wydobycie’s capital was increased in exchange for 203 603 bonds with an estimated value of PLN 177.6 million (current report no. 47/2022, of December 20, 2023).

Due to the disposal of the shares of TAURON Wydobycie shares to the State Treasury, TAURON Wydobycie is no longer a part of TAURON Group as of January 1, 2023.

1. list of the electricity market processes implemented through the central energy market information system,
2. method of implementing the energy market processes,
3. range of the commands sent to the remote readout meter via the central energy market information system and the conditions for sending them,
4. requirements for ensuring the correctness and completeness of the energy market information and the verification thereof,
5. indicators of the quality of the energy market information provided by the individual system users and the manner of the publication thereof.

1. introduces the necessity to adapt the IT systems / meters to the requirements defined in the regulations,
2. imposes the obligation to apply a standardized method to be used to share the metering data for all of the distribution system operators.

1. may cause a decline in the price of the Guarantees of Origin (GOs) of energy,
2. will have a positive impact on the entities dealing with the electricity trading.

1. demand for the capacity,
2. price of a market entry by a new generating unit,
3. maximum price for the price taker,
4. number of rounds, level of the expenditures, minimum mandatory values, correction factors for the individual groups of technologies,
5. parameters that determine the volume of the capacity below and above the demand.

1. introduction of a monthly update cycle for the cost of the base fuel, taken into account when determining the prices of the forced (mandated) delivery of the electricity (CWD) and the prices of the forced (mandated) off-take of the electricity (CWO) with respect to the generating units that use a base fuel other than the natural gas or lignite,
2. introduction of the changes with respect to the submission of the balancing bids (for the delivery of the electricity), the introduction of the maximum MaxCO price caps for the selected production technologies, and the limiting of the bidding prices to the maximum MaxCO price cap,
3. strengthening of the transmission of the pricing signals between the balancing market and the wholesale electricity market.

1. The regulation may have an adverse impact on TAURON Wytwarzanie’s results, as in some cases it forces the bid prices (balancing bids) to be reported below the level of the actual costs incurred for free generation.
2. The regulation will have a favorable impact on the model of updating the variable costs incurred in the production of the electricity when forced (mandated) by the system needs (based on the monthly cycles) along with the retroactive compensation payment settlement, stemming from the difference between the initially adopted and the actually incurred costs of the production.

1. method to be used to calculate the limit for the electricity generated using the individual technologies,
2. method to be used to calculate the limit for the trading enterprises.

The Company estimated the total amount of the charges to be transferred to the Price Difference Payout Fund in 2023 to fall in the range between PLN 1.0 billion and PLN 1.3 billion (current report no. 9/2023 of February 14, 2023).

In addition, the works were continued in 2022 on the „gas package” published by the EC on December 15, 2021, which includes a revision of the Directive on the common rules for the internal market in the natural gas and a revision of the Regulation on the conditions for access to the natural gas transmission networks. The package aims to increase the share of the renewable and low carbon gases in the energy system, which will enable a shift away from the natural gas and the meeting of the EU’s goal of achieving climate neutrality by 2050. The package also includes a new regulation on reducing the methane emissions in the energy sector.

Along with the communication, a legislative proposal amending the directives: REDII, EED and EPBD was published. As part of the above mentioned proposal, the European Commission proposes:

1. increasing the target with respect to the use of the energy from the renewable energy sources (RES) from 40 to 45% (as compared to the proposal included in the Fit for 55 package),
2. introducing the measures aimed at making it easier to invest in the renewable energy sources,
3. raising the 2030 energy consumption reduction target from 9% to 13% as compared to the projections in the 2020 benchmark scenario,
4. increasing the use of the solar energy in the buildings.

In December 2022, the negotiating positions of the EP and the Council towards the above mentioned draft directive were adopted. They are focused, in particular, on the issues related to accelerating the issuance of the permits for the investments in the renewable energy sources. The next steps are the tripartite negotiations on the text of the directive with the participation of the EC, the EP and the Council.

In addition, along with the REPowerEU communication, among others, the EU strategy for the solar energy, the recommendations and the guidelines related to accelerating the issuance of the permits for the investment projects related to the renewable energy sources (RES) as well as a draft regulation amending, inter alia, the Regulation (EU) 2021/241 establishing the Recovery and Resilience Facility (in order to provide the funding for the actions identified in REPowerEU) were published.

1. a change of the rules of the functioning of the so-called 10H rule (distance of the wind turbines),
2. solutions that provide more flexibility for the municipalities to specify the areas for the construction of the wind farms in the local spatial development (zoning) plans,
3. a change of the rules for the consultation of the local zoning plans specifying the areas for the wind farms,
4. the possibility for the investor to allocate at least 10% of the installed capacity of the wind power plant to be taken over by the residents of the municipality.

1. will allow the wind power plants to be located at a distance of less than 10h, if the local government provides for such a possibility in the zoning plan,
2. will introduce changes to the amend the investment consultation process.

1. changes in the rules of concluding and terminating of the agreements for the sale of electricity,
2. introduction of the citizen energy communities, the active consumers and the aggregators of the electricity market,
3. possibility of concluding of the agreements with the dynamic pricing mechanisms,
4. introduction of the provisions on the system services, the flexibility services,
5. changes in the balancing regulations,
6. mechanism for a non-market curtailment of the generation by the RES installations,
7. changes with respect to the direct power lines.

1. will increase the possibility of using the direct power lines,
2. will limit the ability of the DSOs to own energy storage facilities.

1. biomethane,
2. energy clusters,
3. transposition of RED II (district heating and cooling, guarantees of origin, RES National Contact Point, energy trading based on partnership),
4. modernization of the RES installations,
5. continuation support for the RES installations whose 15 year support system is due to expire,
6. hybrid RES installations,
7. offshore wind energy,
8. substitution fee

1. generates the risk of losing customers due to the disconnecting of the consumers from a district heating network that does not meet the efficient district heating system requirements,
2. introduces the favorable changes in the manner of making the payment of the RES substitution fee,
3. introduces the significant changes for the DSOs related to the energy clusters,
4. provides for the possibility of obtaining support for the RES installations whose 15 year support system is due to expire.