44. Provisions for liabilities due to energy certificates of origin and CO2 emission allowances
SELECTED ACCOUNTING PRINCIPLES
Provision for CO2 emission liabilities
The Group creates a provision for the cost of redemption of CO2 emission allowances. The provision for liabilities arising from emission of gases covered by the emission allowance scheme is created only when the actual emission level for a given financial year indicates the expected deficit of emission allowances awarded free of charge, including allocation of free emission allowances to facilities belonging to individual Generation companies. The Group companies covered under the EU ETS are required to redeem an allowance for each tonne of carbon dioxide emitted in a given year by 30 April of the following year.
The provision is charged to operating expenses (taxes and fees) in the following amount:
- in the portion covered by allowances held at the end of the balance sheet date:
- at a zero value, in the case of allowances received free of charge,
- at the purchase price in the case of purchased allowances;
- in the portion not covered by allowances held as at the balance sheet date:
- in the first instance, in values resulting from forward and futures transactions concluded for the purchase of allowances intended to meet the obligation for the current year,
- subsequently, in the market value of the allowances failing to meet the obligation as at the balance sheet date, or in the value of potential penalty
- in accordance with the intention regarding the manner of meeting the obligation,
taking into account the Group’s intention to allocate allowances for redemption purposes for the financial year at the time of purchase.
At the date of redemption of the allowances, the emission allowances classified as current intangible assets are derecognised in correspondence with the provision for gas emission liabilities.
Provision for the obligation to present energy certificates of origin
Energy enterprises trading in electricity and reselling it to the final consumer shall be obliged to purchase and present for redemption certificates of origin for electricity and energy efficiency certificates or to pay a substitution fee. In order to meet the obligation to present the rights for redemption or to pay a substitution fee, the Group creates a provision at the end of the reporting periods for the costs of meeting this obligation.
The provision due to the obligation to present certificates of origin of electricity generated in renewable sources for redemption and certificates of energy efficiency is recognised:
- in the part covered by certificates of origin and certificates of energy efficiency held as at the balance sheet day – at the value of the certificates held,
- in the part not covered by certificates of origin and certificates of energy efficiency held as at the balance sheet day – in the first instance, at values arising from concluded forward transactions, for the purchase of certificates allocated for the fulfilment of the obligation for the current year, and subsequently – at a market value of certificates required to fulfil the obligation as at the balance sheet day, or at a level of the substitution fee – in accordance with the intention of the entity concerning the method of fulfilment of the obligation.
taking into account the Group’s intention to allocate certificates of origin and energy efficiency certificates for redemption purposes for the financial year in question at the time they are produced or purchased.
The provision is charged to operating costs.
The settlement of the amount of the provision and the redemption of the property rights shall take place on the basis of the decision issued by the President of the Energy Regulatory Office on redemption of certificates of origin of electricity submitted by the company or in connection with the payment of the substitute fee.
| Year ended 31 December 2022 | Year ended 31 December 2021 | |||||
|---|---|---|---|---|---|---|
| Provisions for liabilities due to CO2 emission allowances | Provision for obligation to submit energy certificates | Provisions total | Provisions for liabilities due to CO2 emission allowances | Provision for obligation to submit energy certificates | Provisions total | |
| Opening balance | 1 493 | 397 | 1 890 | 981 | 769 | 1 750 |
|
Acquisition of a subsidiary |
33 | 1 | 34 | − | − | − |
|
Recognition |
3 135 | 924 | 4 059 | 2 148 | 859 | 3 007 |
|
Reversal |
(39) | (10) | (49) | (1) | (10) | (11) |
|
Utilisation |
(1 494) | (748) | (2 242) | (1 635) | (1 221) | (2 856) |
| Closing balance | 3 128 | 564 | 3 692 | 1 493 | 397 | 1 890 |
The increase in the cost of creating the provision for CO2 emission liabilities in the year ended 31 December 2022 compared to the comparative period mainly results from the increase of prices of CO2 emission allowances.
For the year ended 31 December 2022, the Group’s entire redemption of CO2 emission allowances related to the 2021 obligation. In the comparative period, the Group redeemed the obligation for 2020 and partially redeemed the obligation for 2021.