End of Year Measures in the Energy Sector (Belgium Federal)
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On the verge of every New Year, a substantial set of legislative acts is issued at fast pace. Indeed, many acts and orders are being voted for entry into force before the 1st of January of the following year. Equally, at the end of 2012, certain remarkable energy related measures at the federal level were issued. The following sections will highlight the most important amendments and their impact on business.
The phenomenon of the "end of the year" measures
It is a recurrent phenomenon that, throughout December, federal and regional legislators try to have legislation published in the Official Journal before 1 January. This trend occurs in July as well, before the summer recess.
This legislation usually relates to technical matters and is adopted through programme laws, or to budget related issues. This legislation may also create specific changes to the existing legislative framework, which may have a strong impact on your business and contracts.
There are many reasons why the phenomenon of the "end of the year" measures occurs:
- The legislator is obligated to issue or enforce a provision before a certain date (traditionally 1 January);
- The entry into force of legislation obviously preferably takes place before the implementation thereof, in order to prevent retroactive implementation which is subject to strict conditions;
- Budgetwise, fiscal years run from the beginning of January until the end of December, related measures should therefore be voted with such before 1 January.
In order to timely proceed end of the year measures, a special "urgency procedure" is required. This often results in the fact that these legislative acts are less rigidly examined on formal and material correctness. The main disadvantage of these "end of the year" measures is that, especially due to the use of consolidated laws, they are often cluttered or, at least, unstructured.
The energy measures of the end of 2012
Before the Christmas holidays of 2012, several amendments were made to the federal legislative framework related to the energy sector, varying from support to offshore installation to the nuclear tax.
The Act of 27 December 2012 related to diverse provisions on energy (thematic act)
Through the Act of 27 December 2012, the federal legislator abolished and amended several energy related measures. These amendments are not purely technical but may influence the strategy of enterprises in their capacity as producer and/or industrial consumer.
The measures may be summarised as follows:
Article 2: Offshore Green Certificates and Minimum Price
The Act of 8 January 2012 had strongly modified the legal framework related to green certificates and the requirement of the grid operator to buy certificates at minimum price. This was a result of the necessity for the legislator to provide clarity regarding existing (licensed) offshore installations that are directly connected to or will be directly connected to the distribution grid. This had already been clarified through a Royal Decree and has now been embedded into the Law.
The provisions do not pertain to the household market, but apply to operators of the offshore wind farms, that inject the electricity directly into the Elia grid. The legislator now allows a (theoretical) injection of these farms into the distribution grid, and therefore adjusts the law to existing legislation. However, the Secretary of State Melchior Wathelet clearly stated that the licenses for future concession shall explicitly state that "the connection of offshore wind farms to the distribution grid is not desirable". This non-desirability supposedly results from the fact that distribution grid operators would have to make additional investments in the coastal region so as to facilitate this injection. As a result of abovementioned modifications, the existing relevant law (the Energy Act) did not have the exact same content as the related Royal Decree. This article now rectifies this previous anomalism.
During parliamentary discussions on this article, the strategy with regard to the support of offshore wind farms was raised. It was stated that as of the start of 2013 the price of this electricity will decrease, thanks to the degressivity mechanism and 40 million Euros of federal support stemming from the nuclear tax (as announced in the budget agreement).
The urgency of this measure was motivated by the CREG and Elia by stating that this situation should be clarified before 1 January 2013 so that "the necessary contractual actions may be taken in the context of a clear legislative framework".
It should be noted here that, although the subject matter of support to offshore technologies concerns both the federal and the regional legislator, the authorities at the different levels did not consult one another (despite that fact that this consultation is a formal requirement).
Article 3: Abolishment of the double limit to the reduction of federal contribution for industrial consumers
This article abolishes the double ceiling, in MWh and in Euros, for the calculation of the federal contribution for industrial sites consuming more than 20 MWh/year. These sites are granted, per installation, a discount on the contribution. Until this modification, the discount (of 45 %) was limited to 250.000 MWh/year, while an absolute upper limit of 250.000 was applicable to industrial sites consuming more than 250.000 MWh.
This double ceiling has been abolished to "end the discrimination", meaning that certain large industrial consumers consumed less but were required to pay more. On the one hand, this article therefore does no longer limit the last instalment of 45 %, and on the other hand this article introduces an upper limit of 250.000 Euros for all industrial sites, regardless of their consumption
Articles (3 and) 4: abolishment of the exemption of parts of the federal contribution for green electricity
Article 4 of the abovementioned Act abolishes the provision of the Royal Decree that provides for a partial exemption to the federal contribution to support green electricity (i.e. the Kyoto fund and the fund for denuclearisation). Through this abolishment, the legislator aims at entities trying to evade this contribution by declaring a fuel mix of 100 % through "international" guarantees of origin. This was put forward by, amongst others sector federations, VBO, FEBEG, FEBELIEC and the consumer organisations.
In the context of the discussions of this article in the Commission for Enterprises in the Parliament, the Secretary of State Melchior Wathelet stated that the Kyoto Fund is adequately financed and that the question of the division of burden between the federal level and the regions still needs to be addressed with the regions. The Secretary of State has announced to provide more clarity on this subject in due course.
Furthermore, the reason why this article has been enacted before 1 January 2013, relates to the possibility for suppliers to include this in their contracts and issue subsequent invoices as from this date. One can assume that, due to this abolishment of the exemption for green electricity, further incentives to conclude green contracts have been reduced. Also, possible alternatives to the previously existing exemption have not yet been proposed. One can also wonder whether the suppliers and the buyers have been able to timely take into account this "urgent" measure in their existing contracts.
The Act of 27 December 2012 modifying the Act of 11 April 2003 on the provisions for dismantling of nuclear power plants and for the management of irradiated fissile materials
The legislator issued another remarkable "end of the year" measure by re-determining the repartition contribution for the nuclear operators. This repartition contribution amounted to 250 million Euros in 2012 and is now increased to 350 million Euros. The Act further stipulates the procedure according to which the nuclear provisions company (Synatom) must implement the abovementioned provisions.
Finally, important modifications have also been made to the existing regional legislative framework (e.g., at the Flemish level, the Order of 21 December 2012 modifying the Energy Order of 19 November 2010). These are subject to separate analysis.