The Court of Justice of the European Union (CJEU) has ruled that the penalties imposed by the President of the Energy Regulatory Office (ERO) on undertakings for breaching the obligation to purchase and submit for redemption certificates of origin or pay a replacement fee (this obligation was introduced in Poland in 2005 to support renewable energy producers) are unlawful. The order in this case was published on 4 March this year. According to the wording of the order, the penalties for the above-mentioned breaches which occurred prior to the EC’s decision to approve the state aid (i.e. before 2 August 2016), are contrary to the EU Treaties.
The value of unduly paid penalties can amount to hundreds of millions of zlotys. In fact, in 2016 alone, the President of the ERO issued 18,021 certificates of origin from RES with a total capacity of 18,618,037.970 MWh for production in 2013-2016 and 1,707 certificates of origin from cogeneration with a total capacity of 28,110,148.736 MWh, which shows the scale of the case.
The order was issued in response to a request for a preliminary ruling from the Court of Appeal in Warsaw, which heard an appeal against a judgment of the Court of Competition and Consumer Protection annulling a penalty imposed by the President of the ERO on an electricity trading company. The case concerned a penalty imposed for the period during which the system of redemption of certificates of origin operated without a relevant EC decision declaring it to be state aid compliant with Article 107 of the Treaty on the Functioning of the European Union (TFEU). The period in question is from 1 October 2005 (when the system was introduced) to 1 August 2016.
In fact, on 2 August 2016, the EC adopted a decision declaring the scheme as state aid compatible with EU law. Similar principles also apply to the provisions imposing an obligation to redeem cogeneration certificates of origin or pay a replacement fee for the period prior to the relevant EC decision of 28 September 2016.
In the order, the CJEU stated that:
- The Polish legislation on the redemption of certificates of origin in the period prior to the EC’s decision declaring the scheme to be state aid breached the obligation to notify state aid and is invalid.
- The EC’s decision does not have retroactive effect and therefore does not convalidate the obligation to redeem certificates of origin up to the date of its adoption.
- The imposition of the penalty violates the obligation to notify state aid and is therefore contrary to EU law.
Effect of the CJEU order
The ECJ’s order opens the way for the reversing or varying of all decisions of the President of the ERO imposing penalties for failure to comply with the obligation to purchase and submit for redemption certificates of origin or to pay a replacement fee in the period between 1 October 2005 and 1 August 2016. However, in determining the temporal scope, the date of the alleged breach should be taken into account, not the date on which the decision was issued.
This means that in practice, decisions of the President of the ERO issued after 2 August 2016 may also be reversed or varied. It cannot be ruled out that the order may also be the basis for a claim for reimbursement of replacement fees paid for the aforementioned period.
Given the variety of remedies available in the context of the CJEU Order, the choice of remedy will depend on the nature and facts of each case and the content of the ERO President’s decision. However, it should be noted that, as a result of the announcement of the Order on 4 March 2024, the deadline for certain administrative actions by companies already expires on 4 April 2024. Therefore, it is necessary for companies to take immediate action to obtain the reimbursement of funds for unduly paid penalties. It is therefore worth making good use of this time by carefully analysing the details of each case and preparing the most appropriate strategy.
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