The European Commission expects to scrutinize a law passed by the Polish Parliament late in December that will freeze electricity prices for households and businesses this year and compensate power generators for any revenue lost due to the move.
Poland's Parliament passed legislation on Dec. 28, 2018, that capped 2019 power prices at the level reached at the end of June last year and froze distribution and transmission fees at the level reached in late December, S&P Global Platts reported. Power contracts negotiated in the second half of 2018 at a higher price need to be renegotiated and generators will be able to apply for monthly compensation for the freeze, with funds raised by the government for that purpose through the sale of CO2 emission allowances, Platts said.
But the European Commission, which is responsible for EU antitrust procedures, said it will need to see if the law complies with bloc-wide regulation prohibiting unfair state aid to companies.
"A member state is obliged to notify the commission about any state aid measures before they are put into effect," a spokeswoman for the commission confirmed in an email on Jan. 3. She added that Poland did not notify the commission but was expected to do so, "if Poland assesses that the measure involves state aid that needs to be notified under EU rules."
Asked what would happen if Poland did not notify the EU, a spokesperson only said that "the commission works to ensure that any laws in member states comply with relevant EU legislation."
But Michal Dworczyk, the head of the Polish Prime Minister's Office, told a radio station that the law does not fall under EU state aid rules, according to Platts. "We have expert opinions that clearly indicate that no regulations have been broken here. This is not aid, this is a type of compensation for companies that will have lower profits as a result of the law," he told RMF FM, Platts said.
The ruling Law and Justice party could be keen on preventing a jump in energy bills in Poland ahead of a parliamentary election this year, after energy prices have recently risen steeply in the coal-dependent country, mainly due to higher prices under the EU's cap-and-trade emissions scheme.
The legislation passed in late December also included sharp reductions in electricity taxes and the transition fee added to energy bills to compensate generators for terminated power purchase agreements that were signed before Poland joined the EU, according to Platts.
Polish state-run utilities had previously proposed raising household bills by more than 30% to recoup revenue lost due to higher wholesale power and emissions prices, Reuters said. According to Platts, energy regulator URE was expected to approve a significant price rise for households in the current year and has now asked distribution companies to submit new tariff proposals in light of the new law.
S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.