HWW Hewelt Wojnowski Lindner i Wspólnicy sp.k. prepares a hedging strategy for an energy undertaking trading in electricity. The work is led by Aleksandra Lindner, partner and adwokat (Polish advocate). HWW prepares the first and subsequent strategies, the supplement following a request from the President of the Energy Regulatory Office (URE), and the annual report.
What this matter requires of counsel
Which energy undertakings prepare a hedging strategy?
An energy undertaking trading in electricity prepares and applies a hedging strategy, that is, a risk reduction strategy (Article 10e(1) of the Polish Energy Law (Prawo energetyczne)). The strategy serves to ensure the continuity of electricity supplies (Article 10e(1)). The strategy takes into account the size of the activity, the structure and liquidity of the markets, especially the short-term ones, financial signals from those markets, and the guidelines of the President of URE (Article 10e(1)).
Counsel checks how the strategy reflects the guidelines of the President of URE, and indicates the data needed to justify the choice of hedges.
What does the hedging strategy contain?
The strategy sets out measures intended to limit the risk of unprofitable contracts with electricity customers as a result of changes on the wholesale electricity market (Article 10e(2)(1)). The measures are to serve the liquidity of the energy undertaking on the day-ahead market and the intraday market, and the continuity of supplies (Article 10e(2)(2) and (3)). Example measures include entering into contracts on the forward market, the day-ahead market, and the intraday market (Article 10e(3)(1)). Measures may also include actions limiting the risk of interruptions to electricity supplies (Article 10e(3)(2)).
Together with the trading and finance functions, counsel compares the prices, volumes, and supply periods in electricity sale and purchase agreements. The finance team calculates how much cash the company needs between paying for the energy and receiving payments from customers. The management board should indicate the persons responsible for responding to a deterioration in liquidity, the conditions for releasing financing, and the sources of funds for purchasing energy.
How does the strategy connect with REMIT?
The Energy Law refers to the definition of the wholesale electricity market in Article 2(6) of the REMIT Regulation (Article 10e(2)(1)). Counsel compares the products, prices, quantities, and dates of hedging transactions with the data reported under Article 8(1) REMIT, as amended by Regulation (EU) 2024/1106. Counsel explains differences in scope and period before treating a discrepancy as an omitted transaction.
When to submit the strategy and how to respond to a request?
An energy undertaking trading in electricity prepares the strategy every 3 years (Article 10e(4)). The undertaking submits it to the President of URE by 15 December of the last year preceding the period covered by the strategy (Article 10e(4)). The undertaking submits the first strategy to the President of URE by 30 January 2027 (Article 27(2) of the Act of 13 March 2026 amending the Energy Law). The President of URE requests a supplement to the strategy where the indicated actions insufficiently limit the risk of interruptions to supplies (Article 10e(5)). The undertaking supplements the strategy within one month of receiving the request (Article 10e(5)).
Counsel sets the deadlines for delivering data, assessing the hedges, and agreeing the strategy with the management board. After a request, counsel records the date of receipt and assigns to each objection a response, a change to the strategy, and a document confirming that it can be carried out.
How to prepare the report and limit the risk of sanctions?
An energy undertaking trading in electricity presents a report to the President of URE by 30 April each year (Article 10e(6)). The report describes the actions taken in the previous year to implement the strategy (Article 10e(6)). A breach of the obligations under Article 10e(1) is subject to a financial penalty (Article 56(1)(61) of the Energy Law). Failure to meet the deadlines under Article 10e(4), (5) or (6) is also subject to a financial penalty (Article 56(1)(62)). In these cases the penalty ranges from PLN 10,000 to PLN 50,000 (Article 56(2h)(9)).
Throughout the year, the company should assign to the measures in the strategy the actions carried out, documents, and the reasons for departures. After a delay, the company should perform the overdue obligation. The President of URE may refrain from imposing a penalty if the harmfulness of the act is negligible and the entity has ceased infringing the law or has performed the obligation (Article 56(6a)).
How to assess counsel for this matter
The management board can review counsel’s way of working before agreeing the engagement:
- Counsel asks for sale agreements, purchase rules, and liquidity data before selecting measures.
- Using the company as an example, counsel explains why a profitable contract may require financing before the customer pays.
- Counsel presents a diagram of the response to a request, linking the objection of the President of URE, the explanation, the needed change to the strategy, and the document.
- Counsel includes the next strategy and the annual reports in the schedule, and indicates the data needed to prepare them.
Offer and contact
We describe the scope, the fee and how to instruct us in the Hedging strategy for an electricity trading company offer. You can describe the matter in the form or call +48 22 100 42 24.