Refusal of connection conditions – what to do in this situation?

Obligation to connect

Pursuant to Article 7 of the Energy Law, energy companies are, in principle, obliged to conclude a network connection agreement with entities applying for a connection if:

• the economic and technical conditions for connection exist
• the conditions for connection are met
• the applicant holds a legal title to use the property, facility or premises to which gas, electricity or hydrogen is to be supplied
• the applicant ensures that the investment complies with building and planning regulations

Connection takes place on the basis of a contract, the conclusion of which is only possible after the connection conditions have been issued. Consequently, a refusal to specify these conditions constitutes, in practice, a refusal to conclude a network connection contract.

The connection agreement should be concluded in accordance with the principle of equal treatment, which obliges the operator to adopt a uniform, non-discriminatory approach towards all entities in comparable technical and economic circumstances.

Economic and technical conditions for connection

The most problematic issue from the perspective of the entire process of applying for connection conditions is determining what constitutes the economic and technical conditions for connection.

These concepts have not been defined by the legislator. The lack of a precise definition leads in practice to numerous disputes between applicants and energy companies. The meaning and scope of these concepts were only clarified as a result of the development of legal doctrine and case law, which gradually gave them practical substance.

Economic conditions

The assessment of the existence of economic conditions is made on a case-by-case basis. If a given investment has been included in a development plan agreed with the President of the Energy Regulatory Office, it is assumed that the implementation of this expansion constitutes an obligation on the part of the operator. In such a case — as indicated in the literature and the regulator’s decisions — the approval of the development plan entails an obligation to connect customers from the area covered by the agreed draft plan and exempts the operator from the need to carry out an efficiency analysis for each connection application.

However, if a given investment has not been included in the company’s development plan, the Operator should carry out an appropriate economic analysis, covering, among other things, the capital expenditure necessary to carry out the connection and the anticipated benefits or costs arising from the operation of the expanded infrastructure.

Technical conditions

It is emphasised that this concept encompasses the necessary activities related to the expansion and modernisation of the network. Legal doctrine indicates that the lack of technical conditions for connection should be understood as a permanent technical obstacle that cannot be removed, despite attempts to do so. There must therefore be objective, insurmountable obstacles preventing the implementation of an investment aimed at connecting the property, facility or premises of the entity applying for the conclusion of a contract, in order for there to be a lack of technical conditions for connection.

The concept of technical conditions encompasses both the current state of the infrastructure and the need to carry out necessary works relating to its expansion or modernisation. Legal doctrine emphasises that the lack of technical conditions should signify the existence of a permanent, objective obstacle that cannot be removed despite the measures taken. It therefore concerns technical barriers that prevent the connection from being carried out regardless of the parties’ will and without the possibility of their realistic elimination.

What can the applicant do in the event of a refusal?

Receiving a refusal does not mean the end of the possibility of applying for connection to the network.

Commercial connection

Where the operator determines that the economic conditions for connection are not met, yet the investment can be carried out provided that additional network works are performed, one of the solutions available to the applicant is the so-called commercial connection, referred to in Article 7(9) of the Energy Law. This involves the applicant financing — in whole or in part — the extension or modernisation of the infrastructure necessary to enable the connection of their facility, whilst the operator is not obliged to bear such costs as part of its regulated activities. A commercial connection is implemented on the basis of negotiations between the parties and requires the conclusion of appropriate agreements specifying the scope of work, the method of financing and the settlement rules. This solution is often attractive to applicants when the alternative is a long wait for network expansion under a development plan or the inability to carry out the project. It should be borne in mind, however, that a commercial connection always requires a detailed legal and technical analysis and must ensure compliance with the provisions of the Energy Law and the principles governing the operation of network infrastructure.

Application to the President of the Energy Regulatory Office for dispute resolution

The most important tool available to applicants in the event of a refusal to issue connection conditions is proceedings before the President of the Energy Regulatory Office (URE), initiated pursuant to Article 8(1) of the Energy Law.

The applicant may request:

• a resolution of the dispute concerning the refusal to connect,
• a determination that the operator is obliged to conclude a connection agreement,
• a determination by the President of the Energy Regulatory Office of the content of the connection conditions.

The President of the Energy Regulatory Office examines the merits of the case – thus, they do not limit themselves to a formal assessment of the refusal, but examine whether there is indeed a lack of technical or economic conditions and whether the operator is properly fulfilling their obligations under the Energy Law. To this end, the President of the Energy Regulatory Office:

• analyses the documents and correspondence of the parties, including the content of the connection application and any proposals for alternative solutions,
• requests additional explanations and data from the operator, e.g. network diagrams, power flow calculations, and the assumptions used in economic analyses,
• in more complex cases, seeks expert opinions,

If, in the course of the proceedings, the President of the Energy Regulatory Office concludes that the refusal to connect was unjustified – e.g. the operator incorrectly assessed the technical conditions, breached the rules set out in its own Distribution Network Operation and Maintenance Manual, or unjustifiably cited a lack of economic conditions – he may:

• impose on the operator an obligation to conclude a connection agreement,
• independently determine the essential terms of that agreement.

As a result**, the decision of the President of the Energy Regulatory Office ‘supersedes’ the agreement between the parties in this regard** – the operator is obliged to comply with it, and refusal to do so may result in additional regulatory consequences.

Both the energy company and the applicant have the right to appeal against the decision to the Court of Competition and Consumer Protection. Following the hearing of evidence, the Court may uphold, amend or set aside the decision of the President of the Energy Regulatory Office, ensuring full judicial review of the regulatory authority’s ruling.

Author

Zuzanna Bokina-Kielbasa

Radca prawny, Managing Associate

Specializes in corporate services for business entities and personal data protection. Assists the firm's clients in the preparation of all corporate documentation, including the registration of commercial companies and the further registration of changes, and provides ongoing and comprehensive advice on business. Provides advice in carrying out transformation processes of commercial companies, including transformations and mergers. Prepares and gives opinions on contracts, regulations and current documentation…

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