The energy regulator is required to consider the effects of a merger by an industrial user of electricity

The president of the Energy Regulatory Office has withdrawn from imposing sanctions on a company that relied on data for a company acquired in a merger when applying for the status of an industrial user of electricity.

Many industrial users of electricity in Poland attempting to extend this status to cover 2017 were surprised to discover that they were missing from the list issued by the president of the Energy Regulatory Office on 30 December 2016. Two months later, it turned out that in most cases the reason was sanctions imposed by the regulator on industrial users under Art. 188(15) of the Renewable Energy Sources Act. The sanction provided for there is ineligibility for the relief for industrial customers in 2016–2020 due to:

  • Failure to provide to the regulator on a timely basis information and statements on performance of obligations in 2015 for the period following entry into force of the RES Act
  • Providing false or misleading information in such statements, or
  • Enjoying the relief for industrial customers without fulfilling the conditions specified by law.

Our law firm represented an industrial customer accused by the regulator of improperly enjoying the relief. The president of the Energy Regulatory Office disputed the correctness of the industrial customer’s use of financial data and power consumption data of a company which the customer acquired in a merger. The customer combined the figures for the acquired company and the acquirer, and on this basis stated its level of power consumption and calculated the power consumption intensity factor for determining the scale of the relief it was entitled to. The regulator also asserted that prior to the merger, the acquired company had not conducted the activity specified by the relevant statistical classification for industrial customers, which in the regulator’s view also barred the company from relying on the financial data of the acquired company.

The regulator indicated as the legal basis for its position that there were no grounds for applying the regulations on succession to rights and obligations in a merger when examining the status of an industrial power user, because the RES Act does not contain a provision permitting recognition of succession to data for purposes of obtaining relief for industrial power users.

On behalf of the industrial user, the firm filed an appeal, alleging violation of regulations of the Commercial Companies Code and the Accounting Act providing for general succession, including under administrative law, in the case of a merger of companies. The firm argued that the RES Act did not need to provide for the existence of succession under administrative law because this was provided for by the Commercial Companies Code. If the parliament intended to prohibit succession in verification of the status of an industrial power user, the RES Act should have provided an express exclusion in this respect. A consequence of the succession to rights and obligations in a merger is to total the financial data of the merged companies in the acquirer’s books. Combining these figures reflects the essence of a merger as an integration of the property of the entities participating in the merger. In the sanctions decision appealed against, the regulator noted the merger, but overlooked that the literal wording of the Accounting Act provides for adding together the respective items of assets and liabilities, and income and expenses, of the merged companies, in order to reflect the consequences of universal succession in the financial documents.

After examining the appeal, the regulator reconsidered the matter and set aside the earlier decision. This lifted the sanction imposed on the firm’s client in the form of a prohibition against enjoying the relief for industrial power users—which could conservatively be estimated at a loss of several million zlotys. In the justification for the decision following the appeal, the regulator stated that the consequences of universal succession, including under administrative law, should be taken into consideration when reviewing the status of an industrial power customer.

A sanction analogous to that provided in Art. 188(15) of the RES Act is also provided in Art. 55 of the act. Consequently, the ruling by the president of the Energy Regulatory Office in this case should also be relevant for proceedings concerning industrial users in later years.

Marek Dolatowski, Energy practice, Wardyński & Partners