Turn on the power
By : Wioletta Buczek
Cleaning up: the PSE's energy compensation fund will make the sector more competitive.
Plans for an energy compensation fund look set to be delayed with the failure of the Energy Regulatory Authority (URE) and the Finance Ministry to provide the necessary regulations on time, according to the Polish Power Grid (PSE).
The fund, which will allow power plants hemmed in by communist-era bank loans to compete on the open market, is scheduled to begin on July 1. The PSE, which is in charge of implementing the fund, cannot move ahead until the URE approves rules for the scheme and until the Finance Ministry decides on related value-added tax (VAT) issues.
"We hope we will manage to close talks with the URE on the rules for compensation funds (SOK) soon, and start negotiations with banks on revising long-term power purchasing agreements," said Zbigniew Kedzierski, PSE deputy president, last week. "If the July 1 deadline for the compensation fund's kickoff is to be met, negotiations with banks should be started immediately after any preliminary accord with the URE is achieved."
Kedzierski also said the request for tax interpretations was filed with the Finance Ministry in April, but so far the ministry has not responded.
When asked about deadlines for the fund's start-up, the ministry declined to comment, but the URE's spokesman Olgierd Szlapczynski said the PSE is worried the schedule for the fund will not be met and is trying to shift the responsibility for the delay.
"It is not that the timely kickoff of SOKs depends on the URE and Finance Ministry, as there are many other matters to be settled, for example the level of transmission tariffs for the PSE," Szlapczynski said.
The first power plants to enter the SOK system will be Dolna Odra, Jaworzno III and Opole, whose combined market share is 25%. At present, 70% of the country's energy is locked in long-term contracts with banks.
Kedzierski said power plants with high sales volumes would be the first in line for the SOK system. "I mean plants such as Polaniec or Turow, and I'm counting on the Belchatow power plant to enter the system soon," Kedzierski said.
Jan Buczkowski, president of the PSE, said the SOK system is an important step toward liberalizing the energy market, especially with Poland's European Union (EU) accession aspirations. He said 30-40% of the energy released from long-term purchasing agreements would enter the PSE.
Buczkowski added, however, that energy bosses are notoriously old-fashioned when it comes to changes in the industry. "The energy sector managers are quite conservative, so it's always better to keep to the old, 'efficient' system," he said. "Still, we have to keep in mind (the requirements of) EU accession and energy market liberalization goals."
Poland's energy law, adopted on December 1997, stipulates that the energy sector should gradually adapt to Western market standards and open up fully by December 2005.
Under communism, many power plants obtained long-term modernization loans from banks in exchange for the transmission company's agreement to buy a specified amount of electricity at an above-market price. The long-term contracts with banks are now seen as an obstacle for the successful privatization of energy generators.
The compensation scheme's aim is to cover the difference between the energy price the power plant receives on the free market and the price envisaged in the long-term contracts with banks.
