Procedure for Issuing License for Engaging in an Energy-related Activity; Connecting the Power Plant to the Electricity Grid

An energy license is a permit issued by the Energy Agency of the Republic of Serbia for engaging in an energy-related activity. The energy license is an administrative decision confirming fulfillment of the requirements prescribed under the Energy Law and the Rulebook on Requirements Regarding Professional Staff and Terms of Issuing and Revoking of Energy Licenses for pursuit of energy-related activities. It is the last in a series of legal documents required for engaging in energy-related activities. The energy license must be possessed by the entity already in possession of a power plant, which has acquired the right to engage in the activity based on the assignment agreement for pursuit of the activity of public interest or based on the concession agreement.

The requirements for obtaining the energy license shall include: 1) Registration in the Business Registry; 2) Fulfillment of the technical requirements with respect to the power plant itself (electric power, fire-prevention, and environmental protection ones), including proprietary rights or the right to use the actual plant; 3) The required staff capacity available; 4) The required financial resources have been made available (evidence of solvency, balance sheet, etc.); 5) The energy entity has not been denied the energy license in the past three years; 6) No members of the management board have been sentenced for an economic offence (CEO, any member of the Board of Directors).

The energy license shall be issued for a period of 10 years. (*97) The energy license fee shall be paid to the Agency at the time of the license granting. The energy license holder shall pay a certain fee to the Agency for possession of the energy license on annual basis. (*98)

The energy license may be suspended or permanently revoked if the license holder ceases to fulfill any of the requirements prescribed for granting the energy license or fails to implement any other regulations related to the electricity generation.

The energy license shall not be required for electricity generation for one’s own use or for electricity generation in power plants of up to 1 MW. The Rulebook on Requirements Regarding Professional Staff and Terms of Issuing and Revoking of Energy License for pursuit of energy-related activities defines the application for the energy license for engaging in the energy-related activity of electricity generation. When electricity generation is in question, the forms to be filled in with the data on facilities are differently defined subject to the facility in which electricity is generated. There are special forms for facilities for electricity generation within hydropower plants, thermoelectric power plants, and power plants-district heating plants (having combined heat-and-power cycle). When filing the application for the energy license for electricity generation in a wind power plant, the applicant shall fill in the form that provides maximum data on the facility, or submit a preliminary application to the Agency for the data he/she should fill in when filing the application for the energy license.

CONNECTING THE POWER PLANT TO THE ELECTRICITY GRID

Once the operating permit and the right to engage in the activities of public interest have been obtained, it is necessary to connect the power plant to the electricity grid. Power producer’s facility shall be connected to the electricity transmission and/or distribution system under the terms and conditions and in the way stipulated under the Energy Law, the Decree on Conditions of Electricity Delivery, and the Transmission or Distribution Grid Codes, in compliance with the standards and technical regulations concerning the criteria for access to and use of power plant facilities, equipment, and plants. (*99)

The energy entity, to whose system the power producer’s facility is to be connected, shall approve the connection if it establishes that the equipment and installations within the facility to be connected meet the requirements prescribed by the laws and statutes, technical and other regulations governing requirements and method of exploitation of such facilities.

The facility shall be connected to the electricity transmission and/or distribution system on the basis of the approval issued by the energy entity to whose system the facility is going to be connected. The approval for connection to the electric power system is an administrative decision issued in form of a decision stipulating the terms and conditions that the applicant, the electricity producer, shall fulfill in order to acquire the right to supply electricity to the electric power system. The approval for connection shall be issued in a decision, further to the application submitted by a natural person or by a legal entity or by an entrepreneur.

The Energy Agency adopted the methodology for determining the costs of connection to the grid (*100), and, based on this methodology, the energy entity to whose system power plants shall be connected, has adopted its own document specifying connection charges.

The application for approval for access to and use of the system shall be submitted to the energy entity in charge of electricity transmission or distribution, to whose network the power plant is to be connected.

The application shall be accompanied by the following data on: 1) The owner of the facility, the holder of the right to use the facility (for natural persons: the name and place of residence, personal identification No. and, for legal persons or entrepreneurs: business name or name, seat, PIB, official registration No., account number, and the name of the person in charge); 2) The facility, for the connection of which, issuing of the approval for connection is applied for (the address, type, location of the facility, and the use of the facility); 3) Estimated time of connecting the facility. In addition, it is required to submit the data on: 1) The total installed capacity of the facility, the number and power of generating units, source voltage, and block transformer; 2) Expected annual and monthly outputs; 3) Protection and measuring equipment; 4) The energy license and the license for engaging in the activity of electricity generation for the facilities of a capacity exceeding 1 MW (consequently, it follows that one should first obtain the license for engaging in the activity, and only then apply for connecting the energy facility to the grid).

In addition to the above, for the already constructed facilities, the construction permit as well as the evidence of the ownership of or of the right to use the facility shall also be submitted.

The energy entity in charge of electricity transmission or distribution to which the application for connection has been submitted, shall decide on the application for the approval for connection of the power plant to the electricity grid within thirty days from the date of receipt of the written application. The energy entity shall issue a positive decision – the Approval provided all the requirements have been fulfilled, and based on the technical report, calculation of the costs for connection, and other available documents. The approval shall be granted in form of a decision. The Decision shall be issued with the validity for the period equivalent to the period of construction of the facility or until completion of the works set out in the application for connection. Validity of the Decision approving the connection shall not exceed two years from the date of its handing down. At the request of the applicant, the validity period of the Decision may be extended. The application for extension of the validity shall be submitted not later than 30 days prior to the expiry of the validity period set out in the Decision.

An appeal against the Decision concerning the approval of the connection may be lodged with the Energy Agency of the Republic of Serbia within 15 days from the date of submitting the Decision. The decision of the Agency on the appeal shall be final and an administrative suit may be instituted against it. The costs of connection to the electricity transmission and/or distribution system shall be borne by the applicant applying for connection. The amount of such costs shall be calculated by the energy entity in charge of the electricity transmission or distribution, in compliance with the methodology for setting tariff elements for pricing access to and use of the system adopted by the Energy Agency. The Methodology shall stipulate the method and detailed criteria for calculation of the connection costs depending on the approved installed capacity, point of connection, the need for carrying out of works or the need for installation of the necessary equipment, and other objective criteria.

After issuing the Decision and the connection, the producer – the privileged producer (*101) and the buyer (*102) shall conclude the Power Purchase Agreement (*103) stipulating their mutual rights and obligations. The Agreement shall be concluded in written form, for the period of 12 years, in accordance with the Energy Law, the law governing general obligations, the General Conditions of Electricity Supply, the Distribution and Transmission Grid Codes, regulations stipulating in more detail the requirements for obtaining the privileged electricity producer status and the criteria for verification of compliance with requirements, and the Decree on Incentives for Electricity Generation Using Renewable Energy Sources and Combined Heat-and-power Generation. Together with the application for signing the agreement, the privileged producer shall submit to the buyer the decision on acquiring the status of the privileged producer. The buyer shall conclude the agreement with the privileged producer within 30 days as of the date of submission of the application in writing for signing of the agreement and, if all the requirements have been met.

It shall be prohibited to connect facilities to the electricity transmission or distribution system unless the operating permit has been obtained, in compliance with the Law. (*104)

Details of Relevant Legislation:

(*97) Article 45, paragraph 2 of the Energy Law.

(*98) The license fee is set by the Energy Agency, specifically: the Criteria and Standards for Setting Energy License Fees for Engaging in Energy-related Activities (Official Gazette of the RoS, Nos. 14/06, 40/06,126/07, and 120/08) and the Decision on Coefficient Value for Calculation of the Energy License Fee for Engaging in Energy-related Activities for 2010 (Official Gazette of the RoS, No. 109/09).

(*99) It is interesting that both the Energy Law and the Decree on Conditions of Electricity Supply prescribe that a facility is connected to the grid after conclusion of the power purchase agreement, which is concluded between an energy entity and the electricity buyer. These provisions should be stated precisely both in the Law and in the Decree, because they suggest that the electricity buyers are always the ones that are connected to the electricity grid, which does not always have to be the case, and it does not always have to be the power purchase agreement that is to be concluded on the occasion of every connection to the electricity grid but just the agreement on electricity transmission or on distribution via the grid. The actual sale of electricity, under the conditions of an open electricity market and under the conditions when a power plant is connected to the transmission or to the distribution system, does not have to be an integral part of that electricity transmission or distribution activity.

(*100) The Decision on Establishing the Methodology for and Criteria and Manner of Setting Costs of Connection to the Electricity Transmission and Distribution Systems (Official Gazette of the RoS, Nos. 60/60, 79/06, and 114/06).

(*101) A privileged producer is the producer engaged in the activity of electricity generation and who has acquired the status of a privileged producer by the decision of the competent authority.

(*102) In this case, the electricity buyer is a public enterprise in charge of generation, distribution, and trade in electricity.

(*103) The Power Purchase Agreement shall be based on a template drafted by the Buyer and approved by the Ministry of Mining and Energy.

(*104) Further information on obtaining the status of a privileged power producer can be found in Chapter 7 hereof.

NOTE: Complete text is taken from the document-guide for investors Construction of Wind Farms and Electricity Generation from Wind Energy in the Republic of Serbia, of which authors are Branislava Lepotic Kovacevic, PhD Law, and Bojan Lazarevic, BSc El. Eng.

The project was implemented under the patronage of USAID, GTZ / GIZ Serbia and the Ministry of Energy in 2010.