Increasing electricity prices may not please customers, but despite appearances they cause energy suppliers a lot of problems too. It is obvious that firms selling energy try to pass on increases in market prices to customers, even if they are bound by long-term energy sale agreements that guarantee a fixed price for the duration of the agreement. If this happens, customers need to seek the appropriate legal remedy to prevent costs going up, and in extreme cases prevent the electricity supply from being cut off.
Problems and actions of energy suppliers
The rapid rate of increase in electricity prices since the beginning of this year has affected all market players. Most customers are supplied under long-term electricity sale agreements. These agreements provide for a fixed price for the duration of the agreement. In agreements concluded in 2017, the price agreed was certainly significantly lower than current market prices observed on the Polish Power Exchange (TGE). This can cause problems for firms that take a market risk and do not enter into long-term contracts to meet obligations under the sale agreements to which they are party. In one recent case, suppliers of this kind were forced to stop trading, and their customers had to use the services of firms selling reserve energy.
Obviously, the rapidly changing situation on the market means it is difficult to construct agreements for the future. This should lead suppliers to re-think their policy on pricing and taking the risk that arises when purchasing large amounts of energy on an ongoing basis. Where competition is fierce, correctly evaluating the risk of further price increases is key to gaining customers and securing one’s own interests at the same time.
There have also been cases recently in which suppliers wished to amend the conditions of agreements currently in effect and change the agreed prices. At times, energy suppliers even expect that a price increase will take effect retrospectively for past periods covered by the agreement.
Unilateral increases and resulting disputes
Energy suppliers have now taken steps to protect against energy price rises in many of the existing agreements. There are often provisions under which the seller has the right to change energy prices unilaterally, for example if the applicable laws are amended or there is a major change in conditions on the market. This triggers numerous disputes that are taken to court. In the long term, courts will comment on whether a unilateral change of this kind is possible. The President of the UOKiK might also review the practices of energy suppliers. Agreements do not always specify precisely the circumstances in which the company is entitled to raise the price and the range of changes the parties can make. Provisions can be worded in a general way and give rise to a lot of confusion regarding interpretation. Under current rules, provisions of this kind should be interpreted in a manner finding against the supplier, if the supplier drew up the agreement and it was not negotiated individually. Nevertheless, each case must be examined according to its particular merits.
More urgent problem for customers – risk of electricity being cut off
In addition to the question of whose standpoint is correct and whether a price increase is permissible, an energy user has a more urgent problem, which can have severe consequences. Failure to pay for electricity when suppliers raise their fees can lead to electricity supply being stopped. Under Polish law, the company can only do this in strictly defined situations, and these include default for more than 30 days on payment for electricity that has been drawn. For businesses operating production plants, for example, having electricity cut off could have disastrous and irrevocable consequences. For this reason, under pressure from the supplier due to a notice demanding that they pay or have their electricity supply cut off, customers pay voluntarily. The rights enjoyed by the supplier seem to give it an advantage, as customers are unwilling to risk production stoppages and serious financial losses for which recourse would be obtained in the distant future, if at all.
An energy customer is not without legal remedies, however, and can prevent electricity being cut off on unreasonable grounds. However, this requires the relevant legal measures in the appropriate proceedings. A customer facing the threat of having their electricity cut off has to act quickly and effectively, and therefore has to know where it is best to seek assistance.
Who will not be able to help?
If the electricity has not yet been cut off, the President of the Energy Regulatory Office (URE) will not be able to help. Although the office does have the power to adjudicate disputes regarding the shutting off of electricity supply on unreasonable grounds, this authority has recently said in its rulings that it considers its powers in this respect to be limited. Its standpoint is that in accordance with its statutory powers it can only intervene when the electricity supply has been cut off. It does not have the power to provide a legal remedy in cases where electricity might potentially be cut off. This even includes cases in which the supplier is openly threatening to do so, and the facts indicate that its claims in this regard are questionable (for example the amount the company is seeking is disputed).
While it may be true that the President of the URE does not have the power to act in matters where energy agreements already in effect are implemented (at least until the amendment to the Energy Law which is now being processed is passed), its power to examine issues relating to cutting off supply does not stop at ruling on disputes where supply has already been cut off. Under Art. 8(2) of the Energy Law, the President of the URE can issue a form of injunction defining the conditions for commencing or continuing supply of energy until the dispute is resolved. Because this provision allows the rules for continuing supply to be determined, this provision should be interpreted as giving the President of the URE the power to prevent supply being cut off.
In cases in which there is a danger of the energy supply being cut off at the request of the supplier, the energy distribution company, which is the party asked by suppliers to cut off the supply and which does this from the technical point of view, will not come to the customer’s aid either. The relevant provisions do not give distributors the power to examine whether a request for energy to be shut off is justified. Under these provisions, distributors have an obligation to comply with the supplier’s request. In such cases, distributors act at the request of suppliers, implementing the relevant procedure provided for in the network operation and use manual. In such cases, liability for energy potentially being cut off without good reason rests with the party that requests that supply be stopped. Any potential risk on the part of the distributor in this respect is therefore limited or even excluded. A judgment given by the competent authorities, in particular the President of the URE, will be binding for the distributor, but, as mentioned above, in practice judgments of this kind are only issued once energy supply has in fact been stopped.
An effective means of preventing electricity being cut off?
A customer contesting a unilateral increase who wishes to prevent electricity being cut off needs to seek a remedy in the common courts. A correctly filed motion for an injunction might be especially effective. On the basis of a motion of that kind, a court can issue an order preventing the supplier and distributor from stopping the energy supply. This motion leads to a statement of claim for the unilateral amendment to the agreement to be ruled ineffective. For the duration of the case or until the agreement between the parties is in effect, the customer’s interests will be secured. A motion of this kind must contain the correct statement of reasons, in which, in particular, the claim must be substantiated (in the form of analysis of the conditions in the agreement between the parties and arguments contesting the effectiveness of unilateral amendments made to the agreement) The legal interest in the injunction being granted must also be proven to be credible (demonstrating the implications for the customer if the injunction is not granted).
Agata Jóźwiak, attorney-at-law, Dispute Resolution & Arbitration Practice, Wardyński & Partners
Radosław Wasiak, adwokat, M&A and Corporate Practice, Wardyński & Partners