Portugal: Legislative Reform Of The National Electricity System

Decree-Law 15/2022 of 14 January ("Decree-Law 15/2022") has been published to establish the new rules for the organisation and operation of the National Electricity System ("SEN"). In doing so, it incorporates into Portuguese law (i) Directive (EU) 2019/944 of the European Parliament and of the Council, on common rules for the internal market for electricity, and (ii) Directive (EU) 2018/2001 of the European Parliament and of the Council on the promotion of the use of energy from renewable sources.

The approval of this Decree-Law follows the public consultation on the draft decree-law that took place last November, and PLMJ's Energy and Natural Resources team published an Informative Note about this.

In this note, we will set out the main legislative changes resulting from the approval of this new law for the Portuguese electricity sector. In describing these changes, we will focus in particular on the new features of the final version now approved compared to the one which had been put out to public consultation.

Electricity generation

Periods

• A period of 1 (one) year from the issuance of the capacity reservation permit (título de reserva de capacidade – "TRC") is established to issue the generation licence, when an Environmental Impact Assessment ("EIA") procedure has to be carried out. Alternatively, if this procedure is not required, the maximum period is 6 (six) months. Therefore, a shorter period is established for these projects and this was not provided for in the version submitted to public consultation.
• The period of 1 (one) year from the granting of the generation licence to obtain the operating licence is maintained, as proposed in the public consultation draft. However, there are different rules for auctions. Cases where the operating licence cannot be issued due to delays in the grid connection processes are expressly considered as exceptions to this deadline, and the possibility of extension is also maintained.

Transfer of the licence and change of control

• The prohibition, proposed in the public consultation draft, on any change in control over the promoter until the operating licence is issued has been eliminated. Moreover, the rules on the transfer of the licence itself have also been made more flexible.
• The new rules equate cases of transfer of the licence and change of control of the licensee. They also make the authorisation of both subject to increasing the security by half of the legally established amount. Thus, the increase in the security is intended to act as a deterrent to purely speculative transactions.
• The encumbrance of shareholdings in favour of licensing entities and the constitution by the licensee of SPVs wholly owned by it to develop the project are not subject to any increase in the security.

Grid connection and licensing

• Decree-Law 15/2022 maintains the provision in the public consultation draft that allows the Public Service Electricity Network ("RESP") operators to change the substation or grid connection level (except in the case of a TRC awarded following a tender procedure). However, the ground for making this change are specified (technical reasons and reasons not attributable to the applicant) and the reference to the possibility of this change being made at the request of the applicant is eliminated.
• The Decree-Law also maintains the proposal in the public consultation draft that makes the issuance of a TRC in the general form subject to the prior payment of compensation to the electricity system of €1500.00 per MVA. However, it is not made clear whether the value of the co-financing with the networks will be maintained and what happens in the event of expiry of the TRC due to the opening of an auction.
• Access to the network in the form of an agreement with the network operator depends on the annual setting of a quota by the member of the Government responsible for energy, as proposed in the public consultation draft. This may be differentiated by technology and by generation for self-consumption, and the procedure for selecting projects in this form is heavily regulated. The final version that has now been approved makes it clear that the signature of agreements between applicants for requests for agreements and the ORD (distribution network operators) are subject to the existence or creation of reception capacity in the national transport network ("RNT") substations that feed the national distribution network ("RND") in the areas subject to these requests for agreements.
• In the case of auctions, the recognition of the public interest and public utility for all legal purposes of the installation of electricity generation plants and their lines is maintained, as had been proposed in the public consultation draft. However, in the final version approved, it is expressly clarified that this recognition is relevant, in particular, for the constitution of easements and public utility expropriation.

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