A. WHOLESALE ELECTRICITY TRADING

1. Background information

The main piece of legislation is the Energy Act (Zákon o energetike) that governs the terms and conditions for conducting business in the energy sector (generation, transmission, supply, distribution, trade of energy). The electricity market is governed by the Act on Regulation in the Network Industries (Zákon o regulácií v sieťových odvetviach) which, inter alia, sets out the status and scope of activities of the Slovak NRA (Úrad pre reguláciu sieťových odvetvíURSO). Finally, the Electricity Market Operation Rules Ordinance (Nariadenie vlády ktorým sa ustanovujú pravidlá pre fungovanie trhu s elektrinouElectricity Ordinance), contains further regulation regarding the operation of the electricity market.

2. Licence requirements

2.1. General aspects

Under Sec. 5 of the Energy Act, the supply of energy is subject to an energy licence. Supply of energy also comprises (wholesale) electricity trading.

Electricity trading without any profit margin is not subject to the licensing regime. The same applies to a trader who is only transiting (importing and exporting at the same time) electricity through the Slovak transmission system. Nevertheless, both shall have to conclude an Agreement on Settlement of Imbalances (see section I.3.2 below).

2.2. Conditions for licensing

  • Corporate presence in Slovakia - a foreign applicant for the licence has to maintain at least a branch in Slovakia within the meaning of the Slovak Commercial Code, or to set up a Slovak subsidiary;
  • Responsible representative - the applicant is obliged to appoint a responsible representative who is in charge of the execution of the energy trading. The responsible representative can act for only one electricity trader in this capacity and shall have a professional qualification in the area of electricity supply. The responsible representative must have acquired a certain level of education, practice and professional experience in the area of energy, which has to be proven by an examination in the Slovak language;
  • Integrity of the statutory body - the applicant must also prove that the head of the branch or the statutory body of a company has not been convicted of any criminal act in connection with electricity trading.

2.3. Timetable and fees for obtaining the licence

The licence is granted by URSO on the basis of an application. URSO has to issue the licence within 30 days from the submission of the complete application. The licence is issued for an unlimited period of time. The fee for the issuance of the licence is EUR 1,659.50.

3. Trading requirements

3.1. Possibilities of electricity trading

Wholesale trading of electricity in Slovakia may be carried out by over-the-counter trading (OTC), on the exchange, on the short term electricity market and by way of auctions:

  • OTC: The Electricity Trader shall conclude a Sale and Purchase Agreement and an Agreement on Settlement of Imbalances (see section I.3.2 below);
  • Trading on the exchange: Electricity may be exchanged via the Slovak electronic exchange system maintained by the power exchange operator SPX (Slovak Power Exchange). For entry into the SPX, a trader must conclude an agreement with SPX and pay a monthly fee;
  • Short-term electricity market (day-ahead market): The organised short-term electricity market allows participants (Electricity Traders) to offer or demand electricity and helps to decrease the possibility of imbalances.
  • Auctions may be used for cross-border trading on cross-border profiles or for auctions established by an electricity trader in compliance with the regulation adopted by URSO.

3.2. Balancing market

Under Slovak law, a wholesale electricity trader is obliged to transfer its liability for imbalances and to settle its imbalances through the balancing biller, ie OKTE (Organizátor krátkodobého trhu s elektrinou). Therefore, the trader shall enter into an Agreement on Settlement of Imbalances with OKTE and deposit a financial security.

4. Cross-border trading

Generally, in Slovakia cross-border trading of electricity is organised by SEPS.

The following essential requirements for cross-border transmission apply:

  • Conclusion of an Agreement on Transmission of Electricity through Cross-border Connection with SEPS;
  • Agreement on Settlement of Imbalances concluded with OKTE (see sec 3.2 above);
  • Allocation of transmission capacities on the cross-border profiles of SEPS. Annually, monthly, weekly and daily, SEPS determines and publishes on its website the transmission capacity of the connection lines to each profile, which is available to market participants for the import or export of electricity as free available trading capacity for cross-border exchange of electricity. Cross-border transmission capacity may also be allocated to OKTE for organising implicit auctions in accordance with its own rules.
  • Sale and Purchase of Electricity Agreement concluded with a suitable foreign partner meeting the conditions of its local transmission system operator.

The Slovak transmission system has three cross-border interconnections with the Czech Republic, two with Hungary, one double line to Poland and one to Ukraine. Bottlenecks may still occur in certain circumstances in case of interconnectors with Hungary. The list of bottlenecks is published by SEPS on its website.

The process of market coupling is increasing opportunities for cross–border wholesale trading in Slovakia. Since June 2010, the national markets of Slovakia and the Czech Republic are connected through the daily organised markets via the abovementioned ČEPS/SEPS profile. As of 1 July 2012, Hungary is also a member of this market coupling project. There are initiatives to also include the markets of Romania and Poland into this project.

5. Grid access

Wholesale Electricity Traders who only trade electricity with other electricity traders within Slovakia and do not supply Slovak final costumers, are not required to have access to the transmission system.

B. WHOLESALE GAS TRADING

1. Background information

The Slovak gas market is mainly regulated by the Energy Act (Zákon o energetike) that governs the terms and conditions for conducting business in the energy sector (generation, transmission, supply, distribution, trade of energy). The regulation of the electricity market is governed by the Act on Regulation in the Network Industries (Zákon o regulácií v sieťových odvetviach) which, inter alia, sets out the status and scope of activities of the Slovak NRA (Úrad pre reguláciu sieťových odvetvíURSO). Finally, the Gas Market Operation Rules Ordinance (Nariadenie vlády ktorým sa ustanovujú pravidlá pre fungovanie trhu s plynom – Gas Ordinance), which contains further regulation for the operation of the gas market.

2. Licence requirements

2.1. General aspects

According to Sec. 5 of the Energy Act, the supply of gas is subject to a licence. Supply of gas also comprises (wholesale) gas trading.

Gas trading without any profit margin is not subject to the licensing regime as well as the supply (trade) of gas produced from bio-mass or biogas. The latter trade activity requires notification of this activity to URSO.

2.2. Conditions for licensing

  • Corporate presence in Slovakia - a foreign applicant for the licence has to maintain at least a branch in Slovakia within the meaning of the Slovak Commercial Code, or to set up a Slovak subsidiary;
  • Responsible representative - the applicant is obliged to appoint a responsible representative who is in charge of the execution of the gas trading. The responsible representative can act for only one gas trader in this capacity and shall have a professional qualification in the area of gas supply.
  • Integrity of the statutory body - the applicant must also prove that the head of the branch or the statutory body of a company has not been convicted of any criminal act in connection with gas trading.

2.3. Timetable and fees for obtaining the licence

The licence is granted by URSO on the basis of an application. URSO has to issue the licence within 30 days from the submission of the complete application. The licence is issued for an unlimited period of time. The fee for the issuance of the licence is EUR 1,659.50.

3. Trading requirements

3.1. Possibilities of gas trading

Wholesale trading of gas in Slovakia may be carried out by over-the-counter trading (OTC) and by way of auctions:

  • OTC: The wholesale Gas Trader shall conclude a Sale and Purchase Agreement and an Agreement on Access to the Gas Transmission System and on Gas Transmission (see section 3.2 below);
  • Auctions may be used for auctions established by a gas trader in compliance with the regulation adopted by URSO, which sets forth, inter alia, requirements of the procedural auction rules, which shall be drafted by the Trader and submitted for approval to URSO.

Currently there is no other form of wholesale gas trading in Slovakia, especially no gas exchange; however, wholesale gas traders may use the gas exchange at the Baumgarten hub in Austria.

3.2. Gas balancing

In Slovakia, physical balancing of the network is executed by Eustream a.s. (Eustream – a 100% subsidiary of SPP). However, the Gas Trader is responsible for the commercial balancing and settlement of the deviations in the network resulting from different quantities of gas supplied at the entry point and handed over at the exit point on the same gas day. To this end, the daily imbalance of gas is charged or credited on the Gas Trader balancing account.

4. Cross-border trading

Eustream manages a transmission pipeline system with three interconnection points. This system is used both to transport gas for consumption in the Slovak Republic and to transit Russian gas further west. The existing three interconnections are at the following border entry-exit points: Baumgarten (to Austria), Veľké Kapuaany (to Ukraine) and Lan~hot (to the Czech Republic). The majority of the gas enters the Slovak transmission system at the Veľké Kapuaany point, due to the transit of Russian gas. The remaining two interconnections are used mostly for transmission to the west; however, at these two interconnections automatic reversal of flow is possible.

The requirements for cross-border trading are further defined by the Operational Order (Prevádzkový poriadok) issued by Eustream and approved by URSO according to which a Contract on Access to the Transmission Network and Transmission of Gas (Transmission Contract) has to be concluded.

5. Grid access

The wholesale Gas Trader is obliged to access the gas transmission system by concluding a Transmission Contract.

Access to the transmission system is based on an entry-exit model at the following four entry/exit points:

  • Veľké Kapuaany (border point with Ukraine);
  • Baumgarten (border point with Austria);
  • Lan~hot (border point with the Czech Republic);
  • Domestic point (virtual aggregated interconnection to and from domestic storage and distribution networks, ie any chosen point in the transmission system).

The entry and exit capacities can be booked separately and for various durations; transmission may also be carried out between two domestic points. Access to the grid is provided based on the Transmission Contract concluded with Eustream.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.