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Czech Republic in 2017 National Report of the Energy Regulatory Office on the Electricity and Gas Industries in the Czech Republic in 2017 July 2018 National Report of the Energy Regulatory Office on the Electricity and Gas Industries in the Czech Republic in 2017 List of frequent abbreviations and acronyms ACER Agency for the Cooperation of Energy Regulators CEER Council of European Energy Regulators ČR, CZ, CR Czech Republic EC, Commission European Commission Energy Act Act No 458/2000 on conditions of business and state administration in energy industries and amending certain laws EP European Parliament ERO, Office Energy Regulatory Office EC European Community EU, Union European Union market operator, OTE, a.s. OTE, a.s., the market operator PCI Projects of Common Interest REMIT Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency TYNDP Ten Year Network Development Plan V4 The Visegrád Four 1 National Report of the Energy Regulatory Office on the Electricity and Gas Industries in the Czech Republic in 2017 Content 1 Foreword by the ERO Board .............................................................................. 3 2 Main developments in the electricity and gas markets....................................... 4 3 The electricity market......................................................................................... 6 3.1 Network regulation............................................................................................. 6 3.1.1 Unbundling......................................................................................................... 6 3.1.2 Technical functioning......................................................................................... 6 3.1.3 Network tariffs for connection and access ......................................................... 7 3.1.4 Cross-border issues ............................................................................................ 8 3.1.5 Compliance....................................................................................................... 13 3.2 Promoting competition ..................................................................................... 15 3.2.1 Wholesale markets ........................................................................................... 15 3.2.2 Retail market .................................................................................................... 16 3.3 Security of supply............................................................................................. 19 4 Gas .................................................................................................................... 21 4.1 Network regulation........................................................................................... 22 4.1.1 Unbundling....................................................................................................... 22 4.1.2 Technical functioning....................................................................................... 23 4.1.3 Network tariffs for connection and access ....................................................... 26 4.1.4 Cross-border issues .......................................................................................... 28 4.1.5 Compliance....................................................................................................... 29 4.2 Promoting competition ..................................................................................... 30 4.2.1 Wholesale markets ........................................................................................... 30 4.2.2 Retail market .................................................................................................... 32 4.2.3 Recommendations on supply prices, investigations and measures to promote effective competition........................................................................................ 35 4.3 Security of supply............................................................................................. 35 5 Consumer protection and dispute settlement in electricity and gas.................. 37 5.1 Consumer protection......................................................................................... 37 5.2 Dispute resolution............................................................................................. 37 2 National Report of the Energy Regulatory Office on the Electricity and Gas Industries in the Czech Republic in 2017 1 Foreword by the ERO Board For the fourteenth time, the Energy Regulatory Office (‘the ERO’ or ‘the Office’) is presenting its National Report on the Electricity and Gas Industries to the European Commission (EC) and the Agency for Cooperation of Energy Regulators (ACER), thereby meeting its reporting and notification obligation set out in the applicable EU Directives and Regulations. The Energy Regulatory Office has been operating under Act No 458/2000 on conditions of business and state administration in energy industries and amending certain laws (the Energy Act), as amended by, in particular, Act No 131/2015 and amendment to Act No 165/2012 on supported energy sources, as amended, as an administrative authority for regulation in the energy industries since 1 January 2001. The year 2017 was a major milestone for the Energy Regulatory Office. Until 31 July 2017, Chairwoman Alena Vitásková headed the Office. Under the Energy Act, the Government of the Czech Republic had appointed a five-member ERO Board, which took over on 1 August 2017. Thus, the ERO is managed by a collective body; this is one of the most fundamental changes in the ERO’s 16-year history. Every year, a new Board member will be appointed for five years to replace the one for whom the term ends. A Board member is appointed as the ERO Board Chairman for the period remaining to the end of his service on the ERO Board, but for no more than three years. The ERO Board’s deliberations follow its Rules of Procedure. The ERO Board decides by voting. Vratislav Košťál, Rostislav Krejcar, Vladimír Outrata (as the ERO Board Chairman), Jan Pokorný, and Vladimír Vlk have been appointed to the ERO Board. The ERO Board approves proposals for implementing acts, proposals for the principles of price regulation, and proposals for price decisions, the plan of the ERO’s activities, the budget proposal, the final account, and the Report on the Activities and Finances of the Energy Regulatory Office [the Annual Report]. The ERO Board also decides on remedies lodged against the first-instance decisions issued by the ERO. In 2017, the Office focused on preparing and migrating to the new system of ERO governance in addition to its standard activities arising from its duties and competences specified in the Energy Act and related to the higher-level legislation. The departing management therefore prepared lists of activities and agendas with a view to the new management having, right upon taking over, a complete picture of the progress in the various tasks, including their prioritisation, on which the new management started to work immediately. The ERO made an effective use of the opportunities opened by the election of CEER’s new Board of Directors and elections to the leading positions in CEER and ACER working groups and task forces. As the result of intensive international cooperation, in October 2017 an ERO representative became a CEER Vice-President and other ERO representatives hold various positions in several working groups. 3 National Report of the Energy Regulatory Office on the Electricity and Gas Industries in the Czech Republic in 2017 2 Main developments in the electricity and gas markets The Energy Regulatory Office operates under the Energy Act, into which the Czech Republic has incorporated the relevant provisions of the third energy package and Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (REMIT). The consultation process for an extension of the Price Control Principles for 2016-2018 for the Electricity and Gas Industries and for the Market Operator’s Activities in the Electricity and Gas Industries until 2020 took place in 2017. The price control principles for 2016-2018 have been set with a view to energy system operators having sufficient funds and motivation for system upgrade and development while preventing them from channelling the funds collected from customers out of their companies; they should use the funds for maintenance and development over the long term. On the strength of this public consultation the decision was taken to extend the fourth regulatory period from three to five years. This caused an extension of the applicability of the rules applicable to 2016-2018. The drafting of the Price Control Principles for the Fifth Regulatory Period, which should begin in 2021, was also started in 2017. In early 2017, the ERO completed the legislative process for amending public notice no. 262/2015 on regulatory reporting. The amendment was necessitated by amendments to certain laws and regulations on accounting, which have changed the chart of accounts and also the arrangement and designation of items in the profit and loss account. To ensure continued clear and understandable reporting based on financial statements, the ERO amended public notice no. 262/2015 on regulatory reporting and modified the regulatory reports to match the modified financial statements. Two meetings of
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