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The Warsaw Voice » Law » September 30, 2011
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Public Procurement Law in the Energy Sector
September 30, 2011   
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The energy sector is now facing challenges connected with the development of energy infrastructure, in particular as concerns constructing new sources of energy and expanding transmission grids. These tasks will be implemented, to a varying extent, by the majority of energy companies operating on the Polish market. In order to establish the legal framework and timeframe of these complex investment processes, it will be essential to determine which energy companies are required to apply the Public Procurement Law when choosing contractors to perform construction works.

An Energy Company as the Awarding Entity For a Utility Contract
Roughly speaking, it can be assumed that, when choosing a contractor to perform construction work, an energy company is required to apply the Public Procurement Law in the following cases: (1) If it is a subsidiary of a public finance sector unit (i.e. a municipality or the State Treasury) and provides “utility services”; (2) if it is independent from a public finance sector unit and provides “utility services” where such services are performed on the basis of “exclusive” or “special” rights; or (3) if more than 50% of the investment is financed from public funds. It is also mandatory to apply the Public Procurement Law where the contract value is at least 4,850,000 euros.

Energy Companies Controlled By Public Entities
Energy companies controlled by public entities include PGE S.A., Tauron Polska Energia S.A., ENEA S.A., PGNiG S.A. and Gaz-System S.A., all controlled by the State Treasury. These companies are obliged to apply the Public Procurement Law if they provide “utility services”. The notion of “utility services” has been defined in Article 132 of the Public Procurement Law and is understood to mean: exploring, prospecting for or extracting gas, oil and its natural derivatives, brown coal, hard coal and other solid fuels, as well as the creation of networks intended to provide public services connected with the production, transmission or distribution of electricity, gas or heat or supply of electricity, gas or heat to such networks or management of such networks. In accordance with this provision, it is assumed that trade in energy is not a “utility service”.

Energy Companies Independent From Public Entities
Private energy companies providing “utility services” in the energy sector may act as Awarding Entities provided that their activities are performed on the basis of exclusive or special rights. These rights should be understood to mean the rights granted to an energy company under a law or an administrative decision and reserving the given activity for one or more entities, if the satisfaction of conditions for obtaining such rights, as set out by the law, does not automatically give rise to an obligation to grant the same. The notion of exclusive or special rights is an autonomous notion used by EU law and has to be construed in accordance with the interpretation of the Court of Justice of the European Union provided in its jurisprudence. [1]

In accordance with the judgment concerning British Telecommunications plc [2], the grant of a license (concession) cannot be described as the grant of exclusive or special rights for as long as they may be granted to any undertaking that meets objective, proportional and non-discriminatory criteria. Energy concessions are granted on the basis of administrative decisions that are not discretionary in nature. Such concessions are granted on the basis of objective and non-discriminatory criteria in open and transparent proceedings. There can be an unlimited number of entities applying for the award of concessions, provided only that they meet the conditions set out in the Energy Law.

This means that private energy companies operating in Poland are not, in principle, required to apply the Public Procurement Law, as by definition, a concession does not provide for granting any exclusive or special rights. Nevertheless, it ought to be noted that the current practice in applying the Public Procurement Law, as well as the jurisprudence, seem to suggest the obligation of private energy companies to apply this law if they are natural monopolists on the market, which is the case of heat producers and energy distribution companies. This practice has not yet been subject to an in-depth analysis and its legal grounds must be seen as dubious.

[1] Cf. Case C-283/81, Srl CILFIT and Lanificio di Galardo SpA p. Ministra of Health, [1982] ECR 3415, point 20; Case C-149/97, The Institute of the Motor Industry p. Commissioners of Customs and Excise, [1998] ECR I-7053, point 16.
[2] Case C-302/94, The Queen p. Secretary of State for Trade and Industry, ex parte British Telecommunications plc., [1996] ECR I-06417, point 39.

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