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Specific Features of the Legal Status of Generating Companies in the Wholesale Electricity and Capacity Market in View of the Sanctions Pressure and Restrictive Measures
 
PIIS0021441-5-1
DOI10.18572/2312-4350-2022-2-95-104
Publication type Article
Status Published
Authors
Nadezhda V. Koropets 
Affiliation: Kutafin Moscow State Law University
Address: Russian Federation, Moscow
Journal nameEnergy law forum
EditionIssue 2
Pages95-104
Abstract

The article considers specific features of the legal status of generating companies in the wholesale electricity and capacity market associated with restrictive economic measures and other changes in the current laws. The author provides an analysis of current problems of energy projects implemented with the participation of generating companies. Debt restructuring projects for resource supplying companies with poor repayment discipline and electric power generation facility construction (modernization) projects are evaluated in terms of influence of: restrictive economic measures (in particular, the prohibition of mutual settlements using promissory note without the Government Commission’s transaction authorization), the bankruptcy moratorium (its influence on recovery based on enforcement documents), changes in the accrual and payment of penalties in the WECM, and changes in energy project deadlines.

Keywordsenergy law, wholesale electricity and capacity market, generating companies, debt restructuring
AcknowledgmentThe study was supported by the Russian Foundation for Basic Research under scientific project No. 20-311-90034.
Received09.08.2022
Publication date09.08.2022
Number of characters31888
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1 The beginning of 2022 can be described as a period of active rule-making. The adopted regulations affect the wholesale electricity and capacity market (WECM) and its players, in particular, generating companies. As A.G. LisitsynSvetlanov, LL.D., Professor, Academician of the Russian Academy of Sciences, rightly noted in his report Energy Projects under Political and Legal Turbulence presented at the scientific and practical conference Musin Readings 2022. Actual Issues of Energy Law, nowadays there is an actual threat to the implementation of energy projects. [1]
2 When operating in the wholesale electricity and capacity market, generating companies take part in various energy projects, such as generating capacity construction and modernization under capacity supply agreements (CSA, CSA-prime, CSA RES, etc.), debt restructuring projects for debtors with poor repayment discipline, etc.
3 Today, the main factors of vulnerability of energy projects that affect the legal status of generating companies in the WECM are as follows:
  • Sanctions pressure of foreign countries;
  • Restrictive economic measures introduced under decrees of the President of the Russian Federation;
  • The bankruptcy moratorium.
The problem of non-payments in the wholesale electricity and capacity market is one of the key problems in the electric power industry and it will only get worse given the economic instability. A number of studies have been devoted to the problem of non-payments in the WECM. For example, V.V. Romanova [2] examines it in the context of legal protection of energy market players’ interests, and O.A. Simvolokov [3] notes that “the lack of timely received funds negatively affects the implementation of infrastructure modernization programs, creates risks of accidents and disconnections of consumers”.
4 The following incentives are applied as part of current regulation to improve the WECM repayment discipline: penalties and fines, withdrawal of default supplier status, mandatory security for obligations to pay for consumed electric power, withdrawal of the right to trade in the wholesale market, withdrawal of wholesale market entity status for an electric power generating entity, debtor bankruptcy, etc.
5 In recent years, the debt restructuring procedure has been widely applied to sales organizations with poor repayment discipline. This measure includes special conditions of debt repayment for a certain category of debtors, most often it is a payment in installment condition, while creditors, in their turn, refrain from debt collection in court.
6 In the first quarter of 2022, the Accession Agreement was amended in terms of the WECM settlement in order to implement a debt restructuring project for default suppliers with poor repayment discipline. The Regulation on Financial Settlement in the Wholesale Electricity Market (Annex 16 to the Agreement of Accession to the Wholesale Electricity Market Trade System) [4] was supplemented by Annex 114.15. Obligation Performance Agreement Form. An overwhelming number of researchers [5] agree that, in terms of the way it is concluded, the agreement of accession to the wholesale electricity market trade system is an accession agreement, the rules on which are defined in Article 428 of the Civil Code of the Russian Federation. Given the legal nature of an accession agreement and the fact that the obligation performance agreement form is an integral part of the Agreement of Accession to the Wholesale Electricity Market Trade System, the form is binding upon all signatories of the Accession Agreement, i.e., all WECM entities.
7 The agreement form under consideration is a typified document that contains not only wordings of terms and conditions of an agreement, but also commercial terms of a transaction, such as:
  1. The Buyer (Rossetti North Caucasus PJSC or Chechenenergo JSC);
  2. The procedure for and terms of the Buyer’s obligations to pay for electric power and/or capacity under contracts concluded in the wholesale market for the periods till December 2021 and for the periods from January 2022;
  3. The mandatory nature of registration of such agreement with Financial Settling Center, JSC, and the termination procedure for the agreement.
8 In fact, the Seller (i.e., a generating company) is the only “unknown variable” in this “equation”, though rather arbitrary, because all generators would like to reduce the amount of debt.
9 Determining personal terms of obligations for a specific list of debtors under contracts concluded in the wholesale market is not new. It has already been implemented as part of debt restructuring of default suppliers of Rosseti, PJSC, (North Caucasus IDGC, PJSC, (Rosseti North Caucasus, PJSC), Kalmenergosbyt, JSC, Chechenenergo, JSC, and Tyvaenergosbyt, JSC) [6] in 2020-2021.
10 The performance of obligations under the Agreement is determined as follows: electric power and/or capacity debt under contracts concluded in the wholesale market for the periods till December 2021 shall be repaid by means of a promissory note (Annex 1) provided to the seller, for the period starting from January 2022, the sellers can choose payment either in promissory notes or in cash deferred for 13 years (Annex No. 2).

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13. Ruling of the Supreme Court of the Russian Federation dd. April 18, 2022, on case A40-233155/2020 (305-EhS21-25305)// https://www.vsrf.ru/stor_pdf_ec.php?id=2110782 
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16. Simvolokov O.A. Contracts in the Electric Power Industry: Problems of Theory and Practice : Monograph. Moscow : Infotropic Media, 2021. 186 p.
17. Ruling of the Judicial Chamber on Economic Disputes of the Supreme Court of the Russian Federation dd. November 30, 2017, on case No. 307-EhS17-9329, A13-4150/2015; No. A40-188880/2020; https://kad.  arbitr.ru/Card/4a24ed39-90f9-4cff-80ea-f9bd1816dbd7
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19. https://sozd.duma.gov.ru/bill/106868-8

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