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Pitfalls of the Unilateral Termination of an Energy Supply Contract (Risks of the Guaranteeing Supplier in Avoiding the Termination and Using the Unilateral Repudiation Mechanism)
 
PIIS231243500026212-1-1
DOI10.18254/S231243500026185-1
Publication type Article
Status Published
Authors
Evgeniya D. Vasilieva 
Occupation: Lead Legal Counsel Saint-Petersburg Sale Company, JSC
Affiliation: Saint-Petersburg Sale Company, JSC
Address: Russian Federation, St. Petersburg
Journal nameEnergy law forum
EditionIssue 2
Pages86-96
Abstract

The article analyzes the laws of the Russian Federation and the results of their implementation in the area of unilateral repudiation of a power supply contract through the prism of the implementation of the risks of a guaranteeing supplier of electric power in the form of invalidation of its actions and, as a consequence, imposition of administrative sanctions against it. The author examines two opposite situations, which do not contain elements of a violation: the guaranteeing supplier avoiding the termination of a power supply contract in the event of receiving a corresponding application from the consumer, and the guaranteeing supplier independently sending notices of unilateral repudiation of a power supply contract to the consumer. The study is divided into two main parts, each of which contains a detailed analysis of the laws on power supply with comparative legal references to foreign experience in legal regulation of the issues of power supply contract termination (on the example of the CIS member states) and a review of the court practice on various controversial situations, which have been settled in court decisions. The study has resulted in conclusions and recommendations on how to solve the problems arising in this area of activity for the guaranteeing supplier.

Keywordsenergy law, guaranteeing supplier of electric power; termination of a power supply contract; unilateral repudiation of a contract; avoidance of termination of a contract
Received15.03.2023
Publication date27.06.2023
Number of characters34213
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1 In accordance with Federal Law No. 35-ФЗ on the Electric Power Industry (hereinafter referred to as the Electric Power Industry Law) dd. March 26, 2003, [1] a guaranteeing supplier of electric power means a commercial organization that has the status of a guaranteeing supplier in accordance with the laws of the Russian Federation, is engaged in selling electric power and, in accordance with the Electric Power Industry Law, shall conclude a power supply contract, an electric power (capacity) sale (supply) contract with any electric power consumer who has addressed it, or with a person who acts in its own name or in the name of the electric power consumer and in the interest of this electric power consumer and is ready to purchase electric power.
2 In accordance with the interrelated provisions of Part 1 of Article 426 of the Civil Code of the Russian Federation (hereinafter referred to as the Civil Code) and the Basic Regulation on the Operation of Retail Electric Power Markets (hereinafter referred to as the Basic Regulation), [2] a power supply contract is public, which results in the legally prescribed consequences in the form of the impossibility for the guaranteeing supplier of electric power to refuse to conclude a power supply contract without expressly stated reasons (in the form of the lack of technological connection and a contract on its implementation, as well as in the form of the location of a power consuming facility outside the boundaries of the guaranteeing supplier’s area of operation).
3 Similarly, the institution of unilateral contract termination has been transformed in relations regulated by a public contract. However, unlike the legal qualification of the reluctance to conclude a contract and the unjustified termination of production of goods, which are understood exclusively as a violation of consumer rights, the guaranteeing supplier’s avoidance of contract termination or use of the right to unilateral repudiation provided for by the current laws is qualified in different ways depending on the preceding circumstances.
4 Analyzing the open list of abusive actions of a business entity holding the dominant position in the commodity market (hereinafter referred to as the Dominant Entity) which is included in Part 1 of Article 10 of Federal Law No. 135-ФЗ on Competition Protection dd. July 26, 2006 (hereinafter referred to as the Competition Protection Law), [3] it can be noted that the directly mentioned violations include, inter alia, economically or technologically unjustified refusal or avoidance of concluding a contract with certain customers (Clause 5 of Part 1 of Article 10) and economically or technologically unjustified termination of production of goods (Clause 4 of Part 1 of Article 10). At the same time, the avoidance of contract termination is not directly mentioned in this Article. The most surprising thing in this situation is the use of the right to unilateral repudiation, which in some cases, even in the absence of signs of the elements stipulated in Clause 4 of Part 1 of Article 10 of the Competition Protection Law, is still qualified as an abuse of the dominant position, because repudiation is treated as a “last resort”.
5 In view of the above, the article attempts to analyze and systematize the current law enforcement practice and theoretical views on the nature of the guaranteeing supplier’s avoidance of termination of a power supply contract and the guaranteeing supplier’s use of the mechanism of unilateral repudiation of a power supply contract (sending notices of cancellation), and to formulate proposals on the “safest” behavior of the guaranteeing supplier. Taking into account the monopoly status of the guaranteeing supplier, the article also draws conclusions on the possibility of qualifying the guaranteeing supplier’ behavior as a violation of antimonopoly law and analyze the significance of the guaranteeing supplier’s behavior in civil-law relations.
6 I would like to draw your attention to the fact that the mentioned structure of selection from the existing list of power sales organizations of a special organization operating on the territory determined by an executive act, with which a power supply contract is public, is not unique for the Russian Federation, and is used, analogously, in the legal systems of many CIS member states. [4] Undoubtedly, there are differences in the rights granted and duties assigned to guaranteeing suppliers, but the general principle of legal regulation aimed at protecting the rights of consumers and customers to free access to electric power remains, therefore this study may also be useful for scientific purposes for researchers of these states.
7 1. Avoidance of Contract Termination by the Guaranteeing Supplier
8 The general procedure for the unilateral termination of a power supply contract initiated by the consumer is regulated by the Basic Regulation, i.e., Clause 49 of the Basic Regulation establishes the consumer’s right to unilaterally repudiate a power supply contract in full, which entails the termination of such contract, provided that the consumed electric power is paid to the guaranteeing supplier no later than 10 business days before the date of termination of the contract, which shall be confirmed by payment of the bill issued by the guaranteeing supplier pursuant to Clause 85 of the Basic Regulation.

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