Retroactive effect for the Access fee

Will the renewable energy producers recoup it after the judgment of the Supreme Court of Cassation?

On the Eve of December 29, 2015, the Supreme Court of Cassation overjoyed a renewable energy producer by publishing its final judgment, this time on the merits, for reimbursement of the collected temporary access fee, introduced by the State Energy and Water Regulatory Commission (SEWRC) in September 2012. It is interesting whether this judgment will put an end to the continuous court battles of the renewable energy producers against CEZ, Energo-Pro, EVN and ESO, where an amount of around 300 million leva has been at stake.

To remind ourselves

The people interested in the topic are painfully aware of the story of the controversial “access fee” and the ups and downs in the case, initially made up by SEWRC. The State regulator in the field of energy (SEWRC at that time and EWRC now) adopted in September 2012 Decision Ц -33, which required only the renewable energy producers to pay temporary prices for grid access. The regulator failed to justify Decision Ц-33 and determined arbitrarily the prices to such extent, that the Supreme Administrative Court (SAC) had no choice but to annul it as unlawful a year later. Still in the grounds of its annulment judgments, SAC ruled that the annulment has retroactive effect, which encouraged the renewable energy producers to claim the reimbursement of the unduly paid access fee. Thus, some of them filed claims for compensation by the State (in the face of SEWRC), but the administrative court ruled in favour of the regulator, arguing that the damage even related to annulled decision, was not direct. More than 1000 cases were initiated against the grid operators (CEZ, Energo-Pro, EVN and ESO), most of which are still pending before the civil courts in Sofia, Plovdiv and Varna and the final instance – the Supreme Court of Cassation (SCC). The claims are based on the legal institute of unjust enrichment, which follows the natural logic that whoever has enriched with no reason at the expense of another must return to him the received. Even without interpreting the statutory provisions and case law, we will come to the conclusion that it would be fair the grid operators to return the collected fees, which SAC ruled to be unlawfully determined by the regulator. The opposite would lead to state arbitrariness in the energy sector. The first and second instance courts in Sofia, Plovdiv and Varna, however, used their imagination in complicated legal theories and with some or other arguments (some of them absurd), came to completely opposite judgments on the claims of the renewable energy producers against the grid operators. This led to the referral of the dispute to SCC by both sides of the barricade.

What does the last instance say?

The cassation control under Bulgarian law is regular, but not always possible court instance, as the SCC decides whether it is permissible for each particular case on limited grounds. One of them is a referred question of relevance to the accurate application of the law and to the development of the law. Thus, more than a year ago, the supreme instance was requested to decide whether the question for the retroactive effect of the annulled Decision Ц-33 was of such nature. In May 2015 the SCC did not allow cassation appealing by EVN, stating that there was already a practice of the courts in the country, according to which the annulment of an individual administrative act (such as Decision Ц-33) had a retroactive effect. Regrettably for the renewable energy producers this statement of the SCC has not been shared in some cases pending before the first two instances, most definitely in Varna. Moreover, other panels of the SCC consider that the same question has not been clarified so far and that there is a lacuna, leaving doubt how it should be resolved.

Namely in its judgment as of December 23, 2015, the third instance ruled for the first time on the merits regarding the temporal effect of the annulment of the temporary access fee. Not only the SCC stated categorically that the annulment occurs retroactively, but it also justified its judgment entirely in accordance with the public relations and the regulatory framework in the sector. In this case, there was a preliminary implementation of the non-effective Decision Ц-33, which established only temporary prices for grid access, whereas no final pricing was at hand. According to the SCC a general rule is that the annulment of an unlawful administrative act has a retroactive effect from the moment of its issuance (except for the normative acts), because only an act issued in accordance with the law is capable of causing the consequences intended by its issuer. The final court instance also rejected explicitly an argument often used by the grid operators that it could be “considered that the parties have agreed to the price, which is generally paid at the time of conclusion of the sale for the same type of good and in such circumstances”. The SCC found correctly that as far as the energy distribution companies in our country are natural monopolies of the respective regional market, there is no legal possibility to freely negotiate prices under market conditions in the energy sector.

As an additional argument for judging in favour of the renewable energy producer, the SCC highlights also the subsequent Decision Ц-6 as of March 2014 of the SEWRC, with which the regulator completed the administrative procedure and determined final prices of the access service. We note that the price for access should be economically justified, so as to recover the costs of the operator in relation to the management of the grid, i.e. it should reflect the actual impoverishment with the costs made and forecasted in relation to the established access. In its Decision Ц-6, SEWRC found that for the relevant price period there were no grounds for recognition of the operational costs of the electricity distribution companies (CEZ, Energo-Pro and EVN) and therefore for these operators the access fee of the renewable energy producers should be at zero values.

The judgment of the SCC is legally sound and fair. Most importantly being ruled on a matter of relevance for the correct application of the law and the development of the law, it is mandatory for the first instance and the appeal courts in the country. From now on Sofia, Varna and Plovdiv must recognize the retroactive effect of the access fee and judge in favour of the renewable energy producers. Only another panel of the SCC is allowed not accept this case law and render its own judgment to the contrary.


Author: Asya Vladimirova & Hristo Hristov
The article has been published in Bulgarian, in Capital Daily