Republic of Latvia
Cabinet
Regulation No. 503
Adopted 24 July 2007
Regulations regarding Electricity Production from Renewable Energy Resources
Issued pursuant to
Section 29, Paragraph two, four and five of the
Electricity Market Law
I. General Provisions
1. These Regulations prescribe:
1.1. the conditions for the production of electricity from renewable energy resources;
1.2. the criteria according to which a producer that produces electricity from renewable energy resources may acquire the right to sell the produced electricity as the volume of electricity to be mandatorily procured;
1.3. the procedures for the determination of the volume of electricity, which is produced from renewable energy resources, to be mandatorily procured;
1.4. a part for every type of renewable energy resources which, from the total consumption of all the electricity end users in Latvia, shall be mandatorily covered by the electricity, which is produced from renewable energy resources;
1.5. the procedures for the determination of the price for electricity, which is produced from renewable energy resources, depending on the type of energy resources;
1.6. the procedures for the determination, implementation and supervision of the mandatory procurement volume;
1.7. the procedures for refusing the right to sell the produced electricity within the scope of the mandatory procurement;
1.8. the procedures for receipt of a guarantee of origin of the electricity produced from renewable energy resources;
1.9. the measures for promotion of electricity production from biomass; and
1.10. the authorised institution that shall issue the guarantee of origin of the electricity produced from renewable energy sources.
2. The part of the total consumption of the electricity end users in Latvia that shall be mandatorily covered by such electricity, which is produced from renewable energy resources, for the time period until 31 December 2010 arranged by years and types of the renewable energy resources, is specified in Annex 1 to these Regulations.
3. For the promotion of electricity production from biomass, concurrently to the mandatory procurement the following measures shall be implemented:
3.1. the Ministry of Agriculture shall grant co-financing from the instruments of the financial support of the European Union, in accordance with the procedures and criteria specified in the legal enactments regulating the instruments of financial support of the European Union, for the projects the aim of which is the growing, acquisition and production of biomass, intended for electricity production;
3.2. the Ministry of Economics shall grant co-financing from the instruments of the financial support of the European Union for the projects the aim of which is the production of electricity from biomass in accordance with the procedures and criteria specified in the legal enactments regulating the instruments of financial support of the European Union; and
3.3. the Ministry of the Environment shall, from the funds, which have been acquired by selling carbon dioxide assigned amount units belonging to the State, grant the co-financing for the projects the aim of which is the production of electricity from biomass in accordance with the procedures and criteria specified in the legal enactments regulating the utilisation of the funds obtained in the international emission trading.
II. The Qualification Criteria for Acquiring the Right to Sell Electricity Produced from Renewable Energy Resources within the Scope of the Mandatory Procurement and the Procedures for Refusing
4. The following merchants may apply for the qualification for selling electricity within the scope of the mandatory procurement:
4.1. a merchant, which has a power plant owned or in use by it that uses renewable energy resources to produce electricity;
4.2. a merchant, which plans to increase the capacity of the power plant owned or in use by it, if the referred to power plant uses renewable energy resources to produce electricity; or
4.3. a merchant which plans to build a power plant that will use renewable energy resources to produce electricity.
5. In order to qualify for the selling of electricity produced from renewable energy resources within the scope of the mandatory procurement, a merchant, which plans to build a power plant that will use renewable energy resources for the production of electricity if the electric power of the power plant shall exceed 1 MW, or which plans to increase the capacity of an existing power plant that uses renewable energy resources to an amount which exceeds 1 MW, shall conform (except for the case specified in Paragraph 6 of these Regulations) to the following qualification criteria (qualification criteria shall be examined according to the audited annual reports of the undertaking):
5.1. during the period of the last two financial years the own funds of the merchant have not been less than 25% of the total amount of the balance sheet; and
5.2. the division of the total amount of the balance sheet (in lats) by the planned capacity of the power plant (in megawatts) is greater than or equal to 100 000.
6. If the merchant, referred to in Paragraph 5 of these Regulations does not conform to the criteria referred to in Sub-paragraphs 5.1. and 5.2. of these Regulations, it may qualify if the parent undertaking thereof, which has been registered within the European Economic Zone (except for the territories which are specified in Cabinet Regulations No. 276 of 26 June 2001, Regulations regarding Low-tax or Tax-free Territories), conforms to the referred to criteria. In such case the merchant, according to the procedures specified in Paragraphs 11 and 46 of these Regulations, shall submit a notarised and irrevocable unconditional guarantee of the parent undertaking that confirms – the parent undertaking shall undertake all commitments which shall arise or may arise to the merchant when the right to sell electricity produced from renewable energy resources within the scope of the mandatory procurement is obtained, and audited the annual reports of the parent undertaking for the last two financial years.
7. The merchants which produce or plan to produce electricity from renewable energy resources in wind power plants (except for the equipment referred to in Sub-paragraph 45.4. of these Regulations), in order to qualify for the acquisition of the right to sell electricity produced from the renewable energy resources within the scope of the mandatory procurement shall participate in a competition.
8. For the merchants to acquire the right to sell the electricity produced in wind power plants from renewable energy resources within the scope of the mandatory procurement, the Ministry of Economics (hereinafter – Ministry) shall organise a competition.
9. The Ministry shall publish an invitation to participate in a competition for acquisition of the right to sell electricity produced from the renewable energy resources in the wind power plants within the scope of mandatory procurement (hereinafter – invitation to competition) in the newspaper Latvijas Vēstnesis [the official Gazette of the Government of Latvia].
10. The invitation to competition shall be prepared in conformity with Annex 2 to these Regulations. The following shall be specified in the invitation to competition:
10.1. the object of the competition – the volume of electricity regarding the right of sales of which within the scope of the mandatory procurement a competition is being held;
10.2. the initial price of electricity sale competition. The initial price shall be determined on the basis of the statistics regarding the average price of the electricity, produced in wind power plants, published by the Directorate-General for Energy and Transport of the European Commission;
10.3. the time period of the submitting of a submission (not shorter than 180 days from the date of announcement of the competition);
10.4. the address of the acceptance place of the submission; and
10.5. other information which may be necessary for the participants of the competition to take a decision for participation in the competition.
11. In order to participate in the competition, a merchant shall submit the following documents to the Ministry:
11.1. a submission in accordance with Annex 3 to these Regulations;
11.2. a certified copy of the registration certificate of the merchant;
11.3. a copy of a document which confirms the property rights to the land property upon which the construction is planned or the rights of use thereof – a merchant, which plans to build a power plant that uses wind energy;
11.4. a document or a certified copy thereof, which confirms that the relevant power plant is owned by or in use by the merchant – a merchant, which participates in the competition with an already existing wind power plant;
11.5. a statement issued by the State Revenue Service, which confirms that the merchant does not have tax debts (the statement shall be issued not earlier than a month prior to the day of the submitting of a competition submission) or a written certification in which he or she authorises the Ministry to receive the referred to statement (the address of the relevant department of the regional office of the State Revenue Service, in which the submitter of a competition submission has been registered as a taxpayer, shall be indicated );
11.6. a bank warranty (guarantee) of a bank registered within the European Economic Zone (except for the territories which are specified in Cabinet Regulation No. 276 of 26 June 2001, Regulations for Low-tax or Tax-free Countries) or another equivalent document, which certifies that the merchant can implement and finance the constructionproject of a wind-using power plant;
11.7. a document which confirms that the supplier, which is registered within the European Economic Zone, of the technological equipment of the wind power plant indicated in the submission will deliver the referred to equipment within a period of 18 months from the date when the merchant acquires the right to sell electricity produced from the renewable energy resources in the relevant wind power plant within the scope of the mandatory procurement.
11.8. a description of the wind power plant (the capacity of the planned electricity production shall be indicated);
11.9. copies of audited annual reports of the undertaking for the past two years, but, if the merchant does not conform to the qualification criteria referred to in Paragraph 5 of these Regulations, also the documents referred to in Paragraph 6 of these Regulations;
11.10. an opinion of the Environment State Bureau stating that it is not necessary to perform an environmental impact assessment for this particular project, or a certified copy of acceptance of the intended activity, which has been received in accordance with the procedures set out by the Law On Environmental Impact Assessment; and
11.11. an attestation in conformity with Annex 4 to these Regulations.
12. In the submission a merchant shall indicate the volume of the electricity produced from the renewable energy resources it is ready to sell to a public trader annually over a period of 10 years, and the price of electricity, at which it is ready to annually sell the referred to volume of electricity. The numbers, dates of issue and periods of validity of permits, issued by the Ministry, for increasing the capacity of electricity production or introduction of new production installations shall be indicated in the submission.
13. The average weighted price, indicated in the submission, of the sale of electricity produced from the renewable energy resources may not exceed the starting price specified in the invitation to competition, but the offered volume of the sale of electricity produced from the renewable energy resources in any year – any of the following amounts:
13.1. the volume of electricity produced from renewable energy resources, which is specified in the invitation to competition; or
13.2. the volume of electricity produced from renewable energy resources (the referred to volume shall be calculated by multiplying the capacity indicated in the submission by 2 500 hours per year).
14. If in the submission a merchant indicates such prices of electricity produced from renewable energy resources, which differ in different years, then the prices shall have a tendency to increase, but not greater than by a 10% price increase in relation to the previous year.
15. A merchant shall cover all costs associated with the preparation and submission of the submission and the announcer of the competition is not responsible for such expenses regardless of the competition results.
16. The Ministry shall receive submissions to competition at such address, which is indicated in the invitation to competition. The merchant shall submit submissions by mail or in person (the last valid date of the postmark – the last day of the submitting of submissions indicated in the invitation to competition).
17. For participation in a competition a merchant shall submit one original of the submission (A4 size pages shall be used) and one copy of the submission, clearly marking “Original” and “Copy” thereon. In the event of any inconsistency between these documents the original of the submission shall prevail.
18. The documents referred to Paragraph 11 of these Regulations shall be appended to both – the original and copy of the submission. All the referred to documents shall be prepared in computer typing without corrections. The submission shall contain the signature of the merchant’s responsible official or a signature of such person who, in accordance with the procedures specified in regulatory enactments, is authorised in the name of the merchant to enter into commitments and which arise from participation in the competition. The authorisation shall be expressed in the form of a written power of attorney and the referred to power of attorney shall be appended to the submission. All pages of the submission shall be numbered and each page shall be signed by the merchant’s responsible official or the person authorised by the merchant.
19. The original of the submission and the copy thereof shall be stamped and put into separate envelopes. The envelopes shall be labelled accordingly: “Iesnieguma oriģināls” ["Original of Submission”] and “Iesnieguma kopija” [“Copy of Submission”]. The envelopes shall be placed in an outer envelope which shall be sealed.
20. The following information shall be indicated on the inner and outer envelopes:
20.1. the name of the Ministry and the address indicated in the invitation to competition; and
20.2. the name of the competition which is specified in the invitation to competition and a notice “Neatvērt pirms (datums)” [“Do not open prior to (date)”] on the basis of the last day of submitting of a submission, which is indicated in the invitation to competition.
21. On the inner envelopes also the name and address of the merchant shall be indicated so that the submission may be sent back unopened if the submission has been submitted after the specified time period.
22. If the outer envelope is not sealed and labelled in accordance with Paragraph 19 of these Regulations, the Ministry shall not take responsibility regarding submissions that have been improperly put into the envelopes or have been opened in advance. If the outer envelope reveals the identity of the participant, the Ministry cannot guarantee anonymity of the submission, but it shall not be grounds for rejection of the submission.
23. If the submission does not include all the necessary information or all the documents have not been submitted, the submitter of the submission has the right to submit additional documents or information in writing until the expiry of the deadline for submitting of the submission. If additional documents or information have been submitted, it shall not change the nature of the submission.
24. The amendments to the submission or notifications of withdrawal shall be prepared, sealed, labelled and submitted in the same way as a submission. The envelopes shall be labelled accordingly: “Iesnieguma oriģināls” [“Original of Submission”] and “Iesnieguma kopija” [“Copy of Submission”].
25. Any amendments, appendices or notifications of withdrawal, which will be received after the expiry of the deadline for submitting of a submission or any extension thereof, due to such reason, shall not be taken into account.
26. The commission of the competition shall evaluate the submissions of the participants and shall take a decision regarding granting the right to sell electricity produced from renewable energy resources as the volume of electricity to be mandatorily procured. The commission of the competition shall be composed of three representatives from the Ministry, two representatives from the regulator and two representatives from the Ministry of Environment. The meetings of the commission shall be closed ones, except for the meeting of the opening of submissions. The commission is entitled to take a decision if more than one half of the members thereof are present at the commission meeting.
27. After the expiry of the deadline for the submitting of submissions the Ministry shall notify all participants of the competition regarding the day, time and place of the meeting of the competition commission for submission opening.
28. The envelopes with submissions (and amendments) shall be opened only after the expiry of the deadline for submitting of submissions.
29. The competition commission shall open the submissions (including the withdrawals and amendments to the submission) in the presence of the authorised representatives of the competition participants who participate in the sitting. Such representatives of the participants who participate in the sitting shall register.
30. The competition commission shall send back the withdrawn submissions unopened to the submission submitters or shall return them to the authorised persons who participate in the meeting of submission opening.
31. The competition commission shall open the submissions which are not withdrawn and shall read the names of the submission submitters and the price offered in conformity with Paragraph 12 of these Regulations.
32. Prior to the evaluation of submissions the competition commission shall examine the submissions and decide on conformity of the submissions to the requirements of these Regulations. The competition commission has the right to verify the authenticity of the documents specified in Paragraph 11 of these Regulations and the identity of issuers thereof.
33. The competition commission shall declare as invalid such submissions which do not comply with Paragraphs 5, 11, 12, 13, 14 and 18 of these Regulations or if after the examination intended according to Paragraph 32 of these Regulations any document referred to in Paragraph 11 of these Regulations shall be declared invalid. The invalid submissions shall be rejected and sent back to the participant of the competition.
34. When evaluating the conforming submissions, the competition commission shall calculate the average weighted selling price (LVL/MWh) of electricity produced from the renewable energy resources, which is offered by the merchant, in the whole time period of 10 years with an accuracy to one hundredth of a santims. The average weighted price shall be calculated by using the following formula: