21.4 Other provisions

The value of other provisions consists mainly of provisions created by ENESTA sp. z o.o. w restrukturyzacji (PLN 93 million) – a detailed description of the movement on provisions is described in note 1.3 of these consolidated financial statements.

In addition, the value of other provisions consists of provisions set up by PGE Paliwa Sp. z o.o. – 49 million relates to onerous contracts, 41 million relates to penalty provisions.

In 2021 the Group created a provision in the amount of PLN 39 million in connection with the sale of shares in PGE EJ1 sp. z o.o. to the State Treasury. Pursuant to the Agreement regulating the liability of the existing Partners for the costs of the dispute with Worley Parsons, in case of defeat PGE S.A. may be required to cover the costs of the dispute in the amount of up to PLN 98 million. The amount of PLN 59 million is disclosed in contingent liabilities, in note 28.1.

In 2021, there was a significant increase in prosumer installations, mainly as a result of the „My Electricity” support program. According to the Energy Market Agency, installed PV capacity in Poland grew by 94% to 7.67 GW in 2021 vs. 3.96 GW at the end of 2020. The act on renewable energy sources of February 20, 2015 introduced a settlement system for prosumers and energy cooperatives that generates losses for the obligated vendor (i.e. PGE Obrót S.A.); the higher the percentage of electricity introduced to the grid that is compensated by the prosumer’s or energy cooperative’s own use, the higher these losses are.

Therefore, the prosumer does not incur any variable costs of distribution services for energy drawn from the grid. Companies in the Supply segment, which are merely intermediaries in the sale of distribution services, have to pay the full fee for electricity drawn by the prosumer to the Distribution System Operator. Companies in the Supply segment, despite the fact that they do not provide distribution services, have to bear the costs related to these services because they are a party to a framework contract with the customer.

The rights to use the current billing system are valid for the prosumer for 15 years. Current prosumers and new prosumers who apply for connection to the electricity grid by March 31, 2022 will be able to settle under the current rules. New regulations abolishing the discount system will come into force from April 1, 2022. As of that date, a net-billing system based on the purchase and sale of energy will be in force, involving the settlement of energy by value. From July 1, 2022, the prosumer will sell energy at an average monthly price. The surplus generated will be collected in the course of the year, but with all charges according to the seller’s tariff, so it will also pay distribution charges (hitherto charged to energy sellers). If, after one year, it obtains an overpayment, it will not pay out more than 20% of the value of the energy injected into the grid in the month to which the overpayment relates.

The necessity to respect the prosumer’s right to use the settlement system based on net-metering in accordance with the currently binding regulations of the Renewable Energy Sources Act for a period of 15 years generates further losses for PGE Obrót S.A. Therefore, a provision of PLN 74 million for agreements creating liabilities within the meaning of IAS 37 was recognised in the financial statements for 2021. The provision has been recognised for losses projected for 2022, i.e. the period of reliably predictable energy price developments.

The provision was fully reversed during 2022. The actual realised loss on the distribution service alone under comprehensive agreements with prosumers in 2022 was PLN 259 million. However, given the high power purchase prices in the context of the take-up of 20% or 30% of the energy injected into the grid by the prosumer and taking into account the result on electricity trading under these contracts, the projected result for 2023 on the billing of prosumers from Gx tariff groups as a whole should remain positive. Accordingly, the Group has not recognised provisions for onerous contracts in these financial statements.