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Supplier of last resort (SoLR)
European Union Electricity Market Glossary

 

 

According to the Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC, suppliers of last resort (SoLR) may be appointed by the EU Member States to ensure the provision of a universal service of electricity connection and supply.

 

Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC does not explicitly foresee universal service, however, it promotes a supply of last resort mechanism for gas consumers.

 

The Electricity and Gas Directives do not further define the meaning and functions of a SOLR.

 

In practice the SoLR is generally used not only as a mechanism to replace failing suppliers, but often performs other functions as well, including protecting inactive consumers or those with payment difficulties (ACER/CEER - Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2017 - Consumer Empowerment Volume, 22 October 2018).

 

The said ACER/CEER Report of October 2018 indicates that all EU Member States have a form of SoLR for both electricity and gas supply, nevertheless, while in some Member States very few consumers are supplied by an SoLR, in other this proportion is overwhelming.

 

 

Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD), Recital 16

 

It should be possible for Member States to appoint a supplier of last resort. That supplier may be the sales division of a vertically integrated undertaking, which also performs the functions of distribution, provided that it meets the unbundling requirements of this Directive.

 

In most jurisdictions, supply of last resort is considered a precaution for supplier and/ or Distribution System Operator (DSO) failure, that is, in cases when a current supplier to the final household consumer goes bankrupt and is no longer able to perform its function, or the licenses of a current supplier or DSO are revoked.

 

In the ACER/CEER opinion (expressed in the said Report of October 2018) this kind of protection appears to be a “universal function” of the supplier of last resort in electricity – most probably also the intention of the European legislator.

 

However, suppliers of last resort often protect consumers with payment diffculties or inactive consumers beyond the business failures of energy service companies.

 

Protection in the case of payment diffculties refers to situations in which:


- final household consumer does not find a supplier in the free market (no energy supplier is willing to sign a contract with the consumer) or

 

quote

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2015, Consumer Protection and Empowerment, November 2016, p. 8

 

 

While actual figures are available for 20 (electricity) and 15 (gas) jurisdictions only, the numbers of electricity consumers supplied by suppliers of last resort range between 0 (in 9 jurisdictions: France, Great Britain, Hungary, Ireland, Lithuania, Luxembourg, Slovakia, Slovenia and the Netherlands) and more than 12 million (Spain).

 

In Spain, this corresponds to 49% of household consumers, while in Romania 99.9% of household consumers (8.6 million) are supplied by the last resort supplier (similarly to Croatia, where more than 90% of all electricity consumers are supplied by the last resort supplier).

 

In gas, a majority of NRAs have reported no consumers supplied by the supplier of last resort, e.g. Croatia, France, Great Britain, Hungary, Ireland, Lithuania, Luxembourg, Poland, Romania and the Netherlands.

 

Among the remaining five jurisdictions for which information was reported, the number is highest in Spain (1.7 million), which corresponds to 23% of all gas household consumers.

 

- final household consumer is dropped by its current supplier because of non-payment.

 

Inactive consumers enjoy protection through a supply of last resort mechanism if:


- they do not choose a supplier when moving home,


- they do not choose a supplier when markets are deregulated, or


- their fixed term contract expires.

 

When it comes to the price-setting in many countries the SoLRs have to follow a pre-defined framework when setting the last-resort price.

 

Less common approaches are:

 

- direct tariff determination by the National Regulatory Authority (NRA) or


- the absence of any restrictions for SoLRs as regards tariffs.

 

According to the ACER/CEER Report, the data shows that the cost to consumers of being supplied by a SoLR is the same or higher than what they used to pay before.

 

ACER and CEER in the Presentation of 24 October 2017 (The 6th Annual Report on Monitoring the Electricity and Natural Gas Markets, Main insights, p. 43) recommended that:

 

- suppliers of last resort or default suppliers should not lead to consumers remaining inactive on a permanent basis,

 

- SoLR mechanism should not be used as a means to keep regulated prices in place.

 

 

 

 

 

IMG 0744

    Documentation    





 

ACER/CEER - Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2017 - Consumer Empowerment Volume, 22 October 2018 

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2015, Consumer Protection and Empowerment, November 2016

 

Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD)

 

ACER/CEER, Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2016, Electricity Wholesale Markets Volume, October 2017

 

ACER/CEER, The 6th Annual Report on Monitoring the Electricity and Natural Gas Markets, Main insights ACER/CEER, The 6th Annual Report on Monitoring the Electricity and Natural Gas Markets, Main insights

 

 

 

 

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Last Updated on Sunday, 25 November 2018 21:15
 

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