1995
Power Purchase Agreements (PPAs) were created in 1995 and established a system to compensate investment in power plants. The producers were paid for the investment and for the production availability of their plants, and were compensated for all the costs they incurred during production. The producer's role was to produce the amount of energy indicated by REN.
Power Purchase Agreements (PPAs) were created in 1995 and established a system to compensate investment in power plants. The producers were paid for the investment and for the production availability of their plants, and were compensated for all the costs they incurred during production. The producer's role was to produce the amount of energy indicated by REN.
Power Purchase Agreements (PPAs) were created to attract investments for the power plants the country needed, but which the State could not or did not want to finance.
The PPAs established that producers who invested in these plants would receive a compensation for their investment and availability and would be compensated for all the costs they would incur during production.
Decree-Law 182/95
Establishes a new organization model for the energy sector and establishes PPAs as a form of remuneration for the production activity. download
Decree-Law 183/95
Creates the PPAs and establishes that non-binding generation licenses, as in the case of Sines, have no deadline. It also determines that the water domain usage should be sub-contracted to the binding producers who, in 1995, had acquired rights to use that public good for the purposes of hydroelectric generation. It also establishes that EDP would receive 1356 million euros of the plant's residual value at the end of those contracts if the plants were delivered to the State. download
1st Phase - June 199729.9% EDP Capital (OPV & Direct Sale)
2nd Phase - May e 3ª Phase - June 1998IBERDROLA (Direct Sale) 16.2% EDP's capital (OPV)
4th Phase - October 200020.0% Capital of EDP (OPV)
2003
LIBERALIZED MARKET
Created in 2007 for all consumers, the liberalized market started giving customers the freedom to choose their electricity and natural gas provider. In the liberalized market, it is the providers who define the commercial supply and the respective energy prices, which encourages competition for the benefit of the consumers.
LIBERALIZED MARKET
Created in 2007 for all consumers, the liberalized market started giving customers the freedom to choose their electricity and natural gas provider. In the liberalized market, it is the providers who define the commercial supply and the respective energy prices, which encourages competition for the benefit of the consumers.
Specific steps are now being taken to phase out the PPAs with the community directive that establishes the rules for the operation of the liberalized electricity market.
Council of Ministers' Resolution #63/2003
Establishes the necessary rules for the start of the market operation within the MIBEL. download
Directive 2003/54/CE
Reinforces the separation of regulated and unregulated activities and the market operation of the production activity. download
Decree-Law 184/2003
Decree-Law 184/2003 - Defines the creation of a market liberalization framework (MIBEL). download
Decree-Law 185/2003
Establishes the principles for the early termination of the PPAs. download
Order 14315/2003
Establishes the methodology's general principles and main valuation parameters for the early termination of the PPAs. download
2004
CMEC
The Costs of Maintenance of Contractual Equilibrium (CMEC) were created in 2004 and implemented in 2007 after the early termination of the PPAs. The aim of the CMECs was to maintain financial neutrality in relation to the PPAs. Thus, it was established that the compensation would be the difference between the value of the PPA and the revenues that the plants obtained in the market. This mechanism, negotiated between the State and the European Commission, was approved by the Portuguese Parliament and validated by Brussels.
The Costs of Maintenance of Contractual Equilibrium (CMEC) were created in 2004 and implemented in 2007 after the early termination of the PPAs. The aim of the CMECs was to maintain financial neutrality in relation to the PPAs. Thus, it was established that the compensation would be the difference between the value of the PPA and the revenues that the plants obtained in the market. This mechanism, negotiated between the State and the European Commission, was approved by the Portuguese Parliament and validated by Brussels.
The early termination of the PPAs was decided, which forced the adoption of a compensation mechanism that ensured financial neutrality and which was approved by the European Commission and the Portuguese Parliament - the Costs of Maintenance of Contractual Equilibrium (CMEC).
EDP, which had the State as its largest shareholder, was the only producer that agreed to transit to the new regime.
Decree 96/2004
Defines the method and criteria for the determination of the amount of annual remuneration that the RNT (REN) concessionary entity is entitled to. It also establishes that producers who had terminated the PPAs in advance and had chosen to rent the land, would have the respective costs recognized by the CMEC. download
ERSE Statement on CMEC's Decree-Law
Analysis by the regulatory authority of the regulations provided in Decree Law 240/2004. download
EC Approval
Approval by the European Commission of the CMEC mechanism, considering them State aid compatible with Community regulations. download
Decree-Law 52/2004
Grants legislative authorization for the Government to define the compensatory measures' conditions for the early termination of the PPAs. download
Decree-Law 240/2004
Approves a new remuneration mechanism, the CMECs, which ensures financial neutrality in relation to the PPAs. download
5th Phase - December 2004State owned 20.3% EDP (OPV & Direct Sale)
6th Phase - December 20054,376% Capital of EDP (OPV)
2005
TERMINATION AGREEMENTS
The termination agreements, established between producers and REN and approved by the Government, stipulate the detailed conditions for achieving the early termination of the PPAs. These agreements always have as guiding line and limits what was defined in the Decree-Law that created the CMEC.
The termination agreements, established between producers and REN and approved by the Government, stipulate the detailed conditions for achieving the early termination of the PPAs. These agreements always have as guiding line and limits what was defined in the Decree-Law that created the CMEC.
The Government approves the agreements for the termination of the PPAs.
Rectification Statements 1-A 2005 and 1-B 2005
Rectify inaccuracies contained in Decree Law 240/2004. download 1-A 2005 download 1-B 2005
Ordinance 228/2005
Establishes the correction coefficient of the Valorágua model. download
Order 4672/2005
Approves the early termination of CMEC contracts between REN and EDP. download
2007
PHD
In 1995, with the PPAs creation, the rules for the use of the Public Hydric Domain (PHD) are established, establishing that EDP would receive the residual value of the power plants at the end of those contracts if it delivered the dams to the State. However, since it was also possible for the producer to choose to continue to operate the plants beyond the end of the PPAs, EDP decided to do so by giving up a 1356 million sum and paying 759 million euros for the PHD extension. The amount paid, which includes the rate of utilization of water resources, was calculated after consulting two independent entities at the request of the Government and following a methodology already validated by the European Commission.
In 1995, with the PPAs creation, the rules for the use of the Public Hydric Domain (PHD) are established, establishing that EDP would receive the residual value of the power plants at the end of those contracts if it delivered the dams to the State. However, since it was also possible for the producer to choose to continue to operate the plants beyond the end of the PPAs, EDP decided to do so by giving up a 1356 million sum and paying 759 million euros for the PHD extension. The amount paid, which includes the rate of utilization of water resources, was calculated after consulting two independent entities at the request of the Government and following a methodology already validated by the European Commission.
CMECs are implemented in accordance to the rules defined in 2004, updating the market parameters - which reduced the value of EDP's remuneration.
In the context of the Public Hydric Domain, EDP abdicates of 1 356 million euros and pays 759 million euros to the State for its extension.
Decree-Law 199/2007
Market parameters' value to be used for the DL 240/2004 application, with the increase of the electricity reference price from €36/MWh to €50/MWh, leading to the reduction of the initial CMEC value to €833M. download
Decree-Law 226-A/2007
Establishes the rules for the regularization of the PHD utilization licenses and recognizes the existence of the right of use of the PHD by the PPAs plants from the entry into force of DL 183/1995, against payment of an economic-financial balance. download
Order 15290/2007
Approves the addenda to the agreements on the early termination of the PPAs. download
Ordinance 611/2007
Realizes the value obtained using the DL 240/2004 methodology, setting a nominal rate of 7.55% before taxes (5.47% after taxes) for EDP. download
Decree-Law 264/2007
New legal provisions to regulate the sale of energy due to Turbogás and Tejo Energia not having agreed to extinguish their PPAs in advance. download
ERSE's 2007 Statement on Revisability
Favorable opinion of the regulator on the remuneration to be attributed to EDP in this year. download
ERSE Statement
Analysis of the regulatory authority to the changes introduced by Decree-Law 199/2007. download
7th Phase - November 20074,144% EDP's capital (OPV)
8th Phase - October 201121.35% EDP Capital (Direct Sale)
2013
The CMEC suffer a cut of 14 million euros per year, for a total of 120 million euros in NPV for the period between 2013 and 2017.
ERSE's statement on the remuneration rate
Regulator analysis of the reformulation of the CMEC remuneration rate. download
ERSE Statement on the new nominal rate
Regulator analysis of the new nominal rate applicable to the CMEC fixed installment annuity. download
Decree-Law 32/2013
Amends the Decree-Law that created the CMEC in 2004, and reformulates the rates applied to the remuneration, allowing the annuity rate to be modified on EDP's proposal - provided that it is lower than the value set in 2007. download
Ordinance 85-A/2013
Approves the new nominal rate applicable to the calculation of the fixed installment of the contract maintenance cost (CMEC) (reduction of the tax rate from 7.55% to 4.72% reducing the initial CMEC value by €120M in NPV). download
Ordinance 172/2013
Establishes the system for checking the availability of the power plants. download
ERSE's 2013 Statement on Revisability
Favorable opinion of the regulator on the remuneration to be attributed to EDP in that year. download
2017
FINAL REVISION
With the creation of the CMECs, a sum of 3356 million euros was set, which the State would have to pay in stages to EDP to compensate for the end of the PPAs. This amount resulted from the calculation between the remuneration provided in the PPAs and the expected revenues from the plants. However, in 2007 the sum was eventually reduced to 833 million euros, after the market prices of electricity and fuels were updated. This value was the target of annual adjustment in the first ten years of the mechanism, between 2017 and 2027. For the last decade, which will end in 2027, the final revisability was calculated, the last of the CMCEs settlement of scores. This adjustment consists in updating the amounts receivable by the producers against the remuneration initially set.
With the creation of the CMECs, a sum of 3356 million euros was set, which the State would have to pay in stages to EDP to compensate for the end of the PPAs. This amount resulted from the calculation between the remuneration provided in the PPAs and the expected revenues from the plants. However, in 2007 the sum was eventually reduced to 833 million euros, after the market prices of electricity and fuels were updated. This value was the target of annual adjustment in the first ten years of the mechanism, between 2017 and 2027. For the last decade, which will end in 2027, the final revisability was calculated, the last of the CMECs settlement of scores. This adjustment consists in updating the amounts receivable by the producers against the remuneration initially set.
The European Commission closes the PHD complaint and reinstates the CMEC mechanism. ERSE proposes final CMEC revisability value, for the period between 2017 and 2027.
European Commission's Decision
The European Commission decides to close the complaint on the extension of the PHD after concluding that it did not constitute State aid. download
ERSE's Press Release
Press release from ERSE on the study that calculated the final revision of the CMECs. download
2018
TESTS TO THE PLANTS' AVAILABILITY
A part of the power plants' remuneration is due to their capacity to be able to produce if that is necessary (availability). In this sense, within the CMECs framework, there is a reference value above which the plants receive a higher remuneration; and a value below which they receive a lower remuneration. From the creation of the PPAs up until today, power stations have declared to the system operator (REN) whether they are available or not. This availability is introduced in the remuneration models and the compensation paid to CMEC stations is calculated.
A part of the power plants' remuneration is due to their capacity to be able to produce if that is necessary (availability). In this sense, within the CMECs framework, there is a reference value above which the plants receive a higher remuneration; and a value below which they receive a lower remuneration. From the creation of the PPAs up until today, power stations have declared to the system operator (REN) whether they are available or not. This availability is introduced in the remuneration models and the compensation paid to CMEC stations is calculated.
The Government approved the final review of the CMEC, and its value has already been disputed by EDP. By governmental order, the alleged overcompensation of EDP was also quantified in relation to the calculation of the coefficient of availability verified in the plants that operated in the CMEC regime. The alleged overcompensation will be discounted over the next three years to the remuneration owed to EDP, according to a decision made by ERSE in December. The Parliamentary Commission of Inquiry for the Payment of Excessive Income to Electricity Producers also started.
CPI Constitution
The Parliamentary Commission of Inquiry for the Payment of Excessive Income to Electricity Producers is constituted, the hearings are still pending. download
Memorandum on the calculation of alleged overcompensation of CMECs
By governmental order, the alleged overcompensation of EDP was quantified at 285 million euros for the calculation of the coefficient of availability verified in the plants that operated in the CMEC regime. In a statement, EDP considered that said order lacks legal, economic and technical basis. download
ERSE tariff proposal
On October 15, ERSE released the tariff proposal for 2019. download
João Manso Neto’s presentation at the Portuguese Parliement
Parliamentary Committee of Inquiry into the Payment of Excess Income to Electricity Producers. download
Decision on rates and prices for 2019
On December 17, ERSE published the rates and prices for 2019 and decided to deduct, over three years, the alleged overcompensation of EDP. download
2019
EDP requested the nullity of the acts of the Government and ERSE that support the thesis of the alleged overcompensation received by EDP under the CMEC regime.
António Mexia's presentation at the Portuguese Parliament
Parliamentary Committee of Inquiry into the Payment of Excess Income to Electricity Producers. download
Press release on the report of the Parliamentary Committee on the Excessive Payment to Electricity Producers
EDP issued a statement once the final report was made available. read
European Commission calls on 8 Member States, including Portugal, to comply with EU law in relation to hydroelectric power concession. download
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