Guaranteed energy service in the public sector
Energy efficiency is defined in Act no. 321/2014 Coll. on energy efficiency and amending certain laws (hereinafter referred to as "Act on EE") as "a process that contributes to an increase in energy efficiency or to a decrease in the energy intensity of energy conversion, distribution or consumption, taking into account technical, economic or operational changes, or changes in the behavior of end customers and end consumers.
The adoption of the EE Act created a legal basis for the development of this segment of business in the Slovak Republic, through the provision of energy services by the so-called providers of supporting energy service and providers of guaranteed energy service.
Energy service providers provide services on the basis of which demonstrably verifiable and measurable or estimable energy savings and energy efficiency improvements occur, and which enable the recipient of the energy service to achieve a financial or material advantage.
The EE Act recognizes two types of energy services, while from the point of view of certainty that the investments made in reconstruction/modernization will actually be returned from the achieved savings, it represents the surest form is the guaranteed energy service, the so-called EPC model (Energy Performance Contracting).
Through this form of energy service, the guaranteed energy service provider undertakes to carry out energy-efficient measures (reconstruction/modernization) at its own expense, which the recipient of the energy service subsequently repays on an ongoing basis from the guaranteed savings that the guaranteed energy service provider guarantees.
Starting from February 1, 2019, the amendment to the EE Act will apply, which will create conditions for the development of guaranteed energy services in the public sector, while after fulfilling the conditions stated there, such public sector expenditures they will not be included in the public debt of the Slovak Republic[1].
The amendment defined in more detail the range of rights and obligations within the energy efficiency contract, which will be concluded between a public administration entity as a recipient of a guaranteed energy service and a private entity as a provider of a guaranteed energy service, while the main changes include:
- the provider of the guaranteed energy service will not have the entire subject property of the public administration at its disposal, nor will it ensure the operation of the entire renovated building, but will only ensure maintenance and repairs within the scope of the renovation carried out within the scope of the energy efficiency contract;
- in the event of the building's valuation, ownership rights to this property will not arise in favor of the guaranteed energy service provider;
- the guaranteed energy service provider will be the owner of the equipment only until the moment agreed in the contract on energy efficiency, but at the latest until the equipment is put into operation;
- the property of the public administration, which is the subject of the energy efficiency contract, will be freely disposed of by the owner or manager, either by transfer of management or transfer of ownership. All rights and obligations of the recipient of the guaranteed energy service are transferred to the acquirer of this property;
- the contract on energy efficiency will be able to be terminated by resignation and notice, while the termination of the contract on energy efficiency concluded for an indefinite period will require special requirements;
- the procedure for early termination of the contract on energy efficiency in terms of payment of the accounting value of investment costs;
- and other.
It should be noted that the model of the contract on energy efficiency for the public sector is to be published on its website by the Ministry of Economy of the Slovak Republic (note: at the time of writing this article, it has not yet been published), while public administration entities in the event that they want to avoid impact on the limits indebtedness, must follow/have contractual documentation in accordance with this sample contract.
Pursuant to the transitional provisions of the EE Act, energy efficiency contracts for the public sector concluded before February 1, 2019 remain in force even after the amendment to the EE Act takes effect, which will enable the continuation of already existing projects using a guaranteed energy service.
Given that there are more than 10,000 public buildings in the Slovak Republic, which are largely characterized by increased energy demand, the so-called The EPC model represents considerable potential for the modernization/reconstruction of public buildings without the need for direct capital investment for this purpose from public sources, the potential to reduce the operating costs of public administration and improve the quality of the environment, and as the Bratislava region has the largest floor area of public buildings, it is precisely in this region that the greatest activity in this direction can be expected.
[1] The amendment primarily responds to the fact that in the case of energy efficient measures that were not supported by the European Structural and Investment Funds, they automatically increased the public debt.
Edited by: JUDr. Matej Slezák