Czechia lags on energy legislation as European Commission issues ultimatum

The European Commission has for the second time called on Czechia to transpose European Directive 2019/944 on common rules for the internal market in electricity. The deadline for transposition expired at the end of 2020. This is already the second warning Czechia has received from the European Commission on this matter. Czechia now has two months to remedy the situation. If it fails to do so, the European Commission may refer the case to the Court of Justice of the European Union.

The Czech Republic is falling behind in transposing key energy legislation, specifically Directive 2019/944 on common rules for the internal market in electricity. The directive is a pillar for setting up the electricity market in the European Union. The Czech Republic has essentially had since June 2019, when the directive was adopted, to transpose it; however, in the European Commission's view, it has still not been transposed correctly. The directive should have been fully incorporated into Czech law by the end of 2020.

Even after almost four years, the Commission is still not satisfied with how the directive has been incorporated into Czech law. The European Commission sent its first warning in the form of a letter of formal notice in May 2022. However, the European Commission was not satisfied even after that, and therefore sent Czechia a reasoned opinion at the beginning of October. Along with it, it gave Czechia two months to remedy the situation; otherwise, the European Commission may refer the case to the Court of Justice of the European Union.

Although the European Commission did not publish the specific reasons or provisions it considers missing from Czech energy legislation, electricity storage is one possible issue. It is still not comprehensively regulated in Czech legislation, although it has been covered by the aforementioned directive since 2019.

The situation may change quickly, however, as the currently discussed draft amendment to the Energy Act (sometimes referred to as Lex RES III) is now awaiting its second reading in the Chamber of Deputies of the Parliament of the Czech Republic.

France and Romania also in the spotlight

The Czech Republic is not the only country in the energy sector to have been formally called on to remedy its energy legislation. Like the Czech Republic, France has also not yet sufficiently transposed the above-mentioned directive.

The situation in Romania is somewhat different. The government there has adopted energy legislation that conflicts with European legislation. Specifically, Romania introduced measures requiring certain electricity producers to pay all revenues above a certain price threshold into an energy transition fund. According to the European Commission, the measures introduced in Romania are contrary to European directives and regulations on the internal electricity and gas markets.

Romania has thus essentially introduced a version of the revenue caps that were introduced as an emergency measure at European Union level during the energy crisis. The revenue caps, as introduced by the European Union, were due to end in mid-2023, and the proceeds from the measure were intended to compensate for household electricity prices. However, their equivalent in Romania remains in force, which the European Commission does not like.

It should be added that revenue caps also remained in force in the Czech Republic somewhat longer, as they did not end until the end of 2023. However, the Czech Republic appears to have avoided a formal rebuke from the European Commission.