COBALT represents hydroelectric power plants in the Constitutional Court

Following the applications (constitutional complaints) of multiple small hydroelectric power plants, on 16 September 2020 the Constitutional Court initiated two cases regarding the compatibility of certain provisions of the Electricity Market Law (EML) with Articles 1 and 105(1) of the Constitution.

The first case (No. 2020-52-01) has been initiated regarding Article 31.⁴(1) of the EML – a provision that regulates overcompensation of electricity producers receiving state support in the form of obligatory purchase (OP) of energy volume. Pursuant to the challenged provision other, historically received support for the production of electricity (received prior obtaining OP rights), including the period between the different support periods, is taken into account when calculating the applicable internal rate of return (IRR).

On 30 January 2020 the Latvian Parliament adopted Amendments to the EML that, inter alia, regulate overcompensation of electricity producers. In the view of the applicants the new calculation of overcompensation is unjustified since the calculation of the applicable IRR takes into account other, historically received state support. Pursuant to the new calculation, the differentiation coefficient applicable to the applicants will be recalculated and the amount of the support significantly decreased, thus, in the applicants’ view, violating their right to property as enshrined in Article 105(1) of the Constitution and various constitutional principles derived from Article 1 of the Constitution – principle of legitimate expectations, principle of legal certainty, as well as principles of good legislation and sustainability.

The second case (No. 2020-53-01) has been initiated regarding provisions of the EML (Articles 1(2)(3.1), 30.⁴ and Point 83 of the transitional provisions) that regulate the total period of state support for the production of electricity. Pursuant to the challenged provisions the applicants’ obtained OP rights for 20 years (until 2027 and 2029 respectively) to sell electricity generated from renewable energy sources, will be terminated already on 15 February 2023. Considering that prior obtaining OP rights the applicants since 1996 and 1998 respectively have received other state support for the production of electricity, on 15 February 2023 the total period for state support will reach 20 years. In the applicants’ view the challenged provisions are contrary to their right to property as enshrined in Article 105(1) of the Constitution and various constitutional principles derived from Article 1 of the Constitution – principle of legitimate expectations, principle of legal certainty, as well as principles of good legislation and sustainability.

COBALT team included Managing Partner Lauris Liepa and Associate Dr. Toms Krūmiņš.