Act LXXXVI of 2007

on Electricity 1

In force: 08.01.201229.09.2012

[consolidated with Government Decree No 273/2007 (X. 19.) on the implementation of certain provisions of the Act]

[The text in bold characters is the text of Act LXXXVI of 2007 (VET); the text in normal characters is the text of Government Decree No 273/2007 (X. 19.) on the implementation of certain provisions of the Act (Vhr.).]

With a view to setting up an efficiently functioning internal electricity market, to promote energy efficiency and energy conservation within the framework of sustainable development, to provide consumers with a secure and reliable supply of electricity of a specified quality at transparent prices, to integrate the Hungarian electricity market into the converging electricity markets of the European Communities, compliance with the legislation of the European Communities, and to develop an objective and transparent regulatory regime in compliance with the principle of equal treatment, Parliament has adopted the following Act:

By virtue of the authorisation granted in points 1 to 8, 10 to 18, 20 to 21, 25 to 29, 31 to 34, 36 to 37 and 39 to 40 of Article 170(1) of Act LXXXVI of 2007 on Electrical Energy acting in the function stipulated in Article 35(1)(b) of the Constitution the Government orders the following for the implementation of certain provisions of the VET:

Chapter I

INTRODUCTORY PROVISIONS

Objective

VET Article 1 The purposes of this Act shall be (a) to enhance the economys competitive capacity through an efficient and

competitive internal market in electricity, (b) to promote energy efficiency and energy-saving practices with a view to

ensuring sustainable development, (c) to ensure homogeneity in the treatment of access to electricity networks

according to objective, transparent and non-discriminatory criteria, (d) to provide consumers with a secure and reliable supply of electricity of a

specified quality at transparent prices, (e) effective protection of consumers interests, (f) integration of the Hungarian electricity market into the converging

electricity markets of the European Union, with particular regard to the development and improvement of the Trans-European networks, and to encouraging the interoperability of electricity systems,

(g) promoting the construction of new production facilities and new network infrastructure, and facilitating new market entrants to enter the electricity market,

(h) promoting the production of electricity generated from renewable energy sources and waste, and electricity produced by a cogeneration process.

Scope

VET Article 2 (1) This Act shall apply to: (a) the generation, transmission, distribution, trade, consumption and resale

of electricity, (b) the operation of the electricity system, (c) the construction, operation, commissioning, continuation and

decommissioning of electrical installations, customer interconnection systems and consumer equipment, production lines, private lines and direct lines,

(d) the persons engaged in activities which are subject to authorisation under this Act and in activities which are not, the persons performing certain segments of activities which are subject to authorisation within the framework of outsourcing prescribed in this Act, persons whose application for authorisation or consent under this Act is pending until their application is adjudged, persons performing activities subject to authorisation under this Act without authorisation, integrated electricity companies, users of electricity, purchasers of electricity, persons intending to acquire holdings, influence or control in electricity companies if the implementation of the planned legal transaction is subject to notification or preliminary official consent or approval under this Act, the owner of the transmission network, the owners of electronic communication network components, in particular fibre pairs, with the capacity necessary for the transmission activity (hereinafter jointly referred to as: electronic communication network components), and to the legal relationship between natural persons, legal entities and legal entities without legal personality to whom this Act applies.

(2) In respect of nuclear power plants, the provisions of this Act shall apply in conformity with the special rules of the Act on Atomic Energy.

(3) In respect of heat co-generated with electricity, the provisions of this Act shall apply in conformity with the special rules of the Act on District Heat Supply.

Definitions

VET Article 3 For the purposes of this Act:

1. Transmission shall mean the transport of electricity through the transmission network, including all related technical and economic activities with a view to delivering electricity subject to standard quality requirements;

2. Transmission network shall mean a system of lines including supporting structures and cross-border lines and the transformer and switching equipment used for the transmission of electricity;

3. 4. Biomass shall mean the biodegradable fraction of products, waste and

residues (including vegetal and animal substances) from agriculture, forestry

and related industries, as well as the biodegradable fraction of industrial and municipal waste;

4a. Safety zone shall mean a geographical area specified in the ministerial decree on safety zones in compliance with Article 172(e) of Act CXL of 2004 on the General Rules of Administrative Proceedings and Services (hereinafter referred to as: Ket.) on which the planned or installed power plant, production line, private line or direct line has a significant effect;

5. Connection point shall mean the property boundary between electrical installations, between an electrical installation and the consumer equipment, or between an electrical installation and a private line, production line or direct line;

6. Interconnector shall mean a system of lines comprising part of the transmission network or distribution network including the relevant transformer and switching equipment linking the branching point of a transmission or distribution network to a connection point. Metering equipment shall be considered part of the interconnector;

7. Universal service shall mean a unique form of sale within the framework of trade in electricity, which ensures the right to eligible customers to be supplied with electricity of a specified quality anywhere within the territory of Hungary at reasonable, comparable and transparent prices;

8. Distribution shall mean the transport of electricity through distribution networks with a view to delivering it to customers, including all related technical and economic activities with a view to transporting electricity subject to standard quality requirements;

9. Distribution network shall mean a system of lines including supporting structures and transformer and switching equipment used for the distribution and transport of electricity to connection points;

10. Prepayment metering device shall mean a metering device where electricity is supplied upon prepayment of the relevant charges;

11. Primary energy source shall mean all available renewable and non-renewable energy sources that may be used for the transformation of energy, containing energy in a chemically, physically or nuclearly bound form, with the stipulation that energy sources containing energy generated by using or transforming electricity shall not be regarded as primary energy sources;

11a. Metering period shall mean the period between two meter readings which is set forth in an agreement and which is the basis of accounting;

12. Metering point shall mean a tariff metering point created by tariff metering, or based on the metering system, or calculated by a specific formula relying on measurements, where the timetable, ancillary services and tariff metering is clearly indicated, and where the metering point can be clearly linked to a connection point;

13. Authorised operator shall mean any person holding an effective authorisation by the Hungarian Energy Office (hereinafter referred to as Office) to perform activities for which authorisation is required under this Act;

13a. Certificate of origin shall mean a document attesting the quantity of electrical energy produced from renewable energy sources or of high-efficiency co-generated electrical energy based on useful heat demand;

14. Power plant shall mean a single energy-transforming facility designed to generate electricity from primary energy sources, including for the purposes of authorisation power plants with an energy storage system;

15. Nominal generating capacity shall mean the sum of nominal active capacity (in watts) of installed power generation units measured on generation terminals within the framework of long-term planning;

16. Service location shall mean any contiguous area supplied through one or more connection points, where the consumer uses electricity;

17. User shall mean any person buying electricity for use at his own service location through a public utility system or a private line by means other than resale;

18. Consumer equipment shall mean the users equipment, wire networks and electrical installations, including their associated fittings and fixtures, required for generating, transforming and switching electricity;

19. Disabled consumer shall mean any person receiving disability allowance under the act on the rights and equal opportunities of disabled persons or personal allowance for the blind, or any person whose life or health is directly endangered by the switch-off or interruption of the electricity service;

20. Economically justifiable demand for heat and cooling shall mean the demand that does not exceed the needs for heat or cooling and which would otherwise be satisfied at competitive market conditions by energy generation processes other than cogeneration of thermal energy and electricity;

21. Cross-border line shall mean a line comprising part of the transmission network which crosses the borders of Hungary, including the relevant transformer and switching equipment;

22. Authorised network operator shall mean transmission system operators and distribution network operators;

23. Useful heat shall mean heat produced in a cogeneration process to satisfy an economically justifiable demand for heat or cooling;

24. Household power plant shall mean a micro power plant connected to a low-voltage system with an interconnection capacity of less than 50 kVA at the connection point;

25. Horizontally integrated electricity company shall mean a company authorised to perform at least one of the functions of the electricity industry that is rendered subject to authorisation under this Act and engaged in another non-electricity activity;

26. Energy from waste shall mean energy generated by using waste as fuel in compliance with the relevant environmental protection and waste management regulations;

26a. Information technology equipment shall mean data storage devices, data processing devices running and serving operating systems and applications (servers), and data processing devices using such service (clients), as necessary for the activity of the authorised operator, including the software ensuring the operation of the above;

27. Integrated electricity company shall mean a vertically or horizontally integrated electricity company;

27a. Control shall mean the relationship set forth in Article 3(2) of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings;

27b. Connection point shall mean the point of the private or direct line which is designated as a property or operational boundary by the parties to the contract concluded between the operator of the line and the purchaser;

28. Cogeneration certificate shall mean an exchangeable certificate verifying the quantity of electricity produced by a high-efficiency cogeneration process to satisfy the economically justifiable demand for heat or cooling in case of an aid scheme for the fulfilment of the minimal requirement stipulated for the use of cogenerated electricity;

28a. Affiliated undertaking shall mean an affiliated undertaking as referred to in Article 3(2)(7) of Act C of 2000 on Accounting (hereinafter referred to as: Szt.);

29. Cogenerated energy shall mean the simultaneous generation in one technological process of mechanical, thermal and electrical energy;

30. Demand-side management shall mean a global or integrated approach aimed at influencing the amount and timing of electricity consumption in order to ensure the regulation of the electricity system and to reduce primary energy consumption by giving precedence to investments in energy efficiency measures, or other commercial or contractual measures;

31. Balancing supply shall mean the volume of electricity the transmission system operator charges to the persons responsible for the balancing group in the process of balancing the electricity system upon any positive or negative shift in the rate schedule;

32. Micro power plant shall mean a power plant with a nominal capacity of less than 50 MW;

33. Combined micro power plant authorisation shall mean an authorisation for the construction of a micro power plant subject to authorisation and for the production of electricity;

34. Low-voltage grid shall mean a network with a nominal voltage of no more than 1 kV;

35. Outsourcing shall mean when certain segments of the activities of an authorised operator, which are subject to authorisation under this Act, are carried out by another person on behalf of the authorised operator;

36. Public utility system shall mean a transmission or distribution network that is necessary for the reliable and proper functioning of the electricity system;

37. 38. Direct line shall mean a power line, other than a public utility, private,

production or cross-border line, or a network component or transformer or switching equipment linking the user with a power plant connected to the public utility system;

39. Public lighting shall mean the illumination of areas defined in specific other legislation with a view to ensuring traffic and public safety and property security, in a systematic and controlled arrangement of lighting for a specific period of time using electricity;

40. Public light fixture shall mean fixtures used for public lighting. Public light fixtures are, in particular:

(a) luminaries and lamps, including fittings; (b) support structures used solely for the purposes of public lighting; (c) power lines used solely for the purposes of public lighting;

(d) control system used for turning public lighting on and off, and for regulating it. In the case of multi-purpose control systems, it includes only the module used for the public lighting system;

41. Public lighting distribution network shall mean a network for the electricity supply of public lighting with interconnection and regulation facilities which is owned by the distributor and is not part of the distribution network;

42. Household customer shall mean customers purchasing electricity for their own household consumption, excluding commercial or professional activities, under an agreement for receiving electricity, where household means any single service location, residential building used for housing purposes, residential suite, resort or weekend house, as well as garage space reserved for private use;

42a. Branch point shall mean the point of the transmission or distribution network through which a connecting line which is part of the interconnector connects to said network;

43. Minimum cost shall mean the justified expenditure of the authorised operator as required for the performance of an authorised activity, or as necessary at the level of the national economy;

44. Private line shall mean a power line, other than a public utility, production or direct line, or a network component, or a transformer and switching equipment, installed beyond the connection point and intended to supply customers or purchasers linked directly or indirectly to the transmission or distribution network;

45. Renewable energy sources shall mean renewable non-fossil and non-nuclear energy sources (solar, wind, geothermal, wave, tidal, hydropower, biomass, and energy sources produced directly or indirectly from biomass, as well as landfill gas, sewage treatment plant gas and biogases);

45a. Timetable shall mean a series of data on average electricity output for a given calendar day in tariff metering time units set forth in the commercial code;

46. Balancing group shall mean a system of reimbursement/settlement designed to cover supply/demand balance and to carry out the related functions, and to govern the related liabilities, comprised of one or more members;

47. National Action Plan shall mean a plan concerning the shares of renewable energy used in transport, electricity consumption, heating and cooling in 2020 taking the effects of other energy-efficiency measures on final energy consumption into account and containing target values for Hungary and enforceable measures for reaching such target values;

48. Interconnected electricity system shall mean a minimum of two electricity systems connected by one or more interconnecting lines, where at least one of them is located within the territory of Hungary;

49. Customer connection system shall mean the unmetered part of an internal network following the connection point at a property used by several customers, which is not owned by the authorised distribution network operator;

49a. Profile shall mean a normalised graph on the annual electricity output demand of consumers for an annual consumption of 1000 kWh, prepared on the basis of statistical analysis;

50. Network user shall mean a person who is linked directly or indirectly to the public utility system for the purpose of injecting into or withdrawing electricity from the system;

51. Grid control shall mean all targeted activities for ensuring the seamless and safe operation of the electricity system and the balance of performance, as well as the availability of international interconnections;

52. Interconnecting line shall mean a cross-border line comprising part of a the transmission network, linking the networks of interconnected electricity systems;

53. Ancillary services shall mean all the services provided by the transmission system operator to ensure supply/demand balance within the electricity system and to maintain the quality of transmission;

54. Wind turbine shall mean a device designed for the harnessing of wind power for electricity production;

55. Wind farm shall mean a collection of wind turbines operated by the same customer or authorised operator, which are linked to the transmission or distribution network at the same connection point;

56. Regulated electricity market shall mean a trading system operated by the authorised operator of the regulated electricity market for the facilitation of regional electricity traffic, where trade in electricity and related transactions are conducted in a standardised form;

57. Generation shall mean the production of electricity; 58. Producer shall mean a person generating electricity; 59. Authorised producer shall mean a person holding an operating licence

for the generation of electricity or a combined micro power plant authorisation; 60. Production line shall mean any power line other than public utility,

private and direct lines, and any network component or transformer and switching equipment, which is used to deliver electricity generated by a power plant to the connection point of the public utility system, and to which no user or purchaser is connected;

61. Resale shall mean the selling of electricity purchased by the user within a single service location to purchasers through a metered private line;

62. Malfunction shall mean any unplanned event in operations, causing unintended changes in prearranged procedures, such as in the production, transmission and distribution of electricity;

63. Standard service agreement shall mean a document containing the authorised operators standard terms and conditions, which has been approved by the Office;

64. 65. Vertically integrated electricity company shall mean an electricity

company or group of companies to the control of which the same person or persons are entitled directly or indirectly, and where the electricity company or group of companies is performing transmission system control or distribution and at the same time performs or is authorised to perform at least one of the functions of the generation or trading of electricity. The person or persons directly controlling the abovementioned electricity company or group of companies shall be regarded as parts of the vertically integrated electricity company;

66. Vulnerable customers shall mean those household customers who require special attention due to their social disposition defined in legislation, or some other particular reason, in terms of supplying them with electricity;

66a. Purchase location shall mean a contiguous territory supplied through one or more connection points, where the purchaser uses the total amount of the purchased electricity;

66b. Purchaser shall mean persons other than users who purchase electricity via private lines from users through resale or via direct lines from producers exclusively for own use;

67. Electricity Supply Codes shall mean a set of operational regulations containing the rules, procedures and methods pertaining to the functions of the electricity system, trade regulations containing the mandatory content elements of commercial agreements, contracts concluded for tariff metering and for the exchange of data, the terms of international commerce and the main terms regulating ancillary services and the operation of the regulated electricity market, as well as the distribution network operators regulations concerning distribution network operations;

68. Electricity company shall mean a business association under Article 685(c) of the Civil Code, or a foreign undertaking registered in another Member State of the European Union or a state party to the agreement on the European Economic Area, including its branch registered in Hungary, which is engaged in activities that are subject to authorisation in accordance with this Act;

69. Trade in electricity shall mean for-profit business operations involving the buying and selling of electricity and the related capacity for purposes other than own use;

70. Electricity system shall mean the power plants and networks operated by the transmission system operator in accordance with the principles of the Electricity Supply Codes and in cooperation with the distributors performing the functions specified by law;

71. Electrical installation shall mean power plants and transmission and distribution networks;

72. Green certificate shall mean an exchangeable certificate verifying the quantity of electricity produced by energy from renewable energy sources in case of an aid scheme for the fulfilment of a minimal requirement for using electricity produced by energy from renewable energy sources;

74. Separately managed institute shall mean a central budgetary body, a budgetary institute of a central budgetary body, local governments, budgetary institutes of local governments, and other non-profit institutions receiving normative state subsidy and performing public functions.

Vhr. Article 1(1) For the purposes of this Decree: 1. Accounting invoice shall mean an invoice issued during the term of an

agreement on network access or electricity purchase, which relates to the given metering period and contains the accounts as a multiple of the actual consumption between the first and final metering data of the metering period and the rate for the specific zone periods or for one tariff period in case of periodical tariffs;

2. Power plant unit shall mean technically independent equipment (boiler, engine and generator, or engine and generator, hereinafter jointly referred to as: main equipment) or group of equipment, which constitutes a technologically independent unit connected to the electricity network and suitable for generating electricity using primary energy sources or electricity cogenerated with heat;

2a. Payer shall mean the person who undertakes the payment of the price of the electricity used at the service location as well as the network access fee and ancillary charges in the framework of a payment agreement;

2b. Consumption meter shall mean the metering equipment used for metering electricity consumption, including supplementary devices;

3. Medium voltage shall mean a nominal voltage above 1 kV and not exceeding 35 kV;

45. 6. Contracted supply shall mean the active power expressed in kW which was laid

down in relation to a given connection point in the network access contract concluded between the authorised network operator and the network user;

78. 9. Balancing group representative shall mean an authorised operator, operator of

a micro power plant not subject to authorisation, or user, who performs the duties relating to the balancing group as laid down in the Commercial Code;

10. Metered private line shall mean the section of the private line metered by the authorised network operator;

10a. High voltage shall mean a nominal voltage exceeding 35 kV; 11. Test run shall mean the last stage of commissioning, the purpose of which is to

attest that during its operation the power plant unit will meet the criteria laid down in legislation, official resolutions and in the Electricity Supply Codes in respect of uninterrupted and appropriate operation;

12. User subject to profile-based settlement of accounts shall mean a user who is supplied through the low-voltage network, and who does not have a remotely accessible consumption meter suitable for the registration of a load-duration curve;

13. 14. Available power shall mean the apparent capacity value expressed in kVA, up

to the amount of which network capacity is provided by the authorised network operator at a given connection point;

14a. Interim invoice shall mean an invoice issued at regular intervals for users within the metering period and based on the quantity of electricity calculated on the basis of statistical analysis or data provision;

15. Producers permit shall mean an operational permit for the generation of electricity and the combined micro power plant authorisation;

16. Operational incident shall mean a change of state or intervention in the operation of the electricity system;

16a. Final invoice shall mean an invoice issued for the user after the expiry of the agreement on network access or electricity purchase, which is based on the multiple of the consumption in the given period as indicated by the meter index and the tariffs assigned to zone periods;

17. Energy service shall mean an activity or procedure provided on the basis of a contract which leads to the improvement of energy efficiency or primary energy savings in respect of a building, group of buildings, industrial operation or establishment, or private or public service, which can be attested, measured or estimated, including the operation, maintenance and control necessary for rendering the service;

18. Energy audit shall mean a proceeding by which relevant information can be obtained in respect of the current energy consumption profile of a building, group of buildings, industrial operation or establishment, or a private or public service, and

which determines and quantifies cost-effective energy saving options and records their results;

19. Energy-efficiency shall mean the quotient of energy output and energy input; 20. Measures for improving energy efficiency shall mean measures which lead to

an improvement of energy efficiency which can be attested, measured or estimated; 21. Programmes for improving energy efficiency shall mean all the measures for

improving energy efficiency pertaining to individual user groups. (2) Terms not included in paragraph (1) shall be interpreted according to Article 3 of

Act LXXXVI of 2007 on Electrical Energy (hereinafter referred to as: VET). Chapter II

PRODUCTION OF ELECTRICITY

Generation

VET Article 4 (1) Electricity may be generated in power plants with a nominal capacity of 50 MW or more in possession of an operating licence for the generation of electricity, or in micro power plants with a nominal capacity of 0.5 MW or more in possession of a combined micro power plant authorisation.

(2) A producer shall be authorised to sell under the authorisation referred to in paragraph (1):

(a) the electricity of his own production, (b) the electricity received from the transmission system operator within the

framework of ancillary services, (c) the electricity received under Article 13(1) under the purchase obligation

regime. (3) Producers supplying electricity directly to users shall be treated as

electricity traders supplying electricity directly to users, with the exception of the obligation for requesting an operating licence pertaining to trade in electricity.

(4) In connection with any production of electricity that is subject to purchasing obligation under specific other legislation, the producer shall be entitled to sell only the electricity of his own production, less own consumption calculated according to the said specific other legislation, in the purchasing obligation regime.

VET Article 4/A Secure and uninterrupted electricity supply to consumers shall be of priority public interest.

VET Article 5 (1) Authorised producers shall offer their available generation capacity to the extent required for providing the ancillary services prescribed in the Electricity Supply Codes, and may not withhold such capacity or cut back on their production of electricity unjustifiably. The Office shall construe the actions of an authorised producer as unfounded withholding, in particular, if:

(a) withholding did not occur as a result of malfunction or any shortage of primary energy sources;

(b) it does not qualify as a suspension of activities in accordance with Article 74(1)(a) to (b); or

(c) withholding did not occur as a result of changes in environmental or efficiency requirements pertaining to production equipment.

(2) Where the power plant is shut down because the prevailing market price fails to cover its specific variable operating costs, this shall not be construed as undue withholding of production.

(3) The transmission system operator shall have powers to request any time under the principle of minimum cost to have serviceable production equipment connected to the network, if guaranteeing to cover the costs of powering up and operating the equipment. If the relevant costs are covered the request may not be refused.

(4) In connection with any undue withholding the Office may impose the sanctions specified in Article 96(1)(a) to (b), and shall adopt a resolution to determine the power generating capacity to be offered.

(5) Micro power plants may fulfil the offering obligation referred to in paragraph (1) jointly as well, in accordance with the operating code. Detailed rules shall be included in the Electricity Supply Codes.

VET Article 6 (1) Operators of power plants with a nominal capacity of 50 MW or more, and generating electricity from non-renewable energy sources shall be required to maintain supplies of energy sources under the conditions set out in specific other legislation.

(2)(3) VET Article 6/A (1) At the request of the producer the Office shall issue a

certificate of origin in order to inform consumers, and shall ensure the electronic registration of certificates of origin.

(2) If the certificate of origin is issued in order to check the eligibility to participate in the purchase obligation regime, Article 12(1) shall apply.

Establishment of New Generation Capacities

VET Article 7 (1) Subject to the exception set out in paragraph (2), any person shall be entitled to set up new generation capacity at its own business risk under the conditions set out in this Act and in specific other legislation.

(2) With a view to ensuring the governance and secure operation of the electricity system, and in light of the limited technical means wind turbines and wind farms apart from household micro power plants and micro power plants which are not linked up with any electrical installation may be established by way of invitation to tender issued in accordance with the conditions set out in the ministerial decree on the conditions of invitations to tenders for the establishment of wind turbine capacities, the minimum content requirements of tenders, and the rules of the tender procedure.

(3) (4) The tender notice shall convey detailed instructions for tenderers to follow

and on the tender evaluation criteria. (5) In the process of the construction of new generation capacities using

renewable energy sources, the authorised network operators shall under the conditions and to the extent specified in specific other legislation and the relevant resolution of the Office bear the costs of technical adaptations to the public utility system, such as grid connections and grid reinforcements, which are necessary in order to integrate such new producers into the distribution and transmission network. The Office shall regulate network access fees taking the above-specified costs borne by the authorised network operators into consideration to a reasonable extent.

VET Article 8 (1) The Office may issue a call for tender under the conditions laid down in specific other legislation and with the contribution of the transmission system operator for the construction of a power plant or for the implementation of demand-side management measures, provided that the volume of electricity available in the country under market conditions is insufficient to meet the foreseeable long-term future electricity demand of users, and if necessary to promote environmental objectives or the introduction of new technologies featuring better efficiency in terms of energy consumption.

(2) The Office may issue the call for tender referred to in paragraph (1) only if the authorisation procedure, generation capacities established upon the investors initiative, and the demand-side management measures adopted are according to projections inadequate to meet existing demands for electricity.

(3) When issuing the call for tender referred to in paragraph (1), the Office shall take the following factors into consideration: data supplied by the transmission system operator under Article 16(b) and all applications submitted for authorisations to design and construct power plants, increase capacity, or make expansions thereof, or applications for operating licences relating to electricity generation, as well as the foreseeable impact of demand-side management measures.

(4) The Office must take into account the criteria set out under Article 78 in connection with the tender referred to in paragraph (1).

(5) The calls for tenders referred to in paragraph (1) shall be published in the Official Journal of the European Union and on the official website of the Office at least six months prior to the planned deadline of the submission of tenders.

(6) The call for tender shall convey detailed instructions for tenderers to follow and on the tender evaluation criteria.

(7) The authorised network operator shall allow the implementation of network improvements following the tender referred to in paragraph (1), and shall cooperate with the person carrying out the improvements.

Facilitating the Generation of Electricity Produced from Energy from Renewable Sources and Waste

VET Article 9 (1) With a view to protecting the environment and nature, ensuring the supply of users, saving primary energy, and expanding the range of available energy sources, the use of renewable sources and waste as an energy source shall be promoted.

(2) To promote the use of renewable energy sources and waste as an energy source, this Act and specific other legislation adopted under authorisation by this Act shall lay down the foundation for a differentiated purchasing obligation regime in consideration of energy sources, generation procedures, nominal generating capacity, the efficiency and effectiveness of energy conversion processes, and the date of construction of power plants.

VET Article 10 (1) The Government shall lay down the detailed regulations for the purchasing obligation regime referred to in Article 9 taking into account the following:

(a) the purchasing obligation regime for electricity generated from renewable energy sources or from waste shall ensure long-term predictability and shall be consistent with energy policy principles;

(b) the purchasing obligation regime shall decrease the competitive disadvantage occurring during the sale of produced electricity by maintaining market competition among producers;

(c) the purchase price of electricity subject to purchasing obligation, its volume and the duration of the purchasing obligation shall be determined in due consideration of the average payback periods of the various generation technologies, the efficiency of using specific energy sources in relation to the countrys natural resources, the ability of users to absorb hardship and the higher rate of efficiency brought about by technological development, and the impact the said technology is likely to have on the electricity system and technological characteristics;

(d) (e) in accordance with specific other legislation, with a view to ascertaining a

solid economic and legal background, the purchasing obligation shall apply from the commencement of electricity generation under a specific project and shall remain in effect for the duration specified in accordance with paragraph (c).

(2) In light of the criteria set out in paragraph (1), the purchasing obligation regime relating to electricity may not be used to promote:

(a)(b) (c) the production of electricity from lumber-grade or higher grade logs as

energy sources, gained by way of unauthorised logging operations according to Act LIV of 1996 on Forests and the Protection of Forests (hereinafter referred to as: Forest Act), or by way of authorisation granted under the Forest Act, with the exception set out in Article 171(6).

(3) The provisions governing the purchasing obligation pertaining to electricity produced by wind turbines and wind farms shall be determined without prejudice to paragraph (1), separately, in light of the limited technical means of ancillary services.

(4) Producers of electricity subject to purchasing obligation shall be required to enter into a balancing group agreement according to the transmission system operators standard service agreement, and join the balancing group created by the transmission system operator for accounting concerning the electricity subject to purchasing obligation. This balancing group shall be balanced by the transmission system operator.

Facilitation of the Generation of Electricity from Renewable Sources and Waste and Electricity Produced in a Cogeneration Process

Vhr. Article 2 In order to enforce the provisions in Article 10(1) of the VET the Hungarian Energy Office (hereinafter referred to as: Office) may require the submission of the manufacture documents of equipment. Equipment the year of manufacture of which was more than five years before the year in which the application for the permit was submitted shall be regarded as used.

VET Article 11 (1) The purchasing obligation defined according to the criteria under Article 10 may be carried out:

(a) at market prices; (b) at a price specified in this Act or in specific other legislation. (2) The purchase price specified in point (b) of paragraph (1) of electricity

subject to purchasing obligation shall be expressed in units of HUF/kWh, in compliance with Article 171(3) to (4).

(3) The purchase price of electricity subject to purchasing obligation, and the terms and conditions of purchase shall be decreed by the Government. The quantity of electricity subject to purchasing obligation and the duration of the purchasing obligation shall be determined by the Office according to statutory conditions. The purchase price of electricity subject to purchasing obligation may be determined in compliance with paragraph (2) separately for each energy source and each generation procedure, and the amount thereof my differ according to power generating capacity.

(4) The purchasing obligation referred to in point (b) of paragraph (1) may be maintained maximum for the payback period of a specific project at a specific purchase price.

(5) The quantity of electricity subject to purchasing obligation and the duration of the purchasing obligation shall be determined net of state subsidies, and orders for waste management services determined according to the Act on Environmental Protection Product Charges.

(6) The subsidies referred to in paragraph (5) are, in particular, investment aid, tax exemptions, and the profit resulting from savings in emission allowance units through increasing the quantity and share of renewable energy sources, where the emission allowance units were obtained free of charge in accordance with the Act on Greenhouse Gas Emission Allowance Trading. The aid for the restructuring of the coal industry and the costs of transition referred to in Article 147(1) need not be taken into account.

VET Article 11/A The Office shall revise the implementation of the objectives laid down in the National Action Plan in respect of production at least every two years, and shall prepare a publicly available report thereon, and shall prepare a proposal for the Government which shall cover the provisions of Article 11(2) if necessary.

Vhr. Article 3 VET Article 12 (1) At the producers request the Office shall verify the quantity

of electricity and useful heat generated from renewable energy sources or waste and the primary energy sources used for the cogeneration process.

(2) If a producer selling in the framework of the purchasing obligation regime referred to in Article 11(1)(b) and using renewable and non-renewable energy sources concurrently applies an accounting system other than what is stipulated in specific other legislation, such producer shall repay the extra revenue from the difference between the market price and the regulated purchase price, and the Office shall have powers to impose the sanctions specified in Article 96(1).

(3) The Office shall prepare a report annually on the generation of electricity from renewable energy sources and on electricity produced in a cogeneration process, and on the annual trends in the purchasing obligation regime. The Office shall publish this report on its official website.

VET Article 13 (1) Electricity traders (including providers of universal services) and authorised producers supplying electricity directly to end users shall be required according to the provisions of specific other legislation to purchase electricity that is subject to purchasing obligation consistent with the quantity of electricity they sell to end users, and to enter into an agreement with the transmission system operator to this effect. Users engaged in the importation of electricity shall be required according to the provisions of specific other legislation to purchase electricity that is subject to purchasing

obligation consistent with the quantity of electricity they use for own consumption, and to enter into an agreement with the transmission system operator to this effect.

(2) Electricity generated by household power plants shall be procured according to the provisions of specific other legislation by the electricity trader that supplies electricity at the connection point in question.

Special Provisions Pertaining to Connecting Household Power Plants to the Network and Network Use

Vhr. Article 4 At the request of the operator the electricity trader selling at a given connection point or the provider of universal services shall purchase the electricity produced by the operator of the household power plant.

Vhr. Article 5 (1) The available capacity of household power plants shall mean the power generating capacity expressed in kVA.

(2) Household power plants may be established and operated at a given connection point up to the capacity available to the user at the same connection point without the amendment of the network connection agreement, or up to a capacity exceeding the available capacity but not exceeding the capacity referred to in Article 3(24) of the VET with the amendment of the network connection agreement, in accordance with the detailed rules laid down in specific other legislation on connecting to the network and in the Distribution Code and in the standard service agreement of the distributor.

(3) The user shall inform the distributor with whom the user has established a legal relationship about his intention to commission a household power plant in a written or electronic claim containing the basic technical data of the household power plant.

(4) In the claim pertaining to the establishment or operation of a household power plant the user must make a statement on whether he intends to inject electricity into the public utility system, or the sole purpose of electricity generation is to cover his own electricity consumption. The technical specifications of the network connection must be specified by taking the above statement into account.

(5) If the household power plant injects electricity into the public utility system at the given connection point, the electricity trader or the provider of universal services being in a legal relationship with the operator of the household power plant as a user shall apply monthly, semi-annual or annual balance accounting, as agreed on by the parties, in respect of the total electricity injected into the network and the total purchased electricity per metering period.

(6) If electricity has been injected into the distribution network according to the balance of electricity quantities purchased and injected in the metering period, the quantity of injected electricity shall be accounted at the average product price of electricity sold by the electricity trader being in a legal relationship with the operator of the household power plant to the operator as a user according to the agreement on electricity purchase.

(7) The costs of the consumption meter shall be borne according to the rules pertaining to users up to a capacity of 3 x 16 A, and according to the rules pertaining to power plants above this capacity.

(8) Further provisions pertaining to the connection and operation of household power plants shall be included in supply codes and the standard service agreements of authorised network operators; further rules pertaining to the accounting of electricity sales shall be included in the standard service agreements of traders.

Chapter III

COMMON PROVISIONS ON TRANSMISSION SYSTEM CONTROL, ELECTRICITY DISTRIBUTION AND AUTHORISED NETWORK OPERATORS

Title 1

Transmission System Control

VET Article 14 Within the framework of performing transmission and system control simultaneously (hereinafter referred to as: transmission system control) the responsibilities of the transmission system operator shall include the following:

(a) ensuring that the electricity system functions smoothly and safely, and balancing the electricity system,

(b) providing for the operation, maintenance and improvement of the transmission network

(c) transmitting electricity at a standard quality, and (d) operation, maintenance and improvement of instruments necessary for

transmission system control. VET Article 15 The transmission system operator shall discharge the duties

conferred upon him in this Act and in Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (hereinafter referred to as: Regulation (EC) No 714/2009) in a manner that is transparent, objective and non-discriminatory.

VET Article 16 The responsibilities of the transmission system operator in connection with the security of electricity supply and the operation of the transmission and distribution networks shall include the following specific duties:

(a) manage the electricity system and keep it operational at all times, including international relations,

(b) collect and supply information as required for the operation and improvement of the electricity system and for the continuous and secure supply of electricity,

(c) collect and provide data to the Office concerning prices related to authorised transmission system control operations in the manner specified in specific other legislation and in the Electricity Supply Codes, with a view to ensuring the fulfilment of Hungarys international commitments,

(d) operate the balancing group system, make arrangements for settlement between the balancing groups and the transmission system operator;

(e) take part in the preparation of tenders specified in Articles 26 and 26/A for the improvement of the transmission network, and of the distribution network specified in the Operating Code influencing the operation of the transmission network (hereinafter referred to as: distribution network influencing transmission conditions),

(f) coordinate and schedule prearranged maintenance work in power plants, distribution and transmission networks with a view to keeping the electricity system operational at all times;

(g) calculate and procure generating capacity to the extent required for providing the ancillary services specified in the Operating Code, to provide

ancillary services and charging for such services in accordance with the Operational and Commercial Codes,

(h) cooperate in the performance of transactions on the regulated electricity market,

(i) contrive and order the measures required for maintaining the cooperative capacity of the electricity system, including measures taken in the event of any major breakdown or malfunction in the electricity system, or the limitation or suspension of transmission, distribution and supply to consumers,

(j) plan and manage the transmission network and the distribution network influencing transmission conditions in addition to maintaining the capacity balance,

(k)(l) (m) coordination of duties arising from the interoperability of European

systems and conferred upon Hungary, (n) provide connection and access to the transmission network and

information relating thereto, (o) coordinate demand-side management measures as specified in the

Electricity Supply Codes, (p) pay all charges relating to the transmission network, fulfil payments

stipulated in the framework of the inter-transmission system operator compensation mechanism under Article 13 of Regulation (EC) No 714/2009 and Commission Regulation (EU) No 838/2010 of 23 September 2010 on laying down guidelines relating to the inter-transmission system operator compensation mechanism and a common regulatory approach to transmission charging (hereinafter referred to as: Regulation (EU) No 838/2010), as well as to collect and account revenues received by the transmission system operator within this framework and charges imposed for congestion management.

(q) monitor compliance on a regular basis concerning the provision of the financial guarantees prescribed in the Government Decree on the implementation of certain provisions of the Act on Electrical Energy (hereinafter referred to as: Vhr.), and to notify the Office in the cases referred to in the Vhr.

Financial Guarantee

Vhr. Article 6 (1) In order to ensure the operation of the balancing group system and to reduce the financial credit and price risks of the arrangement of settlement between the balancing group supervisors and the transmission system operator, the transmission system operator must operate a financial guarantee system which manages the performance risk of the financial positions of a given balancing group supervisor during the accounting cycle specified in the Commercial Code.

(1a) In order to ensure the operation of the of the purchase obligation regime, the operation of the balancing group as specified in Article 13(1) of the VET between the person subject to the purchase obligation and the transmission system operator and of the cogeneration balancing group, and to reduce the financial credit and price risk of the arrangement of settlement between producer having the sales rights under Article 171/A of the VET and the transmission system operator, the transmission system operator shall operate a financial guarantee system, which manages the performance risk of the financial positions of the person obliged to purchase and the producer authorised to sell electricity during the accounting cycle specified in legislation.

(2) The transmission system operator must establish its system for financial risk management in a way that is suitable for the reception of other liquid assets referred to in Act CXX of 2001 on the Capital Market in addition to scriptural money, for the facilitation of the liquidity of the transmission system operator, for decreasing the relevant costs of the person subject to the obligation to provide a financial guarantee and for the minimisation of the financial risk arising from the difference between the registered and actual market value of the financial guarantee in case of non-fulfilment by market participants.

(3) The transmission system operator shall lay down the detailed rules of receiving financial guarantees in its standard service agreement.

VET Article 17 (1) The transmission system operator shall (a) participate in congestion management proceedings organised and

coordinated at the regional level or at the level of the interoperable European electricity system;

(b) take the status and technical specifications of the regional and the single European electricity system into account during the provision of cross-border capacities and the management of congestions in the interconnecting lines;

(c) ensure that the design, development and control of the public utility system are implemented in compliance with the technical requirements of the European electricity system and with the operation of the regional and the single European electricity market.

(d) represent the Hungarian electricity system in international organisations, except for international organisations operating with the participation of the Government or a regulatory authority;

(e) keep contact with third parties, with the Office and with foreign regulatory authorities appointed in other Member States of the European Union to regulate the energy market (hereinafter referred to as: foreign regulatory authorities); and

(f) contribute to the establishment of regional markets, and shall be entitled to establish a joint undertaking in order to facilitate the establishment of the single electricity market.

(2) Within the framework of the representation referred to in paragraph (1), the transmission system operator shall obtain the Offices prior consent before entering into any agreement with significant impact on the congestion management procedures organised and controlled at the regional level or at the level of the interoperable European electricity system and on the interoperability of the electricity system. The transmission system operator shall notify the minister in charge of energy policies (hereinafter referred to as: Minister) and the Office upon the conclusion of such agreements.

VET Article 18 The transmission system operator shall prepare status reports on at least a half-yearly basis for the Office and the Minister, which shall contain the output and energy consumption account of the Hungarian electricity system, the use of primary energy sources, the availability of power plant generation capacities at various intervals, improvements in the transmission and distribution networks, and changes in consumption.

Vhr. Article 7 (1) The status report of the transmission system operator, as referred to in Article 18 of the VET, shall specifically cover the measures taken in order to coordinate demand-side management as well as the outcomes of such measures.

(2) The transmission system operator shall publish its calls for tenders for the provision of ancillary services, for making up losses in the distribution network and for

purchasing the capacities and energy necessary to balance the balancing group for electricity subject to purchase obligation and the affiliate balancing group on its homepage, and shall send them directly by electronic means to the authorised producer and user concerned, and to the electricity trader which concluded a long-term contract with the authorised producer on contracted capacities.

(3) The calls for tenders issued by the transmission system operator may pertain only to the period specified in the Commercial Code.

(4) The calls for tenders shall include the deadline of bidding, and those requirements and technical criteria which must be met by the tenderer.

(5) When issuing a call for tender the transmission system operator shall determine the deadline of bidding and the date of awarding the tender in view of the starting date of the period covered by the call for tender.

(6) If the authorised producer, the user or the trader who concluded a long-term contract with the authorised producer on contracted capacities meets the technical requirements laid down in the call for tenders, he shall be obliged to make an offer to the transmission system operator.

(7) If the persons subject to the obligation to make an offer fail to fulfil their obligation referred to in paragraph (6), the transmission system operator shall notify the Office. If the Office finds that the statutory obligation was violated, it shall apply the sanctions referred to in Article 96(1) of the VET.

(8) The transmission system operator shall adjudge the offers according to the criteria laid down in the Commercial Code and in the call for tender. The transmission system operator shall conclude a contract with the successful Hungarian or foreign tenderers according to the sample contract contained in its standard service agreement.

VET Article 19 (1) For the purpose of billing for the performance of contracts, and for discharging the duties specified in Article 16 the transmission system operator shall operate a tariff metering system and a data traffic and communication system, which shall possess the capabilities specified in the Electricity Supply Codes and shall comply with nationally standardised technical requirements.

(2) The transmission system operator shall perform the quantitative settlements specified in the relevant Operating Code for the transmission of electricity through transmission and distribution networks.

VET Article 20 (1) Network users shall use and pay for the ancillary services related to the purchase of electricity, specified in the Electricity Supply Codes and provided by the transmission system operator.

(2) The transmission system operator shall purchase capacities and electricity to the extent necessary to ensure ancillary services, to make up for losses in the transmission network, and to balance the balancing group of electricity subject to purchase obligation publicly, in a manner accessible to any Hungarian or foreign producer or trader, or to any user having the appropriate equipment.

(3) The terms of and conditions for purchasing electricity to the extent necessary to ensure ancillary services and to make up for losses in the transmission network shall be made public prior to the publication of the call for tender, according to the procedure laid down in specific other legislation.

Vhr. Article 7 (1) The status report of the transmission system operator as referred to in Article 18 of the VET shall specifically cover the measures taken in order to coordinate demand-side management and the results of such measures. The

detailed rules of procedures for demand-side management and the duties of the transmission system operator relating thereto shall be included in the Commercial Code.

(2) The transmission system operator shall publish its calls for tenders for the purchase of the capacities and electricity necessary to ensure ancillary services, to make up for losses is the transmission network and to balance the balancing group of electricity subject to purchase obligation on its homepage and in two national daily newspapers, and shall send them directly by electronic means to authorised producers and to traders who have concluded a long-term agreement with an authorised producer on contracted capacities.

(3) The call for tender published by the transmission system operator shall cover one year or a period shorter than one year as laid down in the Commercial Code.

(4) The deadline of bidding and the requirements and technical criteria to be met by the tenderers shall be laid down in the call for tender.

(5) In respect of authorised producers and traders having concluded a long-term agreement on contracted capacities with an authorised producer the transmission system operator shall determine the deadline of bidding and the date of awarding the tender in the annual call for tender in view of the deadline of fulfilling the tendering obligation referred to in Article 106 of the VET.

(6) If the power plant or the trader who concluded a long-term agreement on contracted capacities with an authorised producer meets the technical criteria laid down in the call for tender, it shall be obliged to make an offer to the transmission system operator.

(7) If the persons subject to the obligation to make an offer fail to fulfil their obligation referred to in paragraph (6), the transmission system operator may notify the Office. If the Office finds that the statutory obligation was violated, it shall apply the sanctions referred to in Article 96(1) of the VET.

(8) The transmission system operator shall adjudge the offers according to the criteria laid down in the Commercial Code and in the call for tender. The transmission system operator shall conclude a contract with the successful Hungarian or foreign tenderers.

VET Article 21 (1) With a view to ensuring the implementation of the provisions contained in Article 16, the transmission system operator shall operate an accounting system based on any number of metering points clearly indicated to it and based on the system of balancing groups. The detailed regulations for such accounting system are contained in the Commercial Code.

(2) Producers, electricity traders, providers of universal services, users, and authorised distribution network operators shall be required to set up a balancing group, or unless otherwise stipulated by legislation to join an existing balancing group. The balancing group shall be represented vis--vis the transmission system operator by the balancing group supervisor.

(3) The authorised operator of a regulated electricity market shall set up its own balancing group. The execution of transactions which the balancing group has notified to the transmission system operator, and which have been settled and acknowledged by the transmission system operator may be restricted according to Article 36 only.

(4) Every metering point shall belong to a balancing group, and may belong to only one balancing group at any given time. A right relating to cross-border transmission capacity as specified in the Commercial Code may be exercised only if belonging to a balancing group.

(5) The balancing group supervisor shall enter into an agreement with the transmission system operator and unless otherwise provided for by legislation with the members of the balancing group according to the provisions laid down in the Commercial Code and in the transmission system operators standard service agreement.

(6) The balancing group supervisor shall be required to have the financial guarantees stipulated in the relevant Government decree.

(7) Users eligible for universal services shall automatically gain membership by operation of law in the balancing group of the authorised provider of universal services or authorised trader in electricity with which they are engaged under contract, and may not be compelled to conclude a balancing group agreement. Users eligible for universal services shall gain membership in the balancing group free of charge.

VET Article 22 The proceeds received by the transmission system operator in connection with the activities it performs relating to the purchasing obligation regime specified in Article 9 shall not be regarded as the transmission system operators revenues, they may not be used for purposes other than operating the aforesaid regime, and the transmission system operator shall keep them separate from its other assets and separately from one another. The transmission system operator shall record the funds held on the said isolated account and the proceeds, less any handling charges, under liabilities. The transmission system operator shall have the right to claim the justified expenses incurred in connection with carrying out the above-specified activities. Such activities may not be aimed at obtaining any commercial gain.

VET Article 23 The detailed rules for the responsibilities of the transmission system operator shall be laid down in the operating licence and in the Electricity Supply Codes.

Title 2

Common Provisions Relating to Authorised Network Operators

VET Article 24 (1) In order to ensure the interoperability of the electricity system and access to the transmission and distribution networks, authorised network operators shall:

(a) operate and maintain the transmission and distribution systems under their control in a safe, effective and reliable way and in view of the requirements of environmental protection and supply security,

(b) perform the maintenance, repair and renovation works and improvements in due time in a way that the transmission and distribution network under their control can transfer electricity on the long term, and shall maintain the required stocks and reserves,

(c) ensure the technical conditions required for operating the transmission and distribution network.

(2) The transmission system operator and authorised distribution network operators shall execute the maintenance, repair and renovation works and improvements referred to in paragraph (1)(b) in a manner to ensure the interoperability and security of the electricity system, and in due observation of the principle of minimum cost. Where any work is subcontracted to a natural person or an economic operator, the transmission system operator and

authorised distribution network operators shall follow the provisions and procedures for the selection and contracting of such natural persons and economic operators as laid down in the Vhr. and in their internal code on selection as approved by the Office and published by the authorised network operator. The authorised network operator shall publish its approved internal code on selection on its homepage.

(3) In cooperation with the transmission system operator, the authorised distribution network operator shall manage the operation of those distribution networks or network sections that do not affect the operation of the transmission network.

(4) The operation of distribution networks and network sections affecting transmission shall be managed by the distributor. In the absence of an agreement or in the case of a divergence of opinions between the transmission system operator and the distributor the distributor shall perform this activity according to the instructions of the transmission system operator.

Network Operation

Vhr. Article 8 (1) The authorised network operator shall ensure the operation, maintenance, repair, renovation and improvement of the public utility system covered by its operating licence in the territory specified therein regardless of the ownership of the public utility system. The obligation to carry out improvements shall be fulfilled in such a way as to ensure the access of every network user in the territory specified in the operating licence to the public utility system. The owner of the network component concerned and the owner of the real estate in which the network component is located shall enable such works and shall cooperate with the authorised network operator.

(2) If the transmission system manager or the distributor applies a network component owned by someone else in addition to their own equipment in order to supply users they shall, under the agreement concluded with the owner of the network component, pay a fee the amount of which shall be proportionate to use. In order to include this amount in the network access fees, the Office shall on the basis of the application submitted by the authorised network operator recognise this amount as a justified cost during the regulation of network access fees. The mandatory elements which must be included in the agreement concluded between the authorised network operator and the owner of the network component or the owner of the real estate in which the network is located shall be contained in the Electricity Supply Codes.

(3) The authorised network operator shall consult with the authorised producer connected to the given network section in respect of planned maintenance, repair and renovation works and improvements affecting access to the network.

(4) The distributor shall send an annual report to the Office on the number of micro power plants which are connected to the network and are not subject to authorisation (household power plants shall be indicated separately), as well as on their type, installed power and the quantity of electricity fed into and purchased from the network.

VET Article 25 (1) With due regard to the development plans and proposals prepared by distributors, current and expected electricity use, generation, demand and supply, cross-border electricity traffic, the requirements of the European electricity market, development plans for regional and Community networks and the criteria laid down in the Vhr. the transmission system

operator shall annually prepare a network development plan for the electricity system in respect of networks of 132 kV or higher in accordance with the Operating Code.

(2) The network development plan shall include the components of the transmission network to be built or renovated in the following ten years, the developments already approved, the investments to be implemented in the following three years, and the planned schedules of such investments.

(3) The development plan for the transmission and distribution network shall be prepared in due observation of demand-side management and consistent with energy policy principles relating to the promotion of generation of electricity from renewable energy sources and waste, and electricity produced in a cogeneration process.

(4) The Office shall approve the network development plan prepared by the transmission system operator as referred to in paragraphs (1) and (2) according to the criteria laid down in the Vhr. If the development plan of the transmission system operator deviates from the development plan or proposal of the distributor, the transmission system operator shall following a consultation with the distributor write a statement of reasons in respect of the deviation, and shall submit the development plan or proposal prepared by the distributor as an annex to the Office. In accordance with its published rules of procedure, the Office shall hold a public consultation with network users on the network development plan, and shall publish the memorandum containing the results of the consultation on its homepage.

(5) During the approval process the Office shall assess the compliance of the network development plan with the Community-wide ten-year network development plan referred to in Article 8(4) of Regulation (EC) No 714/2099. If compliance can be doubted, the Office shall consult with the Agency for the Cooperation of Energy Regulators established under Article 1 of Regulation (EC) No 713/2009 of the European Parliament and of the Council of 13 July 2009 establishing an Agency for the Cooperation of Energy Regulators (hereinafter referred to as: Agency) in order to formulate its position. If the network development plan fails to comply with the Community-wide ten-year network development plan, the Office may oblige the transmission system operator to supplement the plan provided that the compensation for losses referred to in point 4 of Part A of Regulation (EU) No 838/2010 covers the developments which are not included in the network development plan but are included in the Community-wide ten-year network development plan and that these developments are necessary in order to ensure the security of supply in the Hungarian electricity system. If the network development plan is infringing, or hinders efficient competition, the Office shall oblige the transmission system operator to modify the plan, setting a deadline and indicating the reasons.

(6) The authorised network operators must carry out the developments included in the approved network development plan. The justified costs of the investments implemented according to the approved network development plan shall be recognised during the regulation of prices. The Office shall monitor and prepare an annual report on the implementation of the network development plan.

(7) The establishment of lines which are not included in the development plans and proposals prepared by the authorised distribution network operators

but are necessary due to new business demands shall be notified to the transmission system operator.

VET Article 25/A The public nature of lines or equipment with a voltage of 132 kV or higher shall be decided on by the Office. Classifying or reclassifying lines or equipment as public shall be carried out at request or ex officio in accordance with the Vhr.

Network Development Plan

Vhr. Article 9 (1) In order to provide the basis for the network development plan for networks of the electricity system with a voltage of 132 kV or higher (hereinafter referred to as: network development plan) the transmission system operator shall prepare separate analyses on the forecast of consumer demands and on the medium and long-term capacity development of the electricity system on the sources side.

(2) In the analyses referred to in paragraph (1) the transmission system operator shall document

(a) the evaluation of the versions prepared in the previous analysis cycle, (b) the criteria to be considered during the given analysis cycle and the versions of

the analyses to be prepared according to such criteria, and (c) the prepared versions. (3) In the network development plan the transmission system operator shall

document (a) the evaluation of the versions prepared in the previous analysis cycle, (b) the criteria to be considered during the given planning cycle and the versions of

the network development plan to be prepared according to such criteria, and (c) the detailed, technically equivalent versions of the network development plan,

including the state of the network with a voltage of 132 kV or higher, and a proposal for the version to be implemented.

VET Article 26 (1) If the authorised operators fail to comply with the obligations set out in Article 25(4), the Office may publish a call for tender for the development of the transmission network and the distribution networks influencing transmission conditions in collaboration with the transmission system operator and the authorised distribution network operators affected, according to the conditions set out in specific other legislation.

(2) The tender referred to in paragraph (1) shall be published on the official website of the Office, at least six months prior to the deadline of the submission of tenders.

(3) Authorised network operators shall tolerate the implementation of network improvements according to the results of the tender referred to in paragraph (1), and shall cooperate with the person carrying out the improvements.

VET Article 26/A (1) If by its own fault the transmission system operator fails to commence or implement an investment according to the schedule laid down in the network development plan and the investment is to be carried out in the following three years under the network development plan, the Office must if the implementation of the given investment is still justified according to the last network development plan issue a call for tender for the implementation of the given investment according to the criteria laid down in the Vhr.

(2) Depending on the result of the tender, the Office may require the transmission system operator to accept one or more of the options below:

(a) financing of the given investment by a third party, (b) implementation of the given investment by a third party,

(c) construction of the new equipment concerned by the transmission system operator, or

(d) operation of the new equipment concerned by the transmission system manager appointed under paragraphs (1a) and (1b) of Article 99.

(3) The tender shall be published on the homepage of the Office at least six months prior to the deadline of the submission of tenders.

(4) In the cases referred to in points (a) and (b) of paragraph (2) the transmission system operator shall provide the information necessary for the implementation of the investment to the third party, shall connect the new equipment to the public utility network and shall make all the efforts to facilitate the implementation of the investment.

(5) The preliminary consent of the Office shall be required for the financial agreement necessary for carrying out the options referred to in paragraph (2).

VET Article 27 (1) The transmission system operator and the authorised distribution network operator authorised to provide connection shall provide information on the technical and financial criteria related to satisfying network user demand and cooperate with the network user in specifying the most favourable manner of input and purchase.

(2) Authorised network operators may refuse connection to the transmission and distribution network at any specific connection point due to technical reasons.

(3) Authorised network operators, when refusing connection to the transmission or distribution network, shall specify the conditions under which connection may be authorised, and they shall offer an alternative connection point if the necessary technical facilities exist or can be established.

(3a) The transmission system operator shall not refuse the connection of a power plant to the transmission network

(a) with reference to the possible limits of network capacities in the future, or (b) with reference to the ancillary costs of the network development that

needs to be carried out near the new connection point in order for it to be established.

(3b) Users may connect to the transmission network only at a voltage level higher than 132 kV.

(4) The Office, at the network users request, shall revise the lawfulness of the refusal of access. If access was refused in violation of the statutory provisions referred to in paragraphs (2) to (3), the Office shall adopt a resolution to order the authorised network operator affected to allow access to the transmission or distribution network.

(5) Where network access is provided under the conditions set out in a specific resolution of the Office, the network user shall be liable to pay the access charges specified in the resolution of the Office.

Conversion or Replacement of Interconnectors and Connection Points

Vhr. Article 9/A (1) The authorised network operator shall be entitled to modify an interconnector or connection point at its own expenses, subject to the consent of the network user, and according to network conditions and technical, economic and safety requirements, without prejudice to the electricity supply of users and the legitimate interest of other persons affected by the modification of the interconnector or the connection point.

(2) At the request of the network user or the person whose rights or legitimate interests are affected by the replacement or conversion of the interconnector or the connection point (in this Article hereinafter referred to as: other interested person), the authorised network operator may replace or convert the interconnector or the connection point if the replacement or the conversion does not violate the legitimate interest of another network user, the technical conditions of such operations are provided for, and the network user or the other interested person if the replacement or conversion was requested by another interested person undertakes to bear the costs of the conversion or replacement.

VET Article 28 In order to secure supply for users connected by a customer connection system, authorised distribution network operators shall conclude contracts for operating the customer connection system and repairing malfunctions under the terms of the respective standard service agreements when so required by the operator of the customer connection system.

Title 3

Distribution of Electricity

VET Article 29 (1) Within the framework of the distribution of electricity the responsibilities of the authorised distribution network operator shall include the following:

(a) operating the network covered by the operating licence in a seamless and safe manner,

(b) serving all market operators in a competitively neutral manner, (c) transmitting electricity to users, (d) operating, maintaining and, if necessary, developing the distribution

network of the given area. (2) In addition to the duties referred to in paragraph (1), the distributor shall

ensure the long term ability of the distribution network to meet reasonable demands for the distribution of electricity.

(3) The distributor must be in possession of the network, system and operation control, tariff metering and information technology equipment necessary for its activities and specified in its operating licence.

VET Article 30 The authorised distribution network operator shall discharge the duties conferred upon it in this Act, such as, in particular interconnection and access to other networks, in a manner that is transparent, objective and non-discriminatory.

VET Article 31 The responsibilities of the authorised distribution network operator, in connection with the security of electricity supply and the operation of the distribution networks, shall include the following specific duties:

(a) managing the distribution network to which the operating licence pertains, and keeping it operational at all times,

(b) transmission of electricity through the distribution networks, and preparation of quantitative settlements as specified in the Electricity Supply Codes

(c) drawing up a network development plan annually and submitting it to the transmission system operator according to the procedure laid down in the Operating Code,

(d) collecting and supplying information in collaboration with the transmission system operator as required for the operation of the distribution network to which the operating licence pertains, and for the continuous and secure supply of electricity, as specified in the Business and Distribution Codes,

(e) keeping records on household power plants in accordance with the provisions of specific other legislation;

(f) discharging the duties set out in specific other legislation in connection with the users declared as vulnerable customers under this Act;

(g) drawing up a report concerning developments in metering, reading and billings systems at the intervals prescribed in the operating licence, and consulting with the Office before any major changes in the billing system;

(h)operating permanent customer service offices with call centre and electronic access, as well as in premises open to clients in county capitals and metropolitan municipalities in the territory covered by the operating licence, or, if there is no such town in the territory of operation, in the settlement in which the most users are supplied, and

(i) ensuring the connection and access of network users to the distribution network and providing them with information relating thereto.

VET Article 32 (1) Authorised distribution network operators shall purchase electricity to the extent necessary to make up for losses in the distribution network, publicly, in a manner accessible to any Hungarian or foreign producer or trader.

(2) The terms of and conditions for purchasing electricity to the extent necessary to make up for losses in the distribution network shall be made public prior to the publication of the call for tender, according to the procedure laid down in specific other legislation.

(3) Authorised distribution network operators shall be entitled to sell electricity purchased to make up for losses in the distribution network the amount of which exceeds the extent of the actual loss on the regulated electricity market. Authorised distribution network operators must show the revenue from such sales separately in their accounts. The Office shall consider this revenue as a reducing item when determining network access fees.

(4) The activity of authorised distribution network operators referred to in paragraph (3) shall not be regarded as trade.

Purchasing Electricity to Make up for Losses in the Distribution Network

Vhr. Article 10 (1) Authorised distribution network operators shall publish their call for tender for purchasing electricity to make up for losses in the distribution network on their homepage and in the manner specified in the Distribution Code.

(2) The call for tender shall include the deadline for bidding, the criteria of the evaluation of tenders, as well as the requirements and technical conditions which must be met by tenderers.

VET Article 33 The detailed rules for the responsibilities of the authorised distribution system operator shall be laid down in the operating licence and in the Electricity Supply Codes.

VET Article 33/A (1) In order to enter the service location, the authorised distribution network operator may contact the competent notary if the network user hinders or undermines any of the following:

(a) the reading, inspection or replacement of the consumption meter,

(b) disconnection from supply in the case of a breach of contract or unauthorised purchase, or

(c) the inspection of consumer equipment. (2) In his resolution the notary may set out the obligation to tolerate (a) the reading, inspection or replacement of the consumption meter, (b) disconnection from supply or (c) the inspection of consumer equipment, and may to this end stipulate cooperation with the authorised distribution

network operator. Article 33/B The authorised distribution network operator must transfer the

metering data of a network user