Kaugkütteseadus (KKütS)

§ 1. Scope of application of this Act

(1) This Act governs activities related to the production, distribution and sale of heat by way of district heating networks (hereinafter, ‘networks’), and connection to district heating networks.

(2) The activities mentioned in subsection 1 of this section must be coordinated and conform to the principles of objectivity, equal treatment and transparency in order to ensure a secure, reliable and effective heat supply which is provided at a justified price and in compliance with environmental requirements and the needs of the customer.

(2¹) An undertaking pays a regulatory enforcement fee on the grounds and in accordance with the rules provided by the Competition Act.

(3) The provisions of the Administrative Procedure Act apply to administrative proceedings provided in this Act without prejudice to the rules specific to this Act.

§ 2. Definitions

For the purposes of this Act:

1) ‘district heating’ means the production of heat and distribution thereof through a network with the aim of supplying customers with heat by way of district heating systems;

2) ‘district heating system’ means a technical system for the production, distribution and consumption of heat which is composed of technical equipment for the production, distribution and consumption of heat and of the construction works connected thereto;

3) ‘network’ means a fixed operational assembly – or a part of such an assembly – of pipelines, equipment, auxiliary equipment and of any construction works connected to these that is needed for the distribution of heat; consumer installations are not deemed to be part of the network for the purposes of this Act;

4) ‘consumer installation’ means an operational assembly which is or can be connected to a network of interconnected heat pipelines and auxiliary equipment for supplying a customer with heat and which is built within a registered immovable, construction work or a complex of construction works which are functionally linked to one another and which constitute a single economic unit, and on the land necessary to service such a complex;

5) ‘supply point’ means the point of connection of a network and a consumer installation;

6) ‘service boundary of a network’ means the boundary up to which the network operator maintains a district heating system on contract basis;

7) ‘network area’ means an area in which a network that is owned by or that is in the possession of a single network operator is located and developed;

8) ‘licensed territory’ means the area, defined in the heating undertaking’s authorisation, in which the heating undertaking operates;

9) ‘customer’ means a person who purchases heat distributed through a network;

10) ‘network operator’ means an undertaking which uses a network to distribute heat;

11) ‘connection’ means the connection of a customer installation to a network.

12) ‘non-fuel renewable energy sources’ means solar energy and thermal energy converted from solar energy, wind energy and thermal energy converted from wind energy, geothermal energy and thermal energy converted from geothermal energy, heat which is used in a building and which escapes from the building and thermal energy converted from such heat – where that heat has been produced using electricity generated from renewable energy sources, energy that has accumulated beneath the surface of solid earth as thermal energy, or ambient energy;

13) ‘ambient energy’ means naturally occurring thermal energy and energy accumulated in the environment with constrained boundaries which is stored in ambient air or in surface or sewage water;

14) ‘waste heat’ means unavoidable heat generated as a by-product in an industrial or a power generation installation or in the service sector.

§ 4. Heating undertaking

(1) A heating undertaking is an undertaking which operates in at least one of the activity areas of production, distribution or sale of heat and which is responsible for resolving the commercial, technical or maintenance issues related to such activities.

(2) A heating undertaking that is a network operator is regarded as provider of a service of general interest within the meaning of the General Part of the Economic Activities Code Act.

(4) ‘High-efficiency district heating network area’ for the purposes of this Act means a network area in which, of the thermal energy used, 50 per cent has been converted from a renewable source or represents residual heat or a combination of thermal energy converted from a renewable source and residual heat as well as thermal energy produced by high-efficiency cogeneration, or 75 per cent has been produced by high-efficiency cogeneration.

§ 5. District heating regions

(1) ‘District heating region’ means an area determined by a comprehensive spatial plan within which consumer installations are provided with heat by way of district heating in order to ensure a secure, reliable and effective heat supply which is provided at a justified price and in compliance with environmental requirements and the needs of customers.

(2) The council of a local authority has a right to determine district heating regions within the boundaries of the administrative territory of the authority. Any decision which determines a district heating region must be informed by the principles provided by subsection 1 of this section.

(3) Persons who do not use district heating at the time when the district heating region is determined are not required to connect to the network.

(4) Subject to the conditions and pursuant to the rules determined by the local council, consumer installations already connected to a network within a district heating region may be disconnected from the network and other means than district heating may be used to provide heat to a construction work which is under construction or which is being renovated.

(4¹) In addition to heat provided by the district heating network, customers in a district heating region may also purchase thermal energy converted from non-fuel and renewable energy sources from the producers of such thermal energy.

(5) Before establishing a district heating region for an area designated as a densely populated area to be built up with new construction works, an analysis concerning the possibilities of arranging heat supply on the basis of the principles provided by subsection 1 of this section must be carried out. When a district heating region is established for an area designated as a densely populated area to be built up with new construction works, connection to the network is mandatory for all persons located within such a region, unless the council of the local authority provides otherwise.

(6) A decision of the council of a local authority concerning the establishment of a district heating region, among other things, states the following:

1) the boundaries of the district heating region;

2) the conditions and rules for connection to and disconnection from the network, having regard to the provisions of subsections 4 and 5 of this section;

3) the general quality requirements for district heating;

5) the development obligations of the heating undertaking;

6) the date as of which the conditions, requirements and rules become effective.

(7) Before establishment of the conditions, requirements and rules under subsection 6 of this section, endorsement must be obtained for such conditions, requirements and rules from the heating undertakings operating within the relevant district heating region.

§ 6. Production, distribution and sale of heat

(1) For the purposes of this Act, the production of heat means an activity which results in the creation of thermal energy used in customer installations.

(2) For the purposes of this Act, the distribution of heat means the transmission of heat to customer installations through a network.

(3) For the purposes of this Act, the sale of heat is the transfer of heat to a customer either for a charge or without charge.

§ 8. Sale and pricing of heat

(1) A customer purchases heat from the network undertaking to whose network the customer’s consumer installation is connected.

(2) Within technical limits of the network, a heating undertaking is required to sell heat to all customers who have a network connection and who are located within its network area.

(3) The maximum price of heat must be set such that the following are ensured:

1) coverage of necessary operating costs, including costs incurred in relation to the production, distribution and sale of heat;

2) investments necessary in order to perform the operational and development obligations;

2¹) investments to ensure continuity of a vital service;

3) compliance with environmental requirements;

4) compliance with quality and safety requirements;

5) justified return.

(3¹) The pollution charge on the recovery of energy from waste – provided by §§ 18¹ and 20¹ of the Environmental Charges Act – is not included in the maximum price of heat.

(4) A heating undertaking must make public the maximum price set within its network area at least one month before the date as of which the price applies.

§ 9. Approval of price of heat

(1) A heating undertaking which:

1) sells heat to customers;

2) sells heat to a network operator who sells heat to customers;

3) produces heat in a process of combined generation of heat and power

must obtain, for each network area separately, the approval of the Competition Authority regarding the maximum price of the heat to be sold.

(4) A heating undertaking which is required to obtain approval regarding the maximum price of heat may sell heat at a price which does not exceed the approved maximum price.

(5) The Competition Authority makes a decision concerning approval of the maximum price mentioned in subsection 1 of this section within 30 days following the filing of a duly filled out application to set that price. If the application is particularly complex or where proceedings require an inordinate amount of work, the Competition Authority may extend that time limit to a maximum of 90 days, informing the applicant of the extension before expiry of the original time limit.

(6) If the Competition Authority so requires, a seller of heat must explain and provide reasons for the principles which it applies in the setting of maximum prices.

(7) The run of the time limit for proceedings on an application for approval of the maximum price mentioned in subsection 4 of this section is suspended if the information that the Competition Authority has required and that is needed to issue the approval sought by the application has not been filed with the Authority.

(8) A heating undertaking mentioned in subsection 1 of this section which seeks approval regarding a maximum price must allow the Competition Authority to inspect its accounts and provide any explanations that are needed regarding its economic activities.

(9) The Competition Authority has a right to require additional information from the heating undertaking, an authority of the executive branch or a local authority agency if this is needed for making a decision concerning approval of the maximum price or for verifying the information filed.

(9¹) A heating undertaking is required to monitor developments which are independent of its activities and which influence the price of heat charged to customers and to file with the Competition Authority a new application for approval of a maximum price within 30 days as of learning of a development which may decrease the price of heat charged to customers by more than 5 per cent.

(10) A heating undertaking may seek approval of a price formula from the Competition Authority for a period of up to three years. The price formula is used in the process of approving maximum prices of heat at the request of the heating undertaking in a situation in which developments which are independent of its activities and which influence the price of heat are ascertained. The Competition Authority makes a decision concerning approval of maximum prices on the basis of a price formula within ten working days as of receipt of a duly filled out application.

(10¹) The Competition Authority may revoke the approval it has given regarding a maximum price and may determine a temporary selling price of heat for the heating undertaking in the situation in which the heating undertaking sells heat at a price which does not comply with the requirements provided by subsection 3 of § 8 of this Act and has failed to comply with an enforcement order of the Competition Authority. The price determined by the Competition Authority remains in force until the heating undertaking obtains the approval of the Competition Authority regarding the new maximum price of heat.

(10²) When determining the price mentioned in subsection 10¹ of this section, the Competition Authority relies on existing price structure of the heating undertaking, justified costs incurred by the undertaking during the financial year preceding the year when the compliance notice was issued and the rate of justified return. If the heating undertaking has an approved price formula, the Competition Authority relies on the price formula in determining the price. The minister in charge of the policy sector, by means of a regulation, enacts rules for determining the price of heat, having regard to the principles provided by this subsection.

(11) The Competition Authority may not disclose to any third party any information received in relation to approving a maximum price, except where disclosure of such information is prescribed by law or where communication of such information is necessary in order to perform obligations arising from this Act.

§ 10. Connection to the network

(1) Within the technical limits of a network, the network operator is required to provide a network connection to the customer installation of any person who is located within its network area and who has applied for a connection (hereinafter, ‘connectee’), unless this jeopardises the security of supply for earlier connectees.

(1¹) In the case of an immovable property ownership that is divided into apartment ownerships, the connectee is the apartment association. An apartment owner may be a connectee if it is possible to connect their consumer installation to the network through a connection that meets the requirements established in this Act.

(2) A network operator must provide written reasons for any refusal to grant an application of a connectee within thirty days as of receipt of the application.

(3) On an application of a connectee, the network operator issues the conditions for connection to the network (hereinafter, ‘conditions of connection’).

(4) The conditions of connection must:

1) be transparent and unambiguous;

2) comply with the principle of equal treatment of similar connectees;

3) take into consideration the technical and economic conditions of each particular connection;

4) take into consideration the interests of network development and stability;

5) take into consideration the technical capacity of the network.

(5) The conditions of connection determine:

1) the supply point;

2) location of the metering system;

3) the service boundary of the network;

4) the obligations of the connectee and of the network operator;

5) calculation of the connection fee;

6) the term of validity of the conditions of connection;

7) any other special conditions.

(6) For the purposes of this Act, replacement of a consumer installation, or any part thereof, which is connected to a network, or a change of owner or possessor of a consumer installation is not regarded as connection to the network, and no connection fee is charged to the owner or possessor in such cases, provided that the following conditions are met concurrently:

1) the location of the supply point remains unchanged;

2) no change is requested of the technical conditions;

3) the technical conditions required for connecting the connectee’s consumer installation continue to be present.

§ 11. Entry into network connection contract

(1) In order to connect to a network, the owner or possessor of the consumer installation to be connected to the network concludes a written connection contract (hereinafter, ‘contract’) with the network operator.

(2) The contract, among other things, determines:

1) the supply point;

2) location of the metering system;

3) service boundary of the network;

4) connection fee;

5) technical conditions for the connection;

6) the term for performance of the contract.

(3) The Competition Authority is authorised to verify whether the actions – when refusing to grant an application for connection, when determining the connection fee and when establishing the terms and conditions of contracts – of a heating undertaking mentioned in subsection 1 of § 9 of this Act are justified.

(4) The contract mentioned in subsection 1 of this section constitutes the basis for entry into an agreement for the purchase and sale of heat.

§ 12. Calculation of connection fees

(1) The network operator has a right to charge justified connection fees to connectees.

(2) Connection fees are calculated based on the need to ensure the following for each connection:

1) coverage of necessary investments;

2) compliance with environmental requirements;

3) compliance with quality and safety requirements.

4) justified return.

(3) The connection fee is calculated by the network operator.

(4) If the technical conditions of the connection provided by the contract are modified on the initiative of the network operator, any costs involved are borne by the network operator.

(5) A network operator may charge a justified fee for any changes in the technical conditions of the consumption of heat made on the initiative of the customer.

§ 13. Network operator’s licensed territory

(1) A network operator must define its network area and ensure that all interested parties have access to the layout and description of the network.

(2) A network operator may have several network areas which together constitute the licensed territory of the network operator.

(3) The network areas of different network operators may overlap.

§ 14. Network operator’s rights and obligations

(1) A network operator is required to ensure that customers who have a network connection are supplied with heat in accordance with this Act, the conditions of the authorisation or a decision of the council of the local authority, and any relevant contracts.

(2) A network operator is responsible for the functioning and maintenance of the network which it owns or possesses.

(3) A network operator is required to develop the network in a manner which ensures that all consumer installations located within the network area of the network operator can be connected to the network.

(4) A network operator must organise the metering of heat consumed from the network and maintain the corresponding records, unless agreed otherwise.

(5) A network operator is required to provide other network operators within its licensed territory with the information necessary to ensure the distribution and sale of heat in a manner which enables the network to be used in a stable and effective manner.

(6) A network operator may terminate its activities only if it transfers the obligations incumbent on it by virtue of this section to another undertaking.

(7) A network operator must give the Competition Authority at least twelve months’ written notice regarding termination of its activities, specifying the date and schedule for termination, and provide a sufficiently detailed overview of the measures which guarantee that the requirements provided by this section are met.

§ 14¹. Arrangements for the purchase of heat

(1) A producer of heat makes investments for the production of heat – and a network operator concludes contracts, where this is needed in order to ensure the security of investments – for a term of up to 12 years starting from the time of commencement of production by means of a generating installation, having regard to the principles provided by subsection 2 of § 1 of this Act. Where possible, preference is given to heat produced from predominantly renewable energy sources or heat produced predominantly by high-efficiency cogeneration from renewable energy sources, from waste within the meaning of the Waste Act, from peat or from carbonisation gas obtained as a result of the processing of oil shale, and to the best clean technologies currently available.

(2) Where a need arises for new production capacities and/or several undertakings have expressed in writing their wish to enter into the relevant contracts, the network operator organises a tender for the award of the contract.

(3) Where the network operator and the producer of heat are one and the same legal person, the provisions applicable to the contract are applied to any investments made by the network operator in the production of heat.

(4) The network operator undertakes, in advance, to obtain the approval of the Competition Authority regarding any contracts for the purchase of heat or any investments in new production capacities, and regarding any terms and conditions of tenders for the award of contracts, having regard to the conditions provided by subsections 1 and 2 of this section.

(5) The minister in charge of the policy sector enacts, by a regulation, the rules for organising tenders for awards of contracts, and establishes methods for the evaluation of bids in order to assess compliance with the requirements established by law of the entry into the contracts and of the making of the investments described in subsections 1 and 2 of this section.

(6) The Competition Authority considers any approval requests mentioned in subsection 4 of this section in a manner analogous to the rules provided by subsection 5 of § 9 of this Act. The Competition Authority refuses to grant approval if the principles provided by subsection 2 of § 1 of this Act, the requirements established in this section or any other requirements emanating from this Act are not complied with.

(7) Where the Competition Authority has reasonable cause to doubt whether the production of heat in a network area is economically efficient or whether, under a contract which was entered into before the entry into force of this section, compliance with the requirements provided by subsection 1 of this section is ensured, the Competition Authority is entitled to issue an enforcement order to the network operator directing the operator to hold a tender in accordance with the principles provided by this section.

(8) Contracts for the production of heat between a producer of heat and a network operator, entered into before 1 November 2010 are regarded as valid until their term expires, but not longer than for 12 years as of the moment that a generating installation started production, provided that the heat is produced pursuant to the principles provided by subsection 1 of this section and subsection 2 of § 1 of this Act. On expiry of the term mentioned above, the network operator may hold a tender in respect of any vacant capacities according to the rules provided by this section.

(9) The network operator files, by 31 December 2010 at the latest, with the Competition Authority a list of the contracts which it has concluded with a producer of heat before 1 November 2010 and which continue to be valid.

(10) The provisions of this section do not release the heating undertaking from the obligation to obtain the approval of the Competition Authority for any maximum price of heat according to the rules provided by § 9 of this Act.

(11) This section does not apply to network operators who distribute heat by efficient district heating and cooling within the meaning of the Energy Sector Organisation Act.

§ 15. Metering and installation of metering systems

(1) A network operator must ensure that all quantities of heat which enter or leave its network are metered and that meter readings are collected and processed.

(2) Unless otherwise stipulated in the contract, in a network which is in the possession of a network operator, the network operator installs, at its own expense, metering systems as designed together with the necessary auxiliary equipment.

(3) If the existing metering system of a customer does not comply with the established technical requirements, the network operator replaces the metering system at its own expense, unless otherwise stipulated in the contract.

(4) Where a customer wishes to change the capacity of their installation, the network operator replaces or resets the heat metering system and any equipment which limits usage capacity; the customer covers the costs of the reset.

§ 16. Illegal use

(1) The following constitutes illegal use of heat:

1) concealing or reducing of the actual amount consumed by way of damaging the meters, tampering with readings, or damaging the metering systems, parts thereof or stop valves;

2) unmetered consumption from a connection without the permission of the network operator;

3) consumption without a valid written contract.

(2) The network operator may demand compensation for illegally used heat in an amount which equals three times the cost of the quantity of heat consumed.

(3) The rules for determining the amount of heat used illegally and the cost of such an amount is enacted by the minister in charge of the policy sector.

§ 17. Interruption and resumption of heat supply

(1) In the case of danger to the life, health or property of persons or to the environment, a network operator is entitled to interrupt a network connection to the customer or another network operator without giving advance notice thereof.

(2) A network operator is entitled to interrupt a network connection forthwith when it is established that illegal use of heat is taking place.

(3) After giving at least seven days’ notice, a network operator is entitled to interrupt the supply of heat in the following cases:

1) the customer has transgressed the rights granted to him or her in the conditions of connection or has failed to perform his or her obligations under those conditions;

2) the network operator encounters an obstacle in accessing, for the purpose of inspecting or replacing any metering systems located on, or performing any other work on, the premises owned or occupied by the customer or another heating undertaking;

3) the customer’s or heating undertaking’s payments for heat are in arrears.

(4) Before the supply of heat is interrupted in the situations provided for by subsection 3 of this section, the network operator gives the customer or another heating undertaking reasonable time to cure the defects and cautions the customer or another heating undertaking in writing of the possibility of interruption if the defects are not cured. The notice must contain:

1) the reason for interrupting the supply of heat;

2) the time limit for curing the defects.

(4¹) If a customer has failed to pay the amount due according to the contract entered into with the network operator, the supply of heat required for heating a dwelling may be interrupted during the period from 1 October to 30 April only when 90 days have passed since receipt of the notice mentioned in subsection 4 of this section and the customer has failed, during this period, to cure the defect which constitutes the basis for interruption of the supply of heat.

(5) A network connection and heat supply interrupted for the reasons provided by subsection 3 of this section are restored, provided the contract has not been terminated, after the reason for the interruption has been eliminated and the customer or another heating undertaking has paid the justified costs of interruption and reconnection.

§ 18. Authorisation obligation

(1) An authorisation is required in the following areas of activity:

1) production of heat;

2) distribution of heat;

3) sale of heat.

(2) The obligation to hold an authorisation mentioned in subsection 1 of this section does not apply in the following cases:

1) the production of heat if the estimated annual production volume remains below 50,000 MWh per undertaking or if the undertaking does not produce heat in the process of combined generation of heat and power;

2) the distribution of heat if the estimated annual distribution volume remains below 50,000 MWh per undertaking;

3) the sale of heat if the estimated annual volume of sales remains below 50,000 MWh per undertaking;

4) the sale of heat if the heating undertaking is part of a group and the combined annual heat sales of the group in Estonia to persons who are not part of the group remains below 50,000 MWh;

5) the sale of heat if the heating undertaking does not produce heat in the process of combined generation of heat and power;

6) where a person sells heat solely to its members, commercial lessees or tenants provided that the sale of heat is not the principal activity of the person and provided that heat is sold within a single immovable, or within a construction work that is a movable, together with the land necessary for servicing that construction work.

§ 19. Application for authorisation

(1) Applications for authorisation are processed by the Competition Authority.

(2) In addition to the information required under the General Part of the Economic Activities Code Act, the application for authorisation states the licensed territory applied for and includes layout plans and a description of the networks located within that territory.

§ 20. Subject of scrutiny of the authorisation

(1) The undertaking is granted the authorisation provided that:

1) it is a public or private limited company that is entered in the commercial register or that is in process of being founded and possesses the technical capability and employs personnel with the requisite skills for engaging in the area of activity stated in the application;

2) the share capital of a heating undertaking that sells annually over 50,000 MWh of heat amounts at least to 31,950 euros.

§ 23. Ancillary conditions of the authorisation

The following ancillary conditions may be included in the authorisation:

1) a development obligation in accordance with subsection 3 of § 14 of this Act;

2) other ancillary conditions, provided they are necessary in order to ensure security of supply or the performance of obligations arising from, or the achievement of the objectives of, this Act or the legislation enacted under it or in order to take into consideration the particular character of a specific activity.

§ 29. Special measures of regulatory enforcement

The Competition Authority may, in order to exercise regulatory enforcement as provided for by this Act, apply the special measures of regulatory enforcement provided by §§ 30, 31, 32, 50 and 51 of the Law Enforcement Act on the grounds and following the rules provided by that Act.

§ 29¹. Special rules regarding regulatory enforcement

(1) The measure provided by § 50 of the Law Enforcement Act may be applied only when entering the premises, rooms or civil engineering works of a heating undertaking in the presence of a representative of the undertaking under scrutiny.

( 2) In the event of repeated failure to comply with a compliance notice, the Competition Authority is authorised to issue a decision which documents the repeated failure to comply with the notice and which constitutes grounds for revocation of the authorisation issued to the undertaking.

§ 29². Limit rate of non-compliance levy

In the event of failure to comply with a compliance notice, the Competition Authority may impose, before making the decision to revoke the authorisation as mentioned in § 30 of this Act, a coercive measure in accordance with the Substitutional Performance and Non-Compliance Levies Act. The upper limit of a non-compliance levy is 1300 euros.

§ 32. Resolution of disputes

(1) In the event of a dispute arising under § 5 of this Act if the heating undertaking or rural municipality or city administration so requests, the Competition Authority is required to present its reasoned opinion in the matter.

(2) The opinion mentioned in subsection 1 of this section is presented in writing within 30 days. If the matter is particularly complex, the Competition Authority may extend the term for presenting the opinion to a maximum of 90 days and notify this to the applicant in writing.

(3) The time limit stated in subsection 2 of this section is suspended until the information that was required by the Competition Authority and that is needed for presenting a reasoned opinion has been filed with the Authority.

(4) When it decides on the application mentioned in subsection 1 of this section, the Competition Authority may make a proposal to the rural municipality or city executive to amend the decision provided for by subsection 6 of § 5 of this Act.

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§ 39. End date of agreement concluded with the State under the Energy Act

An agreement concluded between an undertaking and the State under the Energy Act remains effective until the end date stated in the market licence.

§ 40. Validity of market licence

(1) A market licence issued under the Energy Act is valid until the end date stated in the market licence.

(2) Within one year following the entry into force of this Act, the Competition Authority enters any valid market licences that have been issued before the entry into force of this Act in the national register of undertakings operating in areas of activity subject to special requirements.

§ 41. Bringing the activity of an undertaking into compliance with requirements provided by this Act

(1) Heating undertakings which operated on the basis of the Energy Act prior to the entry into force of this Act must bring their activity into compliance with the requirements provided by this Act within one year after the entry into force of this Act.

(2) Upon the entry into force of this Act, the maximum price for heat for which a heating undertaking has obtained approval on the basis of the Energy Act are deemed to be the maximum price for which heat is to be sold by that heating undertaking.

§ 41¹. Use of reserve fuel for production of heat

A heating undertaking mentioned in subsection 3 of § 7 of this Act must, by 1 July 2008, provide for the possibility of using reserve fuel for the production of heat.

§ 43. Entry into force of this Act

This Acts enters into force on 1 July 2003.