Public consultation on electricity market design

The public consultation for the decree-law transposing Directive 2024/1711, aimed at optimizing the electricity market’s design and strengthening consumer rights while amending Decree-Law 15/2022, is currently open and will conclude on November 12, 2025.

General background

Note: References to articles below pertain to Decree-Law 15/2022.

The decree-law proposal (“Proposal”) introduces significant changes, including:

-      expanded support mechanisms for renewable energy production (article 17.2 and 17.3);

-      enhanced clarity on self-consumption and energy-sharing frameworks (articles 11, 84, 86, and 87);

-      improved transparency in grid access processes (articles 113 and 115); and

-      strengthened consumer rights, particularly for economically vulnerable groups (articles 181, 185, 186, and 202).

The Proposal also includes regulatory measures to address electricity price crises (under newly added article 101-A) and mandates stricter oversight of market operations, with new information and contract design obligations for suppliers under articles 136 and 206.2.g).

Direct impact on energy traders:

• Mandatory fixed-term, fixed-price contracts: Traders are required to offer fixed-term, fixed-price contracts with a minimum duration of one year. Under article 136.2.cc), the price must remain constant throughout the contract term, regardless of market fluctuations.

A “fixed-term, fixed-price electricity supply contract” allows for certain pricing variations—such as peak/off-peak variations—provided electricity bill variations are not determined by the supplier (article 3 – Definition of “Fixed-term, fixed-price electricity supply contracts”).

• Enhanced reporting requirements: Traders must now periodically provide the Energy Services Regulatory Authority (“ERSE”)—at intervals yet to be defined—with the actual prices charged to customers over the preceding six months, along with contractual details for fixed-term, fixed-price contracts (article 136.2.x)). Also, in accordance with article 206.2.g), ERSE will compile and publish, for 10 years, annual monitoring reports on fixed-term, fixed-price contracts with dynamic pricing, including their impact on electricity bills and a comparison between types.
• Risk management obligations: The Proposal introduces risk management and commercial resilience obligations, which will be defined in a subsequent ERSE regulation. These obligations include the possibility of stress testing and minimum supply/market hedging levels (via power purchase agreements (“PPAs”) or similar instruments) to ensure conditions with customers are agreed upon under a contract (articles 171 and 172, particularly 172.2.g) and 172.4).

• Electricity crisis measures: In the event of electricity price crises declared under Article 66-A of Directive (EU) 2019/944, the Portuguese Government may implement temporary protective measures for households and small and medium-sized enterprises (“SMEs”) (under newly added articles 101-A.1 and 101-A.2). When sales prices are set below cost, access to the regime must be open to all suppliers on equal terms, with transparent and non-discriminatory compensation based on supply costs that best reflect market practice (articles 101-A.3.d) and 101-A.3.e)). Under article 101-A.3.f), Suppliers adhering to this regime must charge uniform prices by supply type and avoid behavior that distorts competition.

• Strengthened customer protection: Under article 180, the Proposal strengthens rules on customer notifications and service continuity:

-      Supply suspension requires a minimum 20-day notice, with the possibility of reducing power temporarily before suspension. (These procedures are regulated by ERSE under articles 181.9 to 181.11.)

-      Interruption orders are suspended while bill-related complaints are being appraised, including when ERSE intervenes (articles 185.5 and 185.6).

-      For beneficiaries of the social tariff, the prior notice period extends to 120 days. Providers must offer an adequate payment plan, and interruptions are restricted during critical consumption periods (articles 186.3 to 186.6).

• Customers may enter energy-sharing agreements tied to a single facility under article 180.2.c); however, the following conditions apply:

(i)           All supply contracts for the facility’s sole connection point must list the same customer name. Also, an interruption to any internal metering point, for reasons attributable to the customer, will result in an interruption to the entire facility.

(ii)         The facility must include a meter linked to the Public Service Electricity Grid (RESP) connection point. This meter must measure the facility’s total physical consumption or injection.

(iii)        Each supply contract or additional energy-sharing agreement must rely on a single, dedicated metering point that measures individual consumption or injection separately.

Amendments with an indirect impact and market context:

• The Proposal expands and refines definitions and regimes for self-consumption and energy sharing. It establishes specific rules for self-consumers, collective self-consumption communities, and management entities. It also introduces capacity thresholds and conditions governing the participation of large customers (articles 11, 84, 86, and 87, and, more specifically, articles 86.6 to 86.8, 87.12, and 87.13).

A collective self-consumption management entity or third party may now own or manage a storage or renewable energy production facility with a capacity of up to 6 MW. However, under article 86.7, it will not be classified as a self-consumer unless it forms part of the self-consumers participating in the energy-sharing project.

A self-consumer is defined as “a final consumer who produces renewable energy for their own consumption at their facility located in Portugal, and can store the energy, participate in energy flexibility or efficiency regimes, or sell electricity generated from a renewable source of their own production or shared with another facility, provided, for non-household self-consumers of renewable energy, these activities do not constitute their primary commercial or professional activity (...).”

The Proposal further specifies that end customers exceeding the size of SMEs that want to participate in energy-sharing agreements must fulfill the following conditions:

(a) The installed production capacity linked to the energy-sharing agreement must not exceed 6 MW.

(b) The energy sharing must occur within a local or limited geographical area, aligned with the proximity criteria outlined in article 83 (article 86.12). Also, under article 86.3, energy service contracts between a collective self-consumption management entity (“EGAC”) and self-consumers are subject to ERSE regulations.

The Proposal does not specify whether these limitations extend to collective self-consumption models or electricity-intensive customers who are exempt from proximity criterion to the production facility.

• The Proposal introduces the concept of “capacity with restrictions,” allowing grid access under specific limitations and providing rules for future conversion into firm access. In regions where developing the grid is not the most efficient option, restricted agreements may become a permanent solution, including for storage purposes (article 3 – Definition of “capacity with restrictions” and articles 181.2.a), 181.7, and 181.8).

• Grid operators must disclose available capacity for new connections, including capacity with restrictions, as well as the status of the applications. At a minimum, this information must be updated on a quarterly basis. Users may apply for connections and submit documentation exclusively through digital means under articles 113.1.c) and 113.2 to 113.4. Small low-voltage operators serving fewer than 100,000 customers are exempt from certain information disclosure obligations under article 115.5.

• Price comparison tools are subject to independence, transparency, accessibility, and updating requirements, as well as to the sector supervision and penalty regime (articles 184.6 and 184.7). The Portuguese Energy Agency (ADENE) will offer voluntary contract templates for energy-sharing agreements (article 90.2.d)).

• The Proposal introduces measures to support renewable energy, including (i) bidirectional difference contracts for specific sources, (ii) auctions with fixed or variable premiums, and (iii) a zero-premium rule when daily market prices are negative (articles 17.2 and 17.3). Also, new definitions—such as fixed-price/fixed-term contracts, conventional metering, and interoperability—have been added to the legal glossary (article 3 – New definitions).

 Implications for traders

• The commercial portfolio must include fixed offers with a minimum duration of one year and ensure consistency between market risk and contractual conditions. Enhanced regulatory transparency will require improved systems for reporting prices and contractual terms to ERSE. Also, customer service, billing, collection, and non-compliance management processes must be adjusted to meet the new deadlines and safeguards.

• Implementing crisis measures, such as below-cost prices with compensation, requires operational and contractual preparations. These preparations must determine adherence to the regime, ensure competition neutrality and price consistency by type, and allow for the demonstration of supply costs.

• Risk management obligations may necessitate formal internal policies addressing hedging, stress testing, and minimum supply thresholds. These obligations affect cash flow, basis risk, and wholesale contract structures (including PPAs).

• Expanding self-consumption and energy-sharing practices, guided by proximity criteria and multiple metering points per facility (articles 181.2.c) and 181.6.a) to 181.6.e)), unlocks new opportunities for supply solutions and services. However, these innovations also bring about complexities related to metering, billing, and coordination with grid operators and EGACs.