RASK partner Ramon Rask and attorney Kristiina Padu successfully represented the energy company Evecon in a landmark Supreme Court victory. The court declared unconstitutional an amendment to the Electricity Market Act that required network connection applicants to pay a security deposit within just 60 days.
Introduced in early 2023, the amendment unexpectedly required those connecting to the grid for production purposes to pay a security deposit to the network operator within 60 days, unless they had already paid at least 70% of their connection fee.
The amendment aimed to accelerate the transition to renewable energy, free up unused grid capacity and eliminate fictitious grid connection applications, which had rapidly depleted available network resources. However, the Supreme Court found that, in practice, the amendment hindered the development of the renewable energy market.
The new requirement was applied retroactively to Evecon’s large-scale projects. “The amendment imposed a dual obligation: to pay for grid construction while also covering a booking fee. It failed to consider rapidly growing companies with ongoing successful developments, where the required security deposit could reach millions of euros, suddenly due within two months and put on hold. We did not want to go to court, let alone against Elering, which implemented the amendment. But we were convinced that this requirement was not lawful,” explained Evecon CEO Karl Kull.
“We have established the largest solar park in the Baltics and, this spring, began developing the largest battery park in mainland Europe. For large-scale investments and developments, we rely on existing legislation and agreements made accordingly. It is therefore crucial that legislation does not undermine existing agreements and conditions for ongoing projects,” Kull emphasised.
In her opinion submitted to the Supreme Court, Chancellor of Justice Ülle Madise stated that the new requirement was unconstitutional because the timeframe provided was unreasonable and deterred legitimate market participants who connected to the grid for purposeful use. “The requirement was extremely burdensome for the complainants, as they had signed their connection agreements at a time when no such obligation existed,” she added.
The
Constitutional Review Chamber of the Supreme Court also highlighted that the
60-day period for paying the security deposit was clearly inadequate,
particularly as connection fees – inflated by rising construction costs – still
had to be paid. The court concluded that granting companies that had already
connected to the grid a longer period to pay the deposit would not have
jeopardised CO2 emission reductions or energy supply security.
Rask argued
that sudden and unexpected rule changes are harmful to the energy sector and
other industries with long investment payback periods. “Hasty legislation
erodes the trust of businesses and investors, which stifles economic growth.”
While the
Supreme Court’s decision declared only a single specific provision
unconstitutional, Rask pointed out that the provision was part of a broader
package aimed at reforming the energy market in 2023. “The issue is not whether
the state has the right to change the rules, but how it does so. What we need
is more analysis and a long-term perspective, and less overreacting.”
Evecon is a leading private equity-based energy company in the Baltic states. It manages an energy portfolio of over 2.7 GW, with a focus on developing wind, solar and battery parks, including the largest solar park in the Baltics and a battery park set to become the largest in mainland Europe.