Kazakhstan: Essential terms and conditions of a bilateral electricity purchase and sale agreement (Private PPA)

published on 23 January 2023 | reading time approx. 1 minute

There are two types of market for purchase and sale of electricity in Kazakhstan: centralised and decentralised. 

Thus, in relation to the centralized market of purchase and sale of electric power the legislator has developed a model contract for purchase by the settlement and financial centre (RFC) of electric power from the power generating organization, using renewable energy sources, but in relation to the decentralized market of purchase and sale of electric power, and due to the regulated freedom of contract, as such a model (form) of contract for sale of electric power is almost not developed, and it can be considered as missing. 

It is well known that in order to draw up any contract it is necessary to understand its contents, namely the conditions governing the relationship of the parties. Thus, it is necessary to understand (a) what a contract for the sale of electricity is and (b) what the essential terms are.  

The contract of purchase and sale of electric power is an agreement concluded between the entities of the wholesale electricity market for the purchase (sale) of contractual amounts of electric power with their physical delivery in a certain period, i.e. the contract of purchase and sale of electric power may be concluded only among the entities of the wholesale electricity market in the decentralized electricity purchase and sale market.

According to Article 393 of the Civil Code of the Republic of Kazakhstan, such conditions are (a) conditions on the subject matter of the contract, (b) conditions that are recognised as essential by legislation or (c) conditions necessary for contracts of this type, as well as (d) all those conditions that are to be agreed upon upon upon application of either party, and if relevant material conditions are reached by the parties, the contract is considered concluded.   

Following the requirements of the legislation of the Republic of Kazakhstan on electric power industry, the essential conditions of the contract for sale and purchase of electric power are also the following:

1. Price, terms and conditions of electricity supply, including its volume and delivery period;    
2. The schedule of daily electricity consumption and the procedure for reservation by the energy generatorsagreed upon by the parties;
3. Schedule of hourly (seasonal) changes in the electric power supply mode agreed upon by the parties;
4. Specification of points of physical and commercial metering of supply to the grid and receipt from the grid of contractual volumes of electric energy of consumers of electric energy and energy generating organisations;
5. Conditions of electric power supply (reservation procedure) in case of emergency failures;
6. Terms and procedure for termination of rendering corresponding services in case of untimely payment;
7. Availability of automated commercial metering systems, telecommunications, ensuring their unification with the systems installed by the system operator;
8. Availability of access to the national and, if necessary, regional electricity network.

Thus, when drafting the power purchase and sale agreement we recommend to take into account the above mentioned conditions that are recognized as essential by the legislation of the Republic of Kazakhstan on electric power industry.  We believe that the conclusion of a power purchase agreement (private PPA) will be a key factor in the near future for attracting RES investments in the private sector outside the state.