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On connecting electricity equipment to distribution networks

Case No. 35/2008

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA
RULING

ON THE COMPLIANCE OF THE REPUBLIC OF LITHUANIA LAW ON THE AMENDMENT OF THE LAW ON ELECTRICITY AND THE REPUBLIC OF LITHUANIA LAW ON ELECTRICITY (WORDING OF 1 JULY 2004) WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA

29 September 2010
Vilnius

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court Armanas Abramavičius, Toma Birmontienė, Pranas Kuconis, Kęstutis Lapinskas, Zenonas Namavičius, Ramutė Ruškytė, Egidijus Šileikis, Algirdas Taminskas, and Romualdas Kęstutis Urbaitis,

with the secretary of the hearing—Daiva Pitrėnaitė,

in the presence of the representatives of a group of Members of the Seimas of the Republic of Lithuania, the petitioner, who were Julius Sabatauskas, a Member of the Seimas, and Gytis Kaminskas, an advocate,

in the presence of the representative of the Seimas of the Republic of Lithuania, the party concerned, who was Vaidotas Bacevičius, a Member of the Seimas,

pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, in its public hearing on 14 September 2010 heard constitutional justice case No. 35/2008 subsequent to the petition (No. 1B-41) of a group of Members of the Seimas of the Republic of Lithuania, the petitioner, requesting to investigate whether:

1) the Republic of Lithuania Law on the Amendment of the Law on Electricity, adopted by the Seimas of the Republic of Lithuania on 1 July 2004, according to the procedure of its adoption, is not in conflict with Paragraph 1 of Article 69 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law;

2) Paragraph 3 of Article 43 of the Republic of Lithuania Law on Electricity (wording of 1 July 2004) is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law;

3) the Republic of Lithuania Law on Electricity (wording of 1 July 2004), to the extent that, according to the petitioner, it does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the monopolist that exploits the said objects, also that it does not establish the duty to connect, free of charge, customers’ equipment to the distribution network, is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.

The Constitutional Court

has established:

I

A group of Members of the Seimas applied to the Constitutional Court with a petition requesting to investigate whether:

1) the Law on the Amendment of the Law on Electricity, according to the procedure of its adoption, is not in conflict with Paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law;

2) Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law;

3) the Law on Electricity (wording of 1 July 2004), to the extent that, according to the petitioner, it does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the monopolist that exploits the said objects, also that it does not establish the duty to connect, free of charge, customers’ equipment to the distribution network, is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

II

The petition of the group of Members of the Seimas, the petitioner, is substantiated by the following arguments.

1. The petitioner points out that, under Paragraph 5 (wording of 2 July 1996) of Article 4 of the Republic of Lithuania Law on the Procedure of Drafting Laws and Other Normative Legal Acts, during the process of coordination a draft legal act regulating economic relations must be assessed from the point of view of anti-corruption, and, under Paragraph 3 of Article 135 (wording of 9 November 2004) of the Statute of the Seimas of the Republic of Lithuania, a submitted draft law must be supplemented with an explanatory note indicating what impact the law will have on corruption. The petitioner maintains that the Draft Law on the Amendment of the Law on Electricity was not assessed from the point of view of anti-corruption, whereas the explanatory note to this draft law does not indicate what impact the law will have on corruption. Therefore, in the opinion of the petitioner, the Law on the Amendment of the Law on Electricity, adopted by the Seimas on 1 July 2004, according to the procedure of its adoption, is in conflict with the Constitution.

2. The petitioner grounds its doubts as regards the compliance of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law on the fact that, in its opinion, by entrenching in the disputed provision the pricing under which, while calculating the price caps for the transmission, distribution and public supply services, one must take into account the value of the assets used by the service provider in the licensed activities, preconditions are created for the enterprises themselves to unreasonably exert influence upon the price of electricity.

By invoking the provisions of the official constitutional doctrine, the petitioner maintains that the state is obliged to regulate monopolistic economic activities by establishing, in a law, certain requirements for the monopolist, by applying special measures of protection of the interests of consumers, i.e. limiting the possibilities for establishment of discriminatory prices, fixing the size of prices and tariffs for the goods of the monopolistic market, setting the requirements for the quality of goods as well as other requirements for the monopolistic economic entity, etc.

3. The doubts of the petitioner as regards the compliance of the Law on Electricity (wording of 1 July 2004) with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law, to the extent that, according to the petitioner, this law does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the monopolist that exploits the said objects (the relevance of this obligation is evidenced in the cases when customers’ equipment is being connected to the distribution network), are grounded on the fact that, according to the petitioner, such a legal gap is prohibited under the provisions of the official constitutional doctrine, most of which are set forth in the Constitutional Court ruling of 6 October 1999, wherein the compliance of the Republic of Lithuania Law on Telecommunications with the Constitution was considered. In the opinion of the petitioner, the provisions of the Constitutional Court ruling of 6 October 1999 are also applicable mutatis mutandis to the legal regulation entrenched in the Law on Electricity (wording of 1 July 2004). In addition, according to the petitioner, the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the monopolist that exploits the said objects must be established in the Law on Electricity (wording of 1 July 2004) due to the fact that such an obligation must be established under European Union law.

III

In the course of the preparation of the case for the Constitutional Court hearing, written explanations were received from the representative of the Seimas, the party concerned, who was V. Bacevičius, a Member of the Seimas, wherein it is maintained that the disputed Law on the Amendment of the Law on Electricity, according to the procedure of its adoption, the Law on Electricity (wording of 1 July 2004) as well as Paragraph 3 of Article 43 thereof, to the extent indicated by the petitioner, are not in conflict with the Constitution. The position of the representative of the party concerned is substantiated by the following arguments.

1. The Law on the Procedure of Drafting Laws and Other Normative Legal Acts does not concretely specify what actions must be taken in order to assess draft legal acts from the point of view of anti-corruption. According to V. Bacevičius, the Law on the Amendment of the Law on Electricity was adopted by not violating any procedures of legislation: before its submission to the Seimas, the said draft law was coordinated by the Government of the Republic of Lithuania with the ministries and other state institutions; the said draft law was submitted to the Seimas along with a properly prepared explanatory note; the consideration of the draft law at the Seimas was carried out in accordance with the established procedures and was public; in the course of the consideration at the Seimas, the Special Investigation Service of the Republic of Lithuania did not submit any remarks or suggestions concerning the said draft law.

The fact that the explanatory note submitted to the Seimas along with the disputed draft law does not mention that the submitted draft law was assessed from the point of view of anti-corruption does not yet mean that this was not done. V. Bacevičius draws attention to the fact that the legal regulation, under which the explanatory note to a draft law must indicate “what impact the law will have on the criminogenic situation and corruption”, was laid down in Paragraph 3 of Article 135 of the Statute of the Seimas only after the Seimas, on 9 November 2004, adopted the Statute of the Seimas of the Republic of Lithuania “On the Amendment and Supplement of Articles 4, 9, 10, 12, 15, 44, 46, 49, 61, 68, 78, 113, 135, 136, 137, 138, 145, 149, 151, 152, 155, 156, 162, 163, 164, and Sections Thirty-eight and Thirty-nine of the Statute of the Seimas, the Supplement of the Statute with Article 441 and Section Twenty-seven1, and the Recognition of Section 40 Thereof as No Longer Valid”.

2. The fact that there exists the monopoly in the field of electricity or that certain requirements are applied to the monopolist does not in itself mean that the disputed provisions of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) are in conflict with Paragraph 4 of Article 46 of the Constitution. The said position of the representative of the person concerned is substantiated by the official constitutional doctrine set forth in the Constitutional Court rulings of 20 April 1995, 15 March 1996, 24 January 1996, 18 October 2000, 17 March 2003, 26 January 2004, 5 March 2008 and 2 March 2009.

The representative of the person concerned maintains that, after the Seimas adopted the Republic of Lithuania Law on the Amendment of Articles 2, 5, 6, 43, 44 and 48 of the Law on Electricity on 19 March 2009, the deficient provisions of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) were repealed. The representative of the party concerned also points out that, under the provisions of Paragraph 3 (wording of 19 March 2009) of Article 43 of the Law on Electricity (wording of 1 July 2004), the price caps for the transmission, distribution and public supply services, while taking account of the value of assets, should not unreasonably rise.

3. In the opinion of V. Bacevičius, in the cases when the owners of the infrastructure objects installed at the expense of consumers express their will to transfer the said objects into the property of the monopolist, the monopolist is obliged to compensate for these objects according to the procedure established in Chapter XXIII of Part IV of Book Six of the Civil Code of the Republic of Lithuania and other legal acts, therefore, an additional legal regulation on this issue is not needed.

IV

In the course of the preparation of the case for the judicial consideration, explanations were submitted by the specialists Danas Janulionis, Deputy Chairman of the National Control Commission for Prices and Energy, and Vygantas Vaitkus, senior advisor of the said commission.

V

1. At the Constitutional Court hearing, the representatives of the group of Members of the Seimas, the petitioner, who were J. Sabatauskas, a Member of the Seimas, and G. Kaminskas, an advocate, and the representative of the Seimas, the party concerned, who was V. Bacevičius, a Member of the Seimas, virtually reiterated the arguments set forth in their written explanations, answered to the questions and presented additional explanations.

2. At the Constitutional Court hearing, the specialist Danas Janulionis, Deputy Chairman of the National Control Commission for Prices and Energy, spoke and answered to the questions.

The Constitutional Court

holds that:

I

1. A group of Members of the Seimas, the petitioner, requests the Constitutional Court to investigate whether:

1) the Law on the Amendment of the Law on Electricity, according to the procedure of its adoption, is not in conflict with Paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law;

2) Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law;

3) the Law on Electricity (wording of 1 July 2004), to the extent that, according to the petitioner, in the cases when customers’ equipment is being connected to the distribution network, it does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the monopolist that exploits the said objects, also that it does not establish the duty to connect, free of charge, customers’ equipment to the distribution network, is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

2. On 20 July 2000, the Seimas adopted the Law on Electricity. This law, with the exception of Article 47, came into force on 1 January 2001 (Article 46).

The Law on Electricity (wording of 20 July 2000) inter alia prescribed:

this law shall regulate the basic principles of the generation, transmission, distribution, and supply of electricity in the Republic of Lithuania by taking account of the requirements of European Union law, also the relations between providers of electricity services and their customers, as well as the conditions promoting competition in the electricity sector (Article 1);

the main objectives of this law are as follows: 1) legal regulation of the rights, responsibilities of and mutual relations between the economic entities in the electricity sector; 2) development of the legal conditions for the functioning of a competition-based electricity market and establishment of the principles of fair competition between producers and suppliers; 3) ensuring and promoting efficiency in the production, transmission, distribution and consumption of electricity; 4) ensuring the reliable generation, transmission and distribution of electricity; 5) ensuring services which meet the public interests and are linked with society’s safety, environmental protection and electricity generation by using local, renewable and waste resources of energy, as well as establishing objectively reasonable, clear and transparent requirements and obligations in the electricity sector; 6) promoting the development of the internal electricity market and electricity export, modernisation of technical facilities for implementation of the market, and development of clear and transparent energy pricing; 7) creating favourable conditions for investments in the electricity sector; 8) promoting the development of environmentally friendly technologies in generation, transmission and distribution of electricity (Article 3).

3. On 1 July 2004, the Seimas adopted the Law on the Amendment of the Law on Electricity, by Article 1 whereof the Law on Electricity (wording of 20 July 2000 with subsequent amendments and supplements) was amended and set forth in a new wording. This law, the compliance of which (to the corresponding extent) with the Constitution is disputed in the constitutional justice case at issue, came into force on 10 July 2004.

Under Article 1 of the Law on Electricity (wording of 1 July 2004), this law establishes the basic principles regulating the generation, transmission, distribution, and supply of electricity in the Republic of Lithuania, the relations between providers of electricity services and their customers, as well as the conditions promoting competition in the electricity sector (Paragraph 1); the provisions of this law are harmonised with the legal acts of the European Union which are specified in the annex to this law (Paragraph 2).

Article 3 of the Law on Electricity (wording of 1 July 2004) entrenches the main objectives of this law: “1) establishment of the rights, responsibilities of and mutual relations between the entities in the electricity sector; 2) development of the legal conditions for the functioning of a competition-based electricity market and establishment of the principles of fair competition between producers and suppliers; 3) ensuring and promoting efficiency in the production, transmission, distribution and consumption of electricity; 4) ensuring safe and reliable operation of the electricity system, electricity generation, transmission and distribution; 5) ensuring services which meet the public interests and establishing objectively reasonable, clear and transparent requirements and obligations in the electricity sector; 6) promoting the development of the internal electricity market and electricity export, modernisation of technical facilities for implementation of the market, and ensuring clear and transparent energy pricing; 7) creating favourable conditions for investments in the electricity sector; 8) promoting the development of environmentally friendly technologies in generation, transmission and distribution of electricity.”

4. Thus, from the Law on Electricity (wordings of 20 July 2000 and 1 July 2004 with subsequent amendments and supplements), inter alia articles thereof which establish the purpose and the main objectives of the law, it is clear that this law regulated and regulates the relations of economic nature.

5. The Law on Electricity (wording of 1 July 2004) has been amended and supplemented more than once, however, Articles 1 and 3 thereof have not been amended or supplemented.

6. The Law on Electricity (wording of 1 July 2004) inter alia prescribed:

the customer means any person whose equipment is connected inter alia to the distribution network and who purchases electricity for consumption (Paragraph 35 of Article 2);

the National Control Commission for Prices and Energy shall be responsible for ensuring non-discrimination of customers and provision of all customers with the services of established quality (Paragraph 2 of Article 6);

the tariffs for the connection of customers’ equipment to the network shall be approved by the National Control Commission for Prices and Energy according to the principles of non-discrimination of customers, network development and efficient use of electricity (Paragraph 3 of Article 42).

Thus, under the quoted provisions of the Law on Electricity (wording of 1 July 2004), the connection of customers’ equipment to the energy distribution network is charged for; and the principles of general nature are laid down (non-discrimination of customers, network development and efficient use of electricity), by following which the National Control Commission for Prices and Energy approves the tariffs for the connection of customers’ equipment to the network.

7. Paragraph 3 of Article 43 “Setting the Price Caps for Transmission, Distribution, Public Supply Services and Public Electricity” of the Law on Electricity (wording of 1 July 2004), the compliance with the Constitution of the provisions whereof is disputed in the constitutional justice case at issue, prescribed:

3. Setting the price caps for the transmission, distribution and public supply services:

1) provision shall be made for required expenditure for the purchase, transmission, distribution and supply of electricity (including electricity cost recovery), expenditure for the network development, reconstruction and maintenance works necessary for carrying out reliable, safe and qualitative operation, as well as expenditure incurred in the course of provision of the services which meet the public interests, and receipt of normative profit shall be secured;

2) guarantees shall be provided for recovery of the service provider’s expenditures related to the accumulation and employment of the capital borrowed for the licensed activities under market conditions, irrespective of the service provider’s capital structure and way of capital accumulation. The service provider’s capital structure, equity and borrowed capital, the conditions of capital accumulation and employment shall be established and calculated according to the service provider’s financial accounts and the projections of changes in the structure of capital presented by the service provider;

3) account shall be taken of the value of the assets used by the service provider in the licensed activities, which is established on the basis of the service provider’s financial accounts;

4) regard shall be paid to the service provider’s asset depreciation or amortisation rates which are established in accordance with the procedure laid down in the Law on Profit Tax and are coordinated with the Commission;

5) the normative profit rate calculated on the value of the assets used by the service provider in the licensed activities shall be not less than the weighted arithmetic average of the annual percentage interest rate at 10-year maturity Government securities auctions held during the last 36 calendar months, increased by 3 percentage points.”

Thus, under the legal regulation laid down in Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004), while setting the price caps for the transmission, distribution and public supply services, inter alia:

the value of the assets used by the service provider in the licensed activities is established on the basis of the service provider’s financial accounts;

the normative profit rate is calculated on the value of the assets used by the service provider in the licensed activities;

the upper limit of the normative profit rate is not established.

8. By means of Article 4 of the Law on the Amendment of Articles 2, 5, 6, 43, 44 and 48 of the Law on Electricity, adopted by the Seimas on 19 March 2009 and which (with the exception of Paragraph 2 of Article 7 thereof) came into force on 1 June 2009 (Paragraph 1 of Article 7), the legal regulation laid down in Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) was changed:

Item 2 of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) was recognised as no longer valid (Paragraph 1 of Article 4);

the former Items 3, 4 and 5 of Paragraph 3 of Article 43 became Items 2, 3 and 4, respectively (Paragraph 2 of Article 4);

Item 2 (wording of 19 March 2009) of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) entrenched that, while setting the price caps for the transmission, distribution and public supply services, inter alia “account shall be taken of the value of the assets used by the service provider in the licensed activities, which is assessed and approved by the Commission according to the principles, prepared by the Commission and approved by the Government, for establishment of the value of the assets used by the service provider in the licensed activities” (Paragraph 3 of Article 4);

Item 4 (wording of 19 March 2009) of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) entrenched that, while setting the price caps for the transmission, distribution and public supply services, inter alia “each year of the regulation period the normative profit rate calculated on the value of the assets used by the service provider in the licensed activities shall be not less than the weighted arithmetic average of the annual percentage interest rate at 10-year maturity Government securities auctions held during the last 36 calendar months, but which is not higher than 5 percent” (Paragraph 4 of Article 4).

Thus, under the legal regulation laid down in Paragraph 3 (wording of 19 March 2009) of Article 43 of the Law on Electricity (wording of 1 July 2004), while setting the price caps for the transmission, distribution and public supply services, inter alia:

the value of the assets used by the service provider in the licensed activities is assessed and approved by the National Control Commission for Prices and Energy;

the normative profit rate is calculated on the value of the assets used by the service provider in the licensed activities;

the upper limit of the normative profit rate is established.

9. Having compared the legal regulation laid down in Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) with the one laid down in Paragraph 3 (wording of 19 March 2009) of Article 43 of this law (wording of 1 July 2004), it is clear that, under Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004), the value of the assets used by the service provider in the licensed activities was established on the basis of the service provider’s financial accounts, the normative profit rate was calculated on the value of the assets used by the service provider in the licensed activities, and the upper limit of the normative profit rate was not established, whereas, under Paragraph 3 (wording of 19 March 2009) of Article 43 of the Law on Electricity (wording of 1 July 2004), the value of the assets used by the service provider in the licensed activities is assessed and approved by the National Control Commission for Prices and Energy according to the principles, prepared by the Commission and approved by the Government, for establishment of the value of the assets used by the service provider in the licensed activities, the normative profit rate is calculated on the value of the assets used by the service provider in the licensed activities, and the upper limit of the normative profit rate is established.

Thus, upon adoption of the Law on the Amendment of Articles 2, 5, 6, 43, 44 and 48 of the Law on Electricity by the Seimas on 19 March 2009, the legal regulation entrenched in Items 3 and 5 of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) was changed in essence.

10. On 15 July 2009, the Seimas adopted the Republic of Lithuania Law on the Supplement and Amendment of Articles 42 and 44 of the Law on Electricity, which, with the exception of Paragraph 2 of Article 3 thereof, came into force on 1 August 2009 (Paragraph 1 of Article 3). By means of Article 1 of the said law, Article 42 of the Law on Electricity (wording of 1 July 2004) was supplemented with Paragraph 4: “The customers shall cover 20 percent of the required costs related to the connection of customers’ equipment, which are incurred by the distribution network operators who carry out the service of connecting customers’ equipment. The remaining part of these costs shall constitute the distribution network operator’s expenditure on network development.”

Under the legal regulation laid down in Paragraph 4 (wording of 15 July 2009) of Article 42 of the Law on Electricity (wording of 1 July 2004), 20 percent of the required costs related to the connection of customers’ equipment, which are incurred by the distribution network operators who carry out the service of connecting customers’ equipment, are covered by the customers whose equipment is being connected to the electricity network; the tariffs for the connection of customers’ equipment to the network directly depend on what amount of the costs, related to the connection of customers’ equipment and incurred by the distribution network operators who carry out the service of connecting customers’ equipment, is regarded as a required one.

II

On the compliance of the Law on the Amendment of the Law on Electricity, according to the procedure of its adoption, with Paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

1. It has been mentioned that the Seimas adopted the Law on the Amendment of the Law on Electricity on 1 July 2004; this law came into force on 10 July 2004, and, by Article 1 thereof, the Law on Electricity (wording of 20 July 2000 with subsequent amendments and supplements) was amended and set forth in a new wording.

2. The group of Members of the Seimas, the petitioner, inter alia requests the investigation into whether the Law on the Amendment of the Law on Electricity, according to the procedure of its adoption, is not in conflict with Paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

From the arguments of the petitioner it is clear that it has doubts as to whether the Law on the Amendment of the Law on Electricity, according to the procedure of its adoption, is not in conflict with the Constitution in the aspect that, according to the petitioner, the draft of this law was not assessed from the point of view of anti-corruption.

3. In the context of the constitutional justice case at issue, one is to mention the circumstances related to the preparation and submission to the Seimas of the disputed draft law as well as the consideration and adoption thereof at the Seimas.

3.1. By Letter No. (28.1-52)-3-2783 “On the Submission of the Republic of Lithuania Draft Law on the Amendment of the Law on Electricity” of 27 May 2004, the Minister of Economy of the Republic of Lithuania requested the assent of the Government to the submitted Draft Law on the Amendment of the Law on Electricity. From the information provided in this letter it is clear that the said draft law was submitted in order to harmonise the provisions of the Law on Electricity with the newly adopted requirements of the legal acts of the European Union, also that the said draft law was coordinated with the Ministry of Justice of the Republic of Lithuania, the European Law Department under the Government of the Republic of Lithuania, the National Control Commission for Prices and Energy, the State Energy Inspectorate and electricity undertakings.

Along with the Draft Law on the Amendment of the Law on Electricity, the Minister of Economy submitted to the Government the Note on the Base Assessment of the Impact of the Republic of Lithuania Draft Law on the Amendment of the Law on Electricity, wherein inter alia it was indicated that:

upon the adoption of the Republic of Lithuania Law on the Amendment of the Law on Electricity, a negative impact on the economy, state finances and social environment is not anticipated (Item 6.2);

in the opinion of the Ministry of Economy, an enlarged assessment of the draft decision is not needed, as the submitted draft law does not provide for any substantial changes in the existing electricity system, and it only harmonises the provisions of the law with the requirements of European Union directives (Item 8).

3.2. On 9 June 2004, the Government adopted Resolution No. 711 “On the Submission of the Republic of Lithuania Draft Law on the Amendment of the Law on Electricity to the Seimas of the Republic of Lithuania” (hereinafter referred to as the Government resolution No. 711 of 9 June 2004), which came into force on 13 June 2004. By Item 1 of this resolution, the Government resolved to assent to the Draft Law on the Amendment of the Law on Electricity, to submit it to the Seimas and to request that the Seimas consider the indicated draft law under the urgency procedure.

3.3. By letter No. 17-5233 of 10 June 2004, the Government submitted the Draft Law on the Amendment of the Law on Electricity to the Seimas. Alongside, an explanatory note, signed by the Minister of Economy, to the said draft law was submitted wherein it was inter alia pointed out that “upon the adoption of the submitted draft law, there should not emerge any negative consequences”.

3.4. On 10 June 2004, at the Seimas the Draft Law on the Amendment of the Law on Electricity was given registration No. IXP-3602.

After considering the suggestions and remarks of inter alia the National Association of Electricity Network Operators, the Lithuanian Confederation of Industrialists, the National Consumer Rights Protection Board under the Ministry of Justice, and the National Control Commission for Prices and Energy, the Seimas Committee on Economics gave its assent to the Draft Law on the Amendment of the Law on Electricity (Conclusion of the Seimas Committee on Economics No. 25 “On the Republic of Lithuania Draft Law on the Amendment of the Law on Electricity No. IXP-3602 ES” of 22 June 2004).

On 30 June 2004, the Law Department of the Office of the Seimas submitted a conclusion (Letter No. IXP-3602 (4) “On the Republic of Lithuania Draft Law on the Amendment of the Law on Electricity”), wherein it inter alia indicated that the Draft Law No. IXP-3602 virtually meets the requirements of legal technique.

It needs to be mentioned that in the course of the consideration of Draft Law on the Amendment of the Law on Electricity No. IXP-3602 at the Seimas, suggestions concerning this draft law were also made by Members of the Seimas.

During the stage of the preparation of the draft the institutions which submitted suggestions and remarks on Draft Law on the Amendment of the Law on Electricity No. IXP-3602 did not submit any remarks as regards the provisions thereof by means of which there could be created conditions for the emergence of corruption. From the travaux préparatoires of this draft law No. IXP-3602, it is clear that, in the course of the consideration and adoption of Draft Law on the Amendment of the Law on Electricity No. IXP-3602 at the Seimas, neither the Seimas Committee on Economics, other committees and Members of the Seimas, nor the Law Department of the Office of the Seimas expressed any doubts as to the fact that, upon the adoption of the Draft Law on the Amendment of the Law on Electricity, there could arise negative consequences, inter alia conditions for the emergence and spread of corruption.

As mentioned, the Seimas adopted the Draft Law on the Amendment of the Law on Electricity on 1 July 2004 and it came into force on 10 July 2004.

4. Summing up the preparation of the said draft law, also the consideration and adoption thereof at the Seimas, one needs to note the following:

4.1. In the Note on the Base Assessment of the Impact of the Draft Law on the Amendment of the Law on Electricity submitted to the Government, the Ministry of Economy, the drafter of the Draft Law on the Amendment of the Law on Electricity, indicated that, upon the adoption of this law, a negative impact is not anticipated and that an enlarged assessment of the draft decision is not needed.

4.2. By its resolution No. 711 of 9 June 2004, the Government assented to the Draft Law on the Amendment of the Law on Electricity submitted by the Ministry of Economy, which was supplemented with the explanatory note to this draft law signed by the Minister of Economy. In the explanatory note inter alia it was pointed out that “upon the adoption of the submitted draft law, there should not emerge any negative consequences”.

4.3. From the shorthand records of the sitting of the Seimas as well as from other material it is clear that, in the course of the consideration and adoption of Draft Law on the Amendment of the Law on Electricity No. IXP-3602 at the Seimas, there were no doubts expressed concerning the fact that upon the adoption of the Draft Law on the Amendment of the Law on Electricity there could be created conditions for the emergence and spread of corruption.

5. While investigating, subsequent to the petition of the petitioner, whether the Law on the Amendment of the Law on Electricity, according to the procedure of its adoption in the aspect indicated, is not in conflict with the Constitution, it is necessary to elucidate what requirements were set in laws for the assessment of the draft law from the point of view of anti-corruption.

6. In this context it needs to be mentioned that the petitioner’s doubts as to the compliance of the Law on the Amendment of the Law on Electricity, according to the procedure of its adoption in the aspect indicated, with the Constitution are grounded inter alia upon the fact that, according to the petitioner, in the course of the consideration of the Draft Law on the Amendment of the Law on Electricity, one could violate inter alia the provision “An explanatory note shall be submitted together with a draft law specifying the following: <...> 6) what impact the law would have on <...> corruption” of Paragraph 3 of Article 135 (wording of 9 November 2004) of the Statute of the Seimas.

It needs to be noted that Item 4 (wording of 22 December 1998) of Paragraph 3 of Article 135 of the Statute of the Seimas of the wording which was in force at the time of the preparation, also submission to the Seimas and consideration at the Seimas of the disputed Draft Law on the Amendment of the Law on Electricity prescribed that an explanatory note submitted to the Seimas together with a draft law must specify “possible negative consequences of the enacted draft law and the measures which should be applied in order to avoid such consequences”.

Thus, under Item 4 (wording of 22 December 1998) of Paragraph 3 of Article 135 of the Statute of the Seimas, in an explanatory note submitted to the Seimas together with a draft law one did not have to indicate what impact the law would have on corruption.

7. At the time of the preparation, also submission to the Seimas and consideration at the Seimas of the disputed Draft Law on the Amendment of the Law on Electricity, the fundamentals of the regulation of the relations related to the assessment of draft laws were established not only in the Statute of the Seimas, but also inter alia in the Law on the Procedure of Drafting Laws and Other Normative Legal Acts and the Republic of Lithuania Law on Prevention of Corruption. In the context of the constitutional justice case at issue the following provisions of the said laws are to be mentioned:

in Paragraph 5 (wording of 2 July 1996) of Article 4 of the Law on the Procedure of Drafting Laws and Other Normative Legal Acts, inter alia it was and it is prescribed that: “During the process of coordination a draft legal act regulating economic relations shall be assessed from the point of view of anti-corruption”;

Article 5 (wording of 28 May 2002) of the Law on Prevention of Corruption inter alia prescribed: “Measures for the prevention of corruption shall be as follows: <...> 3) anti-corruption assessment of legal acts or their drafts”; Article 8 (wording of 28 May 2002) of this law prescribed: “A state or municipal institution drafting or passing a legal act regulating public relations particularly prone to corruption must carry out the anti-corruption assessment of the draft legal act and examine the anti-corruption assessment of the same draft carried out by other state or municipal institutions” (Paragraph 1); “The anti-corruption assessment of the effective legal acts shall be carried out taking into account the practice of their application, and shall be submitted to the state or municipal establishment which adopted them or on whose initiative they were adopted. This establishment shall determine whether it would be expedient to amend the legal act in question” (Paragraph 2); “The Special Investigation Service shall carry out the anti-corruption assessment of the effective or draft legislation on its own initiative or on the proposal by the President of the Republic, the Speaker of the Seimas, the Prime Minister, a Seimas committee, commission, a parliamentary group or a minister” (Paragraph 3).

Thus, under the quoted legal regulation, a state or municipal institution drafting or passing a draft legal act regulating public relations particularly prone to corruption (inter alia a law regulating economic relations) was obliged to carry out the anti-corruption assessment of the draft legal act and examine the anti-corruption assessment of the same draft carried out by other state or municipal establishments, inter alia the Special Investigation Service; the Special Investigation Service could carry out the anti-corruption assessment of such a draft legal act at any stage of drafting thereof on its own initiative or on the proposal by the President of the Republic, the Speaker of the Seimas, the Prime Minister, a Seimas committee, commission, a parliamentary group or a minister, also the Special Investigation Service could carry out the anti-corruption assessment of the same effective legal act. Neither the Law on the Procedure of Drafting Laws and Other Normative Legal Acts nor the Law on Prevention of Corruption provided as to how the institution drafting or passing the draft law had to formalise the carried out anti-corruption assessment of the legal act.

8. It has been mentioned that, by its resolution No. 711 of 9 June 2004, the Government assented to the Draft Law on the Amendment of the Law on Electricity prepared by the Ministry of Economy, and submitted it to the Seimas.

While preparing the Draft Law on the Amendment of the Law on Electricity, the Government Resolution No. 276 “On Approval and Implementation of the Methodology of Assessment of the Impact of Draft Decisions” of 26 February 2003 (hereinafter referred to as the Government resolution No. 276 of 26 February 2003), which regulated the procedure for assessment of the impact of the draft laws submitted for consideration to the Government, was in force.

8.1. Under the Government resolution No. 276 of 26 February 2003:

the base assessment of the impact of all draft decisions submitted for consideration to the Government, with the exception of the drafts whereby amendments of editorial and/or technical nature are introduced, shall be carried out as from 1 August 2003 (Item 2.1);

the enlarged assessment of the impact of draft decisions shall be carried out as from 1 January 2004 and only of the draft decisions the implementation of which would have a great influence on the economic, social and political life of the Republic of Lithuania and/or on the condition of social relations of a particular area (Item 2.2).

8.2. In the context of the constitutional justice case at issue it needs to be mentioned that, under the Methodology of Assessment of the Impact of Draft Decisions (hereinafter referred to as the Methodology) (wording of 26 February 2003), approved by Item 1 of the Government resolution No. 276 of 26 February 2003, the following needs to be noted:

8.2.1. The drafters of the draft decision had to carry out the base assessment of all the submitted alternatives according to the aspects indicated in Items 9.1–9.4 of the said Methodology, while, taking account of the nature of the draft decision, the impact could be assessed according to other aspects as well, as indicated in Items 9 and 10 of the same Methodology (Item 13). In this context it needs to be mentioned that, while carrying out the mandatory base assessment of all the submitted alternatives, the following aspects had to be assessed: the impact on a particular area (the assessment is carried out of a possible impact on a specific area subject to intended changes) (Item 9.1); the impact on the economy (the assessment is carried out of a possible impact on business conditions, processes in the development of the economy and separate sectors thereof) (Item 9.2); the impact on state finances (the assessment is carried out of a possible impact on the Budget of the State of the Republic of Lithuania and/or municipal budgets, financial obligations, the possible fiscal risk, etc.) (Item 9.3); the impact on the social environment (the assessment is carried out of a possible impact on various social groups and social relations) (Item 9.4).

8.2.2. Taking account of the nature of the draft decision, the assessment of impact could be carried out according to other aspects as well (Item 10).

8.2.3. In the base assessment note, one had inter alia to indicate a reasoned suggestion as to the expediency of enlarged assessment (Item 16.9); the enlarged assessment was carried out according to all the assessment aspects specified in Items 9.1–9.8 of the said Methodology (i.e. the assessment was carried out of the impact on: the public administration system (the assessment was carried out of a possible impact on the public administration system, intellectual resources of state institutions and establishments) (Item 9.5), the extent of corruption (the assessment was carried out of a possible impact on the extent of corruption) (Item 9.6), environment (the assessment was carried out of a possible impact on environment) (Item 9.7), the legal system (the assessment was carried out of a possible impact on the legal system) (Item 9.8), also a comprehensive analysis of the said aspects was provided, whereas, taking account of the nature of the draft decision, the assessment of impact could be carried out according to other aspects as well, as indicated in Item 10 of the said Methodology (Item 19).

8.2.4. The state institution or establishment itself could adopt a decision as to the expediency of the enlarged assessment of the impact of the draft decision to be submitted to the Government if the draft decision being prepared could be of considerable importance to the social, economic or political life of the state and could exert great influence on a specific area of social relations, and, in the opinion of that state institution or establishment, the base assessment would be insufficient (Item 21); the question regarding the expediency of the enlarged assessment of the impact of the draft decision to be submitted to the Government could also be decided by the Government (Item 20).

9. In the context of the constitutional justice case at issue it needs to be held that, under the legal regulation of the assessment of draft legal acts laid down in the Law on the Procedure of Drafting Laws and Other Normative Legal Acts and the Law on Prevention of Corruption, the Ministry of Economy, the drafter of the Draft Law on the Amendment of the Law on Electricity, the Government, who submitted this draft law to the Seimas, or the Seimas were obliged to carry out the anti-corruption assessment of the Draft Law on the Amendment of the Law on Electricity; also the said institutions would have had to examine the anti-corruption assessment of the said draft carried out by other state establishments, inter alia the Special Investigation Service, if such an assessment had been carried out.

It needs to be mentioned that the Methodology approved by the Government resolution No. 276 of 26 February 2003 did not provide as to how the institution drafting or passing the draft law had to formalise the carried out anti-corruption assessment of the legal act.

10. It has been mentioned that the group of Members of the Seimas, the petitioner, requests the investigation into whether the Law on the Amendment of the Law on Electricity, according to the procedure of its adoption in the aspect indicated, is not in conflict with Paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

11. Paragraph 1 of Article 69 of the Constitution stipulates that “Laws shall be adopted at the Seimas according to the procedure established by law”.

12. In its rulings of inter alia 8 November 1993, 29 May 1997, 18 October 2000, 28 June 2001, 14 January 2002, 19 January 2005 and 22 February 2008, the Constitutional Court disclosed the notion of the process of legislation and held that: under the Constitution, the process of legislation is the whole complex of legally significant acts necessary for the adoption of a law and performed in a rigid sequence of logic and time, which is virtually also entrenched in the Constitution: the realisation of the right of legislative initiative—in Article 68, the adoption of laws—in Article 69, the promulgation of laws and their entry into force—in Articles 70-72; only with the completion of one stage in consecutive order starts another; the legislation procedure can be regulated by the Statute of the Seimas as well as other laws; one may not ignore any stage of the legislation procedure or rule of the adoption of laws which are enshrined in the Constitution, the Statute of the Seimas or other laws.

In the context of the constitutional justice case at issue it needs to be noted that, if the Statute of the Seimas or laws establish that a certain stage (stages) of the process of legislation must include the verification of a draft law, then one is inter alia obliged to carry out the evaluation of the efficiency of the regulation of relations which is sought by the law, as well as the assessment as to whether the law would not have any negative consequences. It would be constitutionally unjustifiable, if one failed to carry out such verification at some stage of the legislation process (inter alia in the course of the realisation of the right of legislative initiative or the adoption of laws) or if such verification were carried out not at the due stage (stages) of the legislation process. In the context of the constitutional justice case at issue it also needs to be noted that the evaluation of the efficiency of the regulation of relations which is sought by the law must be carried out in a comprehensive, objective and impartial manner, and, if necessary, one must invite persons possessing special knowledge.

In this context it needs to be noted that from the Constitution, namely from the constitutional principle of a state under the rule of law, a duty arises for the legislator to establish in the Statute of the Seimas and/or laws such legal regulation of the legislation process whereby one would entrench the obligation for the subjects who have the right of legislative initiative and/or for the Seimas, while preparing and/or adopting at the Seimas the legal acts regulating the relations which can have influence on inter alia the criminogenic situation and emergence of negative economic consequences, to carry out proper assessment of a draft law, inter alia as regards the negative consequences which might be caused by the established legal regulation. It also needs to be noted that, in its ruling of 19 January 2005, the Constitutional Court held that the compliance of laws and other legal acts with the Constitution is ensured not only by the constitutional control of the legal acts adopted by the Seimas, which is carried out by the Constitutional Court, but also by the internal preventive control implemented by the Seimas in the manner established in the Statute of the Seimas, which prevents adoption of laws and other legal acts which could possibly contradict the Constitution or other legal acts of higher power.

The Constitutional Court has held more than once that the fact that the Seimas, while passing laws, is bound by the Constitution as well as by the laws that were passed by it, is an essential element of the constitutional principle of a state under the rule of law.

13. It has been held in this Constitutional Court ruling that, under the legal regulation of the assessment of draft legal acts laid down in the Law on the Procedure of Drafting Laws and Other Normative Legal Acts and the Law on Prevention of Corruption, the Ministry of Economy, the drafter of the Draft Law on the Amendment of the Law on Electricity, the Government, who submitted this draft law to the Seimas, or the Seimas were obliged to carry out the anti-corruption assessment of the Draft Law on the Amendment of the Law on Electricity; the said institutions would have had to examine the anti-corruption assessment of the said draft law carried out by other state establishments, inter alia the Special Investigation Service, if such an assessment had been carried out. It has been mentioned that neither the Law on the Procedure of Drafting Laws and Other Normative Legal Acts nor the Law on Prevention of Corruption provided as to how the institution drafting or passing the draft law had to formalise the carried out anti-corruption assessment of the legal act.

It has also been mentioned that, in the Note on the Base Assessment of the Impact of the Draft Law on the Amendment of the Law on Electricity submitted to the Government, the Ministry of Economy, the drafter of the Draft Law on the Amendment of the Law on Electricity, indicated that upon the adoption of this law a negative impact was not anticipated and that an enlarged assessment of the draft decision was not needed. Such a conclusion of the Ministry of Economy inter alia means that the Ministry of Economy, in accordance with the then valid laws, did carry out the anti-corruption assessment. The mere fact that the anti-corruption assessment material was not submitted to the Government does not constitute grounds to maintain that the Ministry of Economy failed to carry out the anti-corruption assessment of the Draft Law on the Amendment of the Law on Electricity in the manner established in the then valid Law on the Procedure of Drafting Laws and Other Normative Legal Acts, the Law on Prevention of Corruption, and the Methodology approved by Item 1 of the Government resolution No. 276 of 26 February 2003.

It has also been mentioned that, by its resolution No. 711 of 9 June 2004, the Government assented to the Draft Law on the Amendment of the Law on Electricity submitted by the Minister of Economy, which was supplemented with the explanatory note to this draft law signed by the Minister of Economy; in the explanatory note it was inter alia pointed out that “upon the adoption of the submitted draft law, there should not emerge any negative consequences”. Consequently, there are no grounds to maintain that the Government, by passing resolution No. 711 of 9 June 2004, assented to the Draft Law on the Amendment of the Law on Electricity which had not been assessed from the point of view of anti-corruption.

It has also been mentioned that from the shorthand records of the sitting of the Seimas as well as from other material it is clear that, in the course of the consideration and adoption of Draft Law on the Amendment of the Law on Electricity No. IXP-3602 at the Seimas, there were no doubts expressed concerning the fact that upon the adoption of the Draft Law on the Amendment of the Law on Electricity there would be created conditions for the emergence and spread of corruption.

14. Taking account of the arguments set forth, one is to draw a conclusion that the Law on the Amendment of the Law on Electricity, according to the procedure of its adoption, is not in conflict with Paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

III

On the compliance of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

1. It has been mentioned that Paragraph 3 of Article 43 “Setting the Price Caps for Transmission, Distribution, Public Supply Services and Public Electricity” of the Law on Electricity (wording of 1 July 2004), which is disputed in the constitutional justice case at issue, prescribed:

3. Setting the price caps for the transmission, distribution and public supply services:

1) provision shall be made for required expenditure for the purchase, transmission, distribution and supply of electricity (including electricity cost recovery), expenditure for the network development, reconstruction and maintenance works necessary for carrying out reliable, safe and qualitative operation, as well as expenditure incurred in the course of provision of the services which meet public interests, and receipt of normative profit shall be secured;

2) guarantees shall be provided for recovery of the service provider’s expenditures related to the accumulation and employment of the capital borrowed for the licensed activities under market conditions, irrespective of the service provider’s capital structure and way of capital accumulation. The service provider’s capital structure, equity and borrowed capital, the conditions of capital accumulation and employment shall be established and calculated according to the service provider’s financial accounts and the projections of changes in the structure of capital presented by the service provider;

3) account shall be taken of the value of the assets used by the service provider in the licensed activities, which is established on the basis of the service provider’s financial accounts;

4) regard shall be paid to the service provider’s asset depreciation or amortisation rates which are established in accordance with the procedure laid down in the Law on Profit Tax and are coordinated with the Commission;

5) each year of the regulation period the normative profit rate calculated on the value of the assets used by the service provider in the licensed activities shall be not less than the weighted arithmetic average of the annual percentage interest rate at 10-year maturity Government securities auctions held during the last 36 calendar months, increased by 3 percentage points.”

2. The group of Members of the Seimas, the petitioner, inter alia requests the investigation into whether Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law. According to the petitioner, by having entrenched in the said paragraph of Article 43 of the Law on Electricity (wording of 1 July 2004) the pricing under which, while calculating the price caps for the transmission, distribution and public supply services, account had to be taken of the value of the assets used by the service provider in the licensed activities, preconditions were created for the enterprises themselves to unreasonably exert influence upon the price of electricity.

3. Thus, from the arguments of the petitioner’s request it is clear that the petitioner had doubts as regards the compliance of not entire Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) with the Constitution, but only as regards the following provisions of this paragraph: “Setting the price caps for the transmission, distribution and public supply services: <...> 3) account shall be taken of the value of the assets used by the service provider in the licensed activities, which is established on the basis of the service provider’s financial accounts; <...> 5) each year of the regulation period the normative profit rate calculated on the value of the assets used by the service provider in the licensed activities shall be not less than the weighted arithmetic average of the annual percentage interest rate at 10-year maturity Government securities auctions held during the last 36 calendar months, increased by 3 percentage points.”

4. It has been mentioned that, under the legal regulation laid down in Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004), while setting the price caps for the transmission, distribution and public supply services, inter alia:

the value of the assets used by the service provider in the licensed activities is established on the basis of the service provider’s financial accounts;

the normative profit rate is calculated on the value of the assets used by the service provider in the licensed activities;

the upper limit of the normative profit rate is not established.

5. It has been mentioned that Article 4 of the Law on the Amendment of Articles 2, 5, 6, 43, 44 and 48 of the Law on Electricity changed the legal regulation laid down in Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004), inter alia the provisions thereof which are disputed in the constitutional justice case at issue:

Item 2 of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) was recognised as no longer valid (Paragraph 1 of Article 4);

the former Items 3, 4 and 5 of Paragraph 3 of Article 43 became Items 2, 3 and 4, respectively (Paragraph 2 of Article 4);

Item 2 (wording of 19 March 2009) of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) entrenched that, while setting the price caps for the transmission, distribution and public supply services, inter alia “account shall be taken of the value of the assets used by the service provider in the licensed activities, which is assessed and approved by the Commission according to the principles, prepared by the Commission and approved by the Government, for establishment of the value of the assets used by the service provider in the licensed activities” (Paragraph 3 of Article 4);

Item 4 (wording of 19 March 2009) of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) entrenched that, while setting the price caps for the transmission, distribution and public supply services, inter alia “each year of the regulation period the normative profit rate calculated on the value of the assets used by the service provider in the licensed activities shall be not less than the weighted arithmetic average of the annual percentage interest rate at 10-year maturity Government securities auctions held during the last 36 calendar months, but which is not higher than 5 percent” (Paragraph 4 of Article 4).

As mentioned, under the legal regulation laid down in Paragraph 3 (wording of 19 March 2009) of Article 43 of the Law on Electricity (wording of 1 July 2004), while setting the price caps for the transmission, distribution and public supply services, inter alia:

the value of the assets used by the service provider in the licensed activities is assessed and approved by the National Control Commission for Prices and Energy;

the normative profit rate was calculated on the value of the assets used by the service provider in the licensed activities;

the upper limit of the normative profit rate is established.

6. It has also been mentioned that, while comparing the legal regulation laid down in Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) with the one laid down in Paragraph 3 (wording of 19 March 2009) of Article 43 of this law (wording of 1 July 2004), it is clear that, under Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004), the value of the assets used by the service provider in the licensed activities was established on the basis of the service provider’s financial accounts, the normative profit rate was calculated on the value of the assets used by the service provider in the licensed activities, and the upper limit of the normative profit rate was not established, whereas, under Paragraph 3 (wording of 19 March 2009) of Article 43 of the Law on Electricity (wording of 1 July 2004), the value of the assets used by the service provider in the licensed activities is assessed and approved by the National Control Commission for Prices and Energy according to the principles, prepared by the Commission and approved by the Government, for establishment of the value of the assets used by the service provider in the licensed activities, the normative profit rate is calculated on the value of the assets used by the service provider in the licensed activities, and the upper limit of the normative profit rate is established.

Therefore, the disputed legal regulation entrenched in the provisions of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) was changed in essence.

7. Paragraph 4 of Article 69 of the Law on the Constitutional Court provides that the annulment of the disputed legal act shall be grounds to adopt a decision to dismiss the instituted legal proceedings.

In its acts the Constitutional Court has held more than once that the formula “shall be grounds <...> to dismiss the instituted legal proceedings” of Paragraph 4 of Article 69 of the Law on the Constitutional Court is to be construed as establishing the powers of the Constitutional Court, in cases when not courts, but other subjects specified in Article 106 of the Constitution apply to the Constitutional Court, to dismiss the instituted legal proceedings upon taking account of the circumstances of the case at issue. The Constitutional Court has also held that the same can be said as regards the cases when the disputed legal act (part thereof) was not repealed, however, the legal regulation established therein was changed (Constitutional Court ruling of 4 March 2003, decision of 14 March 2006, rulings of 30 March 2006, 14 April 2006 and 21 September 2006, decision of 28 May 2007, rulings of 22 June 2009, 31 March 2010 and 28 May 2010).

8. Taking account of the arguments set forth, the part of the constitutional justice case at issue subsequent to the petition of the group of Members of the Seimas, the petitioner, requesting to investigate whether the provisions “Setting the price caps for the transmission, distribution and public supply services: <...> 3) account shall be taken of the value of the assets used by the service provider in the licensed activities, which is established on the basis of the service provider’s financial accounts; <...> 5) each year of the regulation period the normative profit rate calculated on the value of the assets used by the service provider in the licensed activities shall be not less than the weighted arithmetic average of the annual percentage interest rate at 10-year maturity Government securities auctions held during the last 36 calendar months, increased by 3 percentage points” of Paragraph 3 of Article 43 of the Law on Electricity (wording of 1 July 2004) were not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law, is to be dismissed.

IV

On the compliance of the Law on Electricity (wording of 1 July 2004) with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

1. The group of Members of the Seimas, the petitioner, requests the investigation into the compliance of the Law on Electricity (wording of 1 July 2004) with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law in the following two aspects:

in the aspect that, according to the petitioner, in the cases when customers’ equipment is being connected to the distribution network, the law does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the monopolist that exploits the said objects, i.e. into the property of the energy enterprise;

in the aspect that, according to the petitioner, the law does not establish the duty to connect, free of charge, customers’ equipment to the distribution network.

2. Article 46 of the Constitution inter alia prescribes: “The State shall regulate economic activity so that it serves the general welfare of the Nation” (Paragraph 3); “The law shall prohibit monopolisation of production and the market and shall protect freedom of fair competition” (Paragraph 4); “The State shall defend the interests of the consumer” (Paragraph 5). In the context of the constitutional justice case at issue the following needs to be noted:

2.1. The Constitutional Court has held more than once that the principles enshrined in Article 46 of the Constitution constitute a whole, which is the constitutional basis of the economy of the country, therefore, the provisions of all paragraphs of this article are interrelated and supplement each other; there is a balance between these principles, each of them is interpreted without denying the other principles, and that if a legal norm which is in a certain paragraph of this article is violated, the legal norms laid down in the other paragraphs of this article are violated as well, or preconditions are created for their violation.

2.2. In the context of the constitutional justice case at issue it needs to be noted that the Constitutional Court has held that the state, while regulating the economic activity, may not establish any such legal regulation whereby unfavourable and unequal economic conditions are established to economic entities, their initiative is restricted and opportunities for its manifestation are not created (inter alia the Constitutional Court rulings of 5 March 2008, 2 March 2009 and 29 April 2009).

In this context it needs to be noted that, as it has been held by the Constitutional Court more than once, freedom of economic activity is not absolute (Constitutional Court rulings of 20 April 1995, 13 May 2005, 31 May 2006 and 2 March 2009); freedom of individual economic activity may be limited when it is necessary to defend the interests of the consumers and to protect fair competition and other values consolidated in the Constitution (Constitutional Court rulings of 6 October 1999, 13 May 2005 and 21 January 2008), however, as it has been held more than once in the acts of the Constitutional Court, this must be done by means of a law and not by a substatutory legal act.

2.3. When systemically construing the legal regulation entrenched in Paragraph 3 of Article 46 of the Constitution (inter alia relating it to the legal regulation entrenched in Paragraph 1 of the same article), the Constitutional Court has held more than once that the state, while regulating the economic activity, has to follow the principle of coordination of interests of the person and society and has to guarantee the interests of both the private person (a subject of economic activity) and the society.

2.4. While construing the provisions of Paragraph 4 of Article 46 of the Constitution, the Constitutional Court has held more than once that the provision “the law shall prohibit monopolisation of production and the market” means that it is prohibited to introduce a monopoly, i.e. it is prohibited to grant, by law, an economic entity exceptional rights to operate in a certain sector of economy due to which this sector would become monopolised, however, the prohibition of monopolisation of production and the market does not mean that it is prohibited, under certain circumstances, to state in the law the existence of a monopoly in a certain sector of economy or to reflect factual monopolistic relations otherwise and to regulate them accordingly, i.e. to create legal preconditions in order to apply corresponding requirements to a monopolist (including inter alia limitation on establishment of discriminatory prices, state regulation of the size of prices and tariffs for the goods of the monopolistic market, establishment of the requirements for the quality of these goods as well as control implemented by the state institutions on how the economic entities follow the established requirements) while protecting the rights and legitimate interests of other economic entities and consumers.

2.5. While construing Paragraph 5 of Article 46 of the Constitution, the Constitutional Court has held more than once that the provision “the State shall defend the interests of the consumer” implies that legal norms ought to establish various measures of protection of the interests of consumers, that state institutions ought to control economic entities how the latter are following such measures, and, if the production and the market are virtually concentrated in the area of certain economic relations, a duty falls on the institutions of the state power to establish an additional legal regulation which would ensure the protection of the interests of the consumers (Constitutional Court rulings of 18 October 2000, 17 March 2003, 26 January 2004, 5 March 2008 and 2 March 2009). The constitutional duty of the state to defend the interests of consumers must be implemented first of all by the legislator establishing the general and, taking account of the concrete particularity of the regulated economic activity, special measures of protection and defence of the rights and interests of consumers; the imperative of guarantee of efficient protection of the rights and interests of consumers also implies that the legislator must establish such legal regulation whereby preconditions would be created for each consumer to receive electricity under non-discriminatory conditions and that electricity would be supplied to all consumers in a safe and reliable manner; establishment of the limits of prices is one of the ways to defend the interests of consumers, it is inter alia to be applied also in the sphere of protection and defence of the rights and interests of electricity consumers; the legislator has the duty to define, by means of a law, the criteria for establishment of the limits of prices of electricity (Constitutional Court ruling of 2 March 2009).

2.6. From the imperatives consolidated in Article 46 of the Constitution that the state shall regulate the economic activity so that it serves the general welfare of the Nation (Paragraph 3) and that the state shall defend the interests of consumers (Paragraph 5), a duty stems for the legislator to define, by means of a law, not only the criteria for establishment of the limits of prices of electricity, but also those of services, inter alia the criteria for establishment of the tariffs for connecting the electricity equipment to the distribution network, so that the said tariffs could be differentiated according to the customers who are objectively in different positions, also by taking account of the services required by the customers, inter alia the required costs related to the connection of customers’ equipment to the network, as well as by taking account of the fact whether a property contribution has been made by the customers when connecting their equipment to the electricity network. Such criteria must be clear and reasonable, so that, while establishing tariffs for such services, no preconditions would be created for abuse and, thus, violations of the rights and interests of electricity consumers. From the imperatives of protection of the rights of consumers, which are entrenched in Paragraph 5 of Article 46 of the Constitution, a duty arises for the legislator to establish also such legal regulation which would ensure efficient protection of the rights of electricity consumers.

3. The imperatives stemming from Article 46 of the Constitution are also inseparable from Article 23 thereof (Constitutional Court ruling of 27 March 2009). The Constitutional Court has held more than once that freedom of economic activity and initiative are grounded on the innate human freedom and innate right to possess property, thus, a person’s constitutional right to property, which is enshrined in Article 23 of the Constitution, is an essential (necessary) condition for implementation of freedom of individual economic activity; if a person’s right of ownership is limited, individual economic freedom is limited as well (Constitutional Court ruling of 2 March 2009).

In its acts the Constitutional Court has held more than once that Article 23 (inter alia Paragraphs 1 and 2 thereof) of the Constitution entrenches the inviolability and protection of property; laws should protect the rights of ownership of all owners.

While construing the provisions of Article 23 of the Constitution, the Constitutional Court has also held more than once that the inviolability of property and protection of the rights of ownership inter alia mean that the owner, as the holder of subjective rights to property, has the right to require that other persons not violate his rights, as well as that the state has a duty to ensure the defence and protection of the rights of ownership. The rights of ownership are protected by legal acts of supreme juridical power, i.e. by laws. All the remaining legal acts in the area of regulation of ownership rights must be in conformity with laws (Constitutional Court rulings of 13 December 1993, 15 July 1994, 18 April 1996 and 23 February 2000).

4. It needs to be noted that constitutional values upon which the national economy is grounded are tightly related with other constitutional values (Constitutional Court ruling of 13 May 2005), inter alia the constitutional principle of a state under the rule of law (Constitutional Court rulings of 4 December 2008 and 2 March 2009).

The constitutional principle of a state under the rule of law is related with the constitutional principle of separation of powers, inter alia entrenched in Paragraph 2 of Article 5 of the Constitution, therefore, the Seimas does not have the right to commission the Government or any other institution to implement the constitutional competence of the Seimas (Constitutional Court rulings of 14 January 2002 and 2 March 2009).

5. The petitioner doubts whether the Law on Electricity (wording of 1 July 2004), to the extent that, according to the petitioner, in the cases when customers’ equipment is being connected to the distribution network, it does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the monopolist that exploits the said objects, i.e. into the property of the energy enterprise, although, under the Constitution, such legal regulation must be established in the Law on Electricity (wording of 1 July 2004), inter alia is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law. Thus, the petitioner does not dispute the legal regulation entrenched in the Law on Electricity (wording of 1 July 2004), but it disputes something that is not established in this law, which, however, in the opinion of the petitioner, ought to be established therein; in this case it is the issue of legislative omission that is raised.

6. The Constitutional Court has held that a legal gap, inter alia legislative omission, always means that the legal regulation of corresponding social relations is established neither explicitly, nor implicitly, neither in the said legal act (part thereof), nor any other legal acts, even though there exists a need for legal regulation of these social relations, while the said legal regulation, in case of legislative omission, must be established, while heeding the imperatives of the consistency and inner uniformity of the legal system stemming from the Constitution and taking account of the content of these social relations, precisely in that legal act (precisely in that part thereof), since this is required by a certain legal act of higher power, inter alia the Constitution itself (Constitutional Court decisions of 8 August 2006, 5 November 2008, rulings of 2 March 2009 and 11 December 2009).

7. In this context it needs to be noted that the relations related with electricity are regulated by the Law on Electricity (wording of 1 July 2004 with subsequent supplements and amendments) as well as, to a certain extent, by the Law on Energy (wording of 16 May 2002 with subsequent amendments and supplements).

8. On 16 May 2002, the Seimas adopted the Republic of Lithuania Law on Energy which came into force (with the exception of Paragraphs 2, 3 and 4 of Article 20 thereof) on 1 July 2002 (Article 29). This law regulates general activities of the energy sector, the basic principles of development and management of the energy sector, and efficient use of energy and energy resources; peculiarities of activities of individual energy sectors and of relations between energy enterprises and consumers shall be established by other laws (Paragraph 1 of Article 1). Thus, this law (wording of 16 May 2002) in respect of the disputed Law on Electricity (wording of 1 July 2004) is general (lex generalis).

9. Paragraph 1 of Article 28 of the Law on Energy (wording of 16 May 2002) prescribed: “Energy enterprises shall buy out or operate, under the procedure prescribed by the Government or an institution authorised by it, energy objects installed at the expense of the customers (legal and natural persons) for common use prior to the entry of this law into force and intended for transmission and/or distribution of energy.”

In this context it needs to be mentioned that, under Paragraph 12 of Article 2 of the Law on Energy (wording of 16 May 2002), energy objects mean inter alia power plants, electricity networks and the associated equipment.

10. While construing the legal regulation entrenched in Paragraph 1 of Article 28 of the Law on Energy (wording of 16 May 2002), in the context of the constitutional justice case at issue one is to note that:

energy enterprises buy out or operate, under the procedure prescribed by the Government or an institution authorised by it, energy objects installed at the expense of the customers (legal and natural persons) for common use prior to the entry of the Law on Energy (wording of 16 May 2002) into force and intended for transmission and/or distribution of energy;

the said provisions did not and do not regulate the relations related with the obligation of energy enterprises, in the cases when customers’ equipment is being connected to the distribution network, to settle accounts with the customers who have expressed their wish to transfer the energy objects installed at their expense into the property of the energy enterprises.

11. When the Seimas adopted, on 6 November 2008, the Republic of Lithuania Law on the Amendment and Supplement of Articles 2, 4, 6, 16, 17, 21, 27, 28 and Annex of the Law on Energy and the Supplement thereof with Article 71, which, save Article 6, came into force on 1 January 2009, Article 28 of the Law on Energy (wording of 16 May 2002) was supplemented, however, the legal regulation, under which energy enterprises buy out or operate, under the procedure prescribed by the Government or an institution authorised by it, energy objects installed at the expense of the customers (legal and natural persons) for common use prior to the entry of the Law on Energy (wording of 16 May 2002) into force and intended for transmission and/or distribution of energy, remained unchanged.

12. It has been mentioned that the petitioner requests the investigation into whether the Law on Electricity (wording of 1 July 2004), to the extent that, according to the petitioner, in the cases when customers’ equipment is being connected to the distribution network, it does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the monopolist that exploits the said objects, i.e. into the property of the energy enterprise, is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

In this context it needs to be noted that Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004) prescribes: “The tariffs for the connection of customers’ equipment to the network shall be approved by the Commission according to the principles of non-discrimination of customers, network development and efficient use of electricity”, however, the Law on Electricity (wording of 1 July 2004) does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the energy enterprise.

13. It has been mentioned that, on 15 July 2009, the Seimas adopted the Law on the Supplement and Amendment of Articles 42 and 44 of the Law on Electricity, which, with the exception of Paragraph 2 of Article 3 thereof, came into force on 1 August 2009 (Paragraph 1 of Article 3). By means of Article 1 of the said law, Article 42 “Regulation of Prices” of the Law on Electricity (wording of 1 July 2004) was supplemented with Paragraph 4: “The customers shall cover 20 percent of the required costs related to the connection of customers’ equipment, which are incurred by the distribution network operators who carry out the service of connecting customers’ equipment. The remaining part of these costs shall constitute the distribution network operator’s expenditure on network development.” It needs to be noted that the legal regulation laid down in Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004) was not changed.

In this context it needs to be noted that Item 6 of Article 21 of the Law on Electricity (wording of 1 July 2004) inter alia provides that the distribution system operator must connect the customers’ equipment, located in the territory specified in the license for distribution activity, to the distribution network.

14. Thus, under the legal regulation established in Paragraph 4 (wording of 15 July 2009) of Article 42 of the Law on Electricity (wording of 1 July 2004), which is to be construed in conjunction with the legal regulation established in Item 6 of Article 21 and Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004):

the distribution system operator must connect the customers’ equipment, located in the territory specified in the license for distribution activity, to the distribution network;

the customers shall cover 20 percent of the required costs related with the connection of customers’ equipment, which are incurred by the distribution network operators who carry out the service of connecting customers’ equipment;

remaining part of the required costs (i.e. 80 percent) of the connection service constitutes the distribution network operator’s expenditure on network development.

It needs to be noted that the provision of Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004), whereby the tariffs for the connection of customers’ equipment to the network are approved by the National Control Commission for Prices and Energy according to the principles of non-discrimination of customers, network development and efficient use of electricity, has remained unchanged.

15. In the context of the constitutional justice case at issue it needs to be noted that, having supplemented, by means of the Law on the Supplement and Amendment of Articles 42 and 44 of the Law on Electricity, adopted by the Seimas on 15 July 2009, Article 42 of the Law on Electricity (wording of 1 July 2004) with Paragraph 4, the Law on Electricity (wording of 15 July 2009) establishes already a different regulation of the relations of settlement of accounts between customers and energy enterprises regarding the connection of customers’ equipment to the electricity distribution network than the Law on Electricity (wording of 1 July 2004).

It has been mentioned that the petitioner grounds the non-compliance of the Law on Electricity (wording of 1 July 2004) with the Constitution on the fact that, according to the petitioner, in the cases when customers’ equipment is being connected to the distribution network, the Law on Electricity (wording of 1 July 2004) does not contain any legal regulation which should establish the obligation to settle accounts with the customers who have expressed their wish to transfer the infrastructure objects installed at their expense into the property of the monopolist that exploits the said objects, i.e. into the property of the energy enterprise.

Consequently, the legal regulation laid down in the Law on Electricity (wording of 1 July 2004), which, to the indicated extent, is disputed by the petitioner, compared with the one laid down in the Law on Electricity (wording of 15 July 2009), in the aspect disputed by the petitioner, was changed in essence.

16. Paragraph 4 of Article 69 of the Law on the Constitutional Court provides that the annulment of the disputed legal act shall be grounds to adopt a decision to dismiss the instituted legal proceedings.

It has been mentioned that in its acts the Constitutional Court has held more than once that the formula “shall be grounds <...> to dismiss the instituted legal proceedings” of Paragraph 4 of Article 69 of the Law on the Constitutional Court is to be construed as establishing the powers of the Constitutional Court, in cases when not courts, but other subjects specified in Article 106 of the Constitution apply to the Constitutional Court, to dismiss the instituted legal proceedings upon taking account of the circumstances of the case at issue. The Constitutional Court has also held that the same can be said as regards the cases when the disputed legal act (part thereof) was not repealed, however, the legal regulation established therein was changed (Constitutional Court ruling of 4 March 2003, decision of 14 March 2006, rulings of 30 March 2006, 14 April 2006 and 21 September 2006, decision of 28 May 2007, rulings of 22 June 2009, 31 March 2010 and 28 May 2010).

17. Taking account of the arguments set forth, the part of this constitutional justice case, subsequent to the petition of the group of Members of the Seimas, the petitioner, requesting to investigate whether the Law on Electricity (wording of 1 July 2004), to the extent that, in the cases when customers’ equipment is being connected to the distribution network, it does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the energy objects installed at their expense into the property of the energy enterprise, is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law, is to be dismissed.

18. It has been mentioned that the group of Members of the Seimas, the petitioner, doubts whether the Law on Electricity (wording of 1 July 2004), inter alia to the extent that, according to the petitioner, it does not establish the obligation to connect, free of charge, customers’ equipment to the distribution network, although, under the Constitution, such legal regulation must be established in the Law on Electricity (wording of 1 July 2004), is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law. Thus, the petitioner does not dispute the legal regulation entrenched in the Law on Electricity (wording of 1 July 2004), but it disputes something that is not established in this law, which, however, in the opinion of the petitioner, ought to be established therein; in this case it is the issue of legislative omission that is raised.

19. It has also been mentioned that a legal gap, inter alia legislative omission, always means that the legal regulation of corresponding social relations is established neither explicitly, nor implicitly, neither in the said legal act (part thereof), nor any other legal acts, even though there exists a need for legal regulation of these social relations, while the said legal regulation, in the case of legislative omission, must be established, while heeding the imperatives of the consistency and inner uniformity of the legal system stemming from the Constitution and taking account of the content of these social relations, precisely in that legal act (precisely in that part thereof), since this is required by a certain legal act of higher power, inter alia the Constitution itself.

20. While deciding whether the Law on Electricity (wording of 1 July 2004), to the extent indicated by the petitioner, is not in conflict with the Constitution, it is necessary to disclose how laws, inter alia the Law on Energy (wording of 16 May 2002) and the Law on Electricity (wording of 1 July 2004) regulated the relations related with the connection of customers’ equipment to the electricity distribution network.

20.1. The Law on Energy (wording of 16 May 2002) inter alia prescribes:

within the territory of their operation the energy enterprises shall connect, according to the established procedure, the energy consuming equipment of the energy customers to the operating energy distribution networks; the connection expenditures shall be covered by the corresponding customers according to the set tariffs; the connection work shall be carried out under a mandatory contract between the energy enterprise and energy customer (Paragraph 3 of Article 12);

the National Control Commission for Prices and Energy shall approve the tariffs for the connection of energy objects (networks, systems and equipment) (Item 4 of Paragraph 8 of Article 17);

the nomenclature and principles of regulation of state regulated prices shall be laid down in energy sector laws (Paragraph 1 of Article15).

20.2. It has been mentioned that one of the energy sector laws, the Law on Electricity (wording of 1 July 2004), inter alia prescribes:

the customer means any person whose equipment is connected inter alia to the distribution network and who purchases electricity for consumption (Paragraph 35 of Article 2);

the National Control Commission for Prices and Energy shall be responsible for ensuring non-discrimination of customers and provision of all customers with the services of established quality (Paragraph 2 of Article 6);

the distribution system operator must connect the customers’ equipment, located in the territory specified in the license for distribution activity, to the distribution network (Item 6 of Article 21).

21. Taking account of the aforementioned provisions of the Law on Energy (wording of 16 May 2002) and the Law on Electricity (wording of 1 July 2004), in the context of the constitutional justice case at issue it needs to be held that energy enterprises must connect the equipment of the energy (inter alia electricity) consumers to the electricity distribution network; the connection of customers’ equipment to the energy distribution network is paid for by the customers according to the tariffs set by the National Control Commission for Prices and Energy.

22. It has been mentioned that Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004) prescribes: “The tariffs for the connection of customers’ equipment to the network shall be approved by the Commission according to the principles of non-discrimination of customers, network development and efficient use of electricity.”

Thus, Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004) establishes only the principles of general nature (non-discrimination of customers, network development and efficient use of electricity), which must be followed by the National Control Commission for Prices and Energy while approving the tariffs for the connection of customers’ equipment to the network.

23. It needs to be noted that neither Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004), nor other articles (paragraphs thereof) entrench the criteria for establishment of the tariffs for the connection of customers’ equipment to the network, which must be followed by the National Control Commission for Prices and Energy while approving the tariffs for the connection of customers’ equipment to the network.

24. It has been mentioned that from the imperatives entrenched in Paragraphs 3 and 5 of Article 46 of the Constitution a duty arises for the legislator to define, by means of a law, not only the criteria for establishment of the limits of prices of electricity, but also those of services, inter alia the criteria for establishment of the tariffs for the connection of electricity equipment to the distribution network, so that the said tariffs could be differentiated according to the customers who are objectively in different positions, also by taking account of the services required by the customers, inter alia by taking account of the required costs related to the connection of customers’ equipment to the network, as well as by taking account of the fact whether a property contribution has been made by the customers when connecting their equipment to the electricity network.

25. It needs to be held that having not entrenched in Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004) the criteria for establishment of the tariffs for the connection of customers’ equipment to the network, which must be followed by the National Control Commission for Prices and Energy while approving the tariffs for the connection of customers’ equipment to the network, so that the said tariffs could be differentiated according to the customers who are objectively in different positions, also by taking account of the services required by the customers, inter alia by taking account of the required costs related to the connection of customers’ equipment to the network, as well as by taking account of the fact whether a property contribution has been made by the customers when connecting their equipment to the electricity network, one deviates from the imperatives stemming from Paragraphs 3 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

26. Taking account of the arguments set forth, one is to draw a conclusion that Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004), inasmuch as it does not entrench any criteria for establishment of the tariffs for the connection of customers’ equipment to the network, which ought to be followed by the National Control Commission for Prices and Energy while approving the tariffs for the connection of customers’ equipment to the network, is in conflict with Paragraphs 3 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

27. Having held that Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004), inasmuch as it does not entrench any criteria for establishment of the tariffs for the connection of customers’ equipment to the network, which must be followed by the National Control Commission for Prices and Energy while approving the tariffs for the connection of customers’ equipment to the network, is in conflict with Paragraphs 3 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law, the Constitutional Court will not investigate whether Paragraph 3 of Article 42 of the Law on Electricity (wording of 1 July 2004) is not in conflict with Paragraph 4 of Article 46 of the Constitution.

28. It has been mentioned that, on 15 July 2009, the Seimas adopted the Law on the Supplement and Amendment of Articles 42 and 44 of the Law on Electricity, which, save Paragraph 2 of Article 3 thereof, came into force on 1 August 2009 (Paragraph 1 of Article 3). By means of Article 1 of the said law, Article 42 “Regulation of Prices” of the Law on Electricity (wording of 1 July 2004) was supplemented with Paragraph 4: “The customers shall cover 20 percent of the required costs related to the connection of customers’ equipment, which are incurred by the distribution network operators who carry out the service of connecting customers’ equipment. The remaining part of these costs shall constitute the distribution network operator’s expenditure on network development.”

29. While construing the legal regulation laid down in Paragraph 4 (wording of 15 July 2009) of Article 42 of the Law on Electricity (wording of 1 July 2004), it needs to be held that:

20 percent of the required costs related with the connection of customers’ equipment, which are incurred by the distribution network operators who carry out the service of connecting customers’ equipment, are covered by the customers whose equipment is being connected to the electricity distribution network;

the tariffs for the connection of customers’ equipment to the network directly depend on what amount of the costs related to the connection of customers’ equipment and incurred by the distribution network operators who carry out the service of connecting customers’ equipment, is regarded as a required one.

Thus, Paragraph 4 (wording of 15 July 2009) of Article 42 of the Law on Electricity (wording of 1 July 2004) provides that the customers whose equipment is being connected to the electricity distribution network must cover 20 percent of the required costs related with the connection of customers’ equipment, which are incurred by the distribution network operators who carry out the service of connecting customers’ equipment, however, the criteria, on the basis of which the amount of the required costs, incurred by the distribution network operators who carry out the service of connecting customers’ equipment, is established, inter alia, so that the said amount could be differentiated according to the customers who are objectively in different positions, also by taking account of the services required by the customers, as well as by taking account of the property contribution made by the customers when connecting their equipment to the electricity network, are not set down.

30. It has been mentioned that from the imperatives entrenched in Paragraphs 3 and 5 of Article 46 of the Constitution a duty arises for the legislator to define, by means of a law, not only the criteria for establishment of the limits of electricity prices, but also those of services, inter alia the criteria for establishment of the tariffs for the connection of electricity equipment to the distribution network, so that the said tariffs could be differentiated according to the customers who are objectively in different positions, also by taking account of the services required by the customers, inter alia by taking account of the required costs related to the connection of customers’ equipment to the network, as well as by taking account of the fact whether a property contribution has been made by the customers when connecting their equipment to the electricity network.

It has also been mentioned that, under the constitutional principle of a state under the rule of law, the Seimas does not have the right to commission the Government or any other institution to implement the constitutional competence of the Seimas.

31. It needs to be held that, by entrenching in Paragraph 4 (wording of 15 July 2009) of Article 42 of the Law on Electricity (wording of 1 July 2004) that all customers must cover 20 percent of the required costs related with the connection of customers’ equipment, which are incurred by the distribution network operators who carry out the service of connecting customers’ equipment, however, without establishing any criteria, on the basis of which the amount of the required costs, incurred by the distribution network operators who carry out the service of connecting customers’ equipment, is established, inter alia, so that the said amount could be differentiated according to the customers who are objectively in different positions, also by taking account of the services required by the customers, as well as by taking account of the fact whether a property contribution has been made by the customers when connecting their equipment to the electricity network, one deviates from the imperatives stemming from Paragraphs 3 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

32. Taking account of the arguments set forth, one is to draw a conclusion that Paragraph 4 (wording of 15 July 2009) of Article 42 of the Law on Electricity (wording of 1 July 2004), inasmuch as it does not establish any criteria, by following which the amount of the required costs incurred by the distribution network operators who carry out the service of connecting customers’ equipment is established, is in conflict with Paragraphs 3 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 54, 55, 56 and 69 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania has passed the following

ruling:

1. To recognise that the Republic of Lithuania Law on the Amendment of the Law on Electricity (Official Gazette Valstybės žinios, 2004, No. 107-3964), according to the procedure of its adoption, is not in conflict with the Constitution of the Republic of Lithuania.

2. To recognise that Paragraph 3 of Article 42 of the Republic of Lithuania Law on Electricity (wording of 1 July 2004; Official Gazette Valstybės žinios, 2004, No. 107-3964), inasmuch as it does not entrench any criteria for establishment of the tariffs for the connection of customers’ equipment to the network, which ought to be followed by the National Control Commission for Prices and Energy while approving the tariffs for the connection of customers’ equipment to the network, is in conflict with Paragraphs 3 and 5 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

3. To recognise that Paragraph 4 (wording of 15 July 2009; Official Gazette Valstybės žinios, 2009, No. 91-3912) of Article 42 of the Republic of Lithuania Law on Electricity (wording of 1 July 2004; Official Gazette Valstybės žinios, 2004, No. 107-3964), inasmuch as it does not establish any criteria, by following which the amount of the required costs incurred by the distribution network operators who carry out the service of connecting customers’ equipment is established, is in conflict with Paragraphs 3 and 5 of Article 46 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.

4. To dismiss the part of the case subsequent to the petition of the group of Members of the Seimas of the Republic of Lithuania, the petitioner, requesting to investigate whether the provisions “Setting the price caps for the transmission, distribution and public supply services: <...> 3) account shall be taken of the value of the assets used by the service provider in the licensed activities, which is established on the basis of the service provider’s financial accounts; <...> 5) each year of the regulation period the normative profit rate calculated on the value of the assets used by the service provider in the licensed activities shall be not less than the weighted arithmetic average of the annual percentage interest rate at 10-year maturity Government securities auctions held during the last 36 calendar months, increased by 3 percentage points” of Paragraph 3 of Article 43 of the Republic of Lithuania Law on Electricity (wording of 1 July 2004; Official Gazette Valstybės žinios, 2004, No. 107-3964) were not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.

5. To dismiss the part of the case subsequent to the petition of the group of Members of the Seimas of the Republic of Lithuania, the petitioner, requesting to investigate whether the Republic of Lithuania Law on Electricity (wording of 1 July 2004; Official Gazette Valstybės žinios, 2004, No. 107-3964), to the extent that, in the cases when customers’ equipment is being connected to the distribution network, it does not establish the obligation to settle accounts with the customers who have expressed their wish to transfer the energy objects installed at their expense into the property of the energy enterprise, is not in conflict with Paragraphs 4 and 5 of Article 46 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.

This ruling of the Constitutional Court is final and not subject to appeal.

The ruling is promulgated in the name of the Republic of Lithuania.

Justices of the Constitutional Court: Armanas Abramavičius
                                                                      Toma Birmontienė
                                                                      Pranas Kuconis
                                                                      Kęstutis Lapinskas
                                                                      Zenonas Namavičius
                                                                      Ramutė Ruškytė
                                                                      Egidijus Šileikis
                                                                      Algirdas Taminskas
                                                                      Romualdas Kęstutis Urbaitis