Compensation for lost benefits for the energy company

Table of contents:

1. Legal basis for the claim sought by the energy enterprise.

2. The Court’s findings – the claim for damages is justified.

3. The amount awarded.

Can an energy company claim damages when the consumer ceases to draw electricity, deliberately disconnecting from the grid and then joining the grid of a new energy supplier? Is compensation due if the energy consumer disconnects during the period of notice and thus before the legal termination of the contract?

Claims for lost profits are among the most difficult to prove, and thus also difficult to be pursued   in court.

The Regional  Court recognized the validity of the claim formulated by the advocate Justyna Michalak – Królicka, acting as the representative of an energy company, in a dispute with an electricity consumer. During the notice period, this customer physically and arbitrarily disconnected from the power company network and connected to the network of a new energy supplier. The court shared the plaintiff’s position, represented by attorney Justyna Michalak – Królicka, stating that the damage was lost profits resulting from the inability to sell energy during the notice period. The Regional  Court in Wrocław awarded the defendant compensation in the amount of approximately PLN 100,000. The defendant’s appeal was dismissed and the judgment of the Court of First Instance is already final and binding.

1. Basis of the claim pursued by the energy company

The claim formulated by advocate Justyna Michalak – Królicka was based on the principle of liability for damages related to non-performance of the provisions of the contract for the sale of electricity and provision of distribution services, through the unlawful termination of the contract between the parties by the electricity consumer. This unlawfulness consisted in physical disconnection from the energy supplier’s network, without observing the notice period specified in the contract.

The claim for damages was based on the principle of ‘lost profits’ (lucrum cessans).

Pursuant to the provision of art. 361 § 2 of the Civil Code, compensation for damage includes not only losses suffered by the injured party, but also benefits that could have been achieved if the damage had not happened. . In the course of the case in question, it was for the plaintiff-energy company to demonstrate that there was a normal causal relationship between the defendant’s actions and the damage (constituting lost profit).

The construction of ‘lost profits’ as an attitude for seeking compensation is an interesting issue from the point of view of judicial practice, but in the aspect of court proceedings  it remains a complicated and difficult to prove question. In contrast to the loss, which is defined as the reduction of assets or increase in liabilities, lost profits are the value of assets that did not enter the property as a result of the event causing damage and the value of liabilities that have not decreased as a result of this event. In other words, the damage associated with lost profits consists in the fact that the injured party’s assets did not increase as if it had happened had the event, the other party’s liability is connected with, not occurred. 

In addition to the causal link indicated above, between the action of the defendant and lost profit, the plaintiff was obliged to demonstrate , i.e. prove the amount of loss constituting lost profits. There is therefore no doubt that demonstrating that a party has suffered damage in the form of lost profits is a much more complicated issue than demonstrating that a party has suffered a loss. The above is primarily due to the fact that the demonstration that there has been a loss of profit is based on a comparison of the current state (related to the non-performance or improper performance of the contract by the other party) with the hypothetical state, i.e. if the contract was duly performed.

Moreover, the harm must be demonstrated by the injured person with such a high probability that it justifies the acceptance in the light of life experience that the loss of benefits has actually occurred.

These circumstances were carefully considered by the Regional  Court in the present case and acknowledged by the Court of Appeal.

2. Findings of the Court – recognition of the claim  justified

In the course of the discussed case, the Regional  Court in Wrocław, on the basis of evidence taken at the request of attorney Justyna Michalak – Królicka, acting as a representative of the energy company, shared the plaintiff’s position that all premises determining the defendant’s liability for damages in the form of lost profits have been  fulfilled.

Based on the evidence gathered in the case, the Court concluded that there was an event with which the law combines the obligation to repair the damage, the existence of the damage itself and a causal link between the event claiming damages and the damage itself.

The Regional Court in Wrocław, examining the case, fully shared the position of the plaintiff represented by the lawyer Justyna Michalak – Królicka, who pointed out the loss of lost profits, being the equivalent of unallocated electricity during the termination of the contract. The disconnection by the recipient of electricity from the network of the energy company after termination of the contract, but before the expiry of the notice period is a manifestation of improper performance of the transmission (distribution) contract. There is no doubt that also during the notice period, the parties are obliged to perform the obligations arising from its provisions.

Accordingly, it should be considered that the electricity consumer,, was obliged to collect electricity in accordance with the provisions of the contract even during the period of notice.

The binding contractual obligation relationship, in addition to the indications resulting from the Energy Law, should be assessed on the basis of art. 555 of the Civil Code, which shows that for the sale of energy it is mandatory to apply the provisions on sales, which are characterized by the equivalence of benefits, and the resulting obligation remains a continuous obligation. 

With reference to the foregoing, it should be stressed  that the submission of a declaration of intent to terminate the contract by the energy consumer does not lead to the expiry of the contractual obligation. Only after the notice period has expired can one speak of the expiry of the parties’ obligations arising from the contract they have concluded.

It should be noted, however, that the buyer’s receipt of the energy offered to him is his legal obligation arising from the necessity  of the debtor to cooperate in the performance of the energy supplied  by the energy company.

The court shared the plaintiff’s position here that the defendant’s arbitrary disconnection from the network on the eve of submitting the statement on termination of the contract, should be treated as preventing the energy company from fulfilling the obligation in the form of selling energy with the power ordered by the customer. Thus, due to the actual inability of the energy company to sell energy, there was damage as a result of improper performance of the contract by the defendant during the period of notice.

3. The amount awarded

The court fully complied with the demand of the energy company, awarding it  compensation of nearly PLN 100,000.00 from the electricity consumer. 

The court found the grounds for compensation demand indicated by the attorney of the energy company justified, indicating that the damage was lost profits due to the lack of energy sales by the energy company during the termination of the contract. This energy otherwise  would be sold  by the energy company to the defendant if the defendant company performed the contract in accordance with its provisions.

The decision made in the case in question confirms the possibility of effectively seeking compensation for lost profits in a situation where one of the parties to the contract ceases to perform its obligations before the expiry of the notice period specified in the contract.

Unlawful termination of the contract between the parties with immediate effect, without the actual period of notice constitutes  improper performance of the contract, which in turn, makes it possible to claim compensation for lost profits.

Importantly, the obligation to comply with the provisions of the contract rests not only with the party providing the given type of services (in this case the energy company), but also with the recipient who, as the contractual partner, even after termination of the contract should cooperate in its performance and allow the supplier to fulfill benefits until the end of the notice period.

Otherwise, the party obliged to provide services, ready to perform the service until the expiry of the notice period, may claim compensation for lost profits.

I encourage you to take advantage of JMK Advocate Office’s experience in seeking compensation for lost profits.