Hidroelectrica received a sanction of about 20.44 million lei (4.6 million euros) from the Competition Council (CC), together with 10 business partners, related to conclusion of cartel deals in production and sale of electricity, announces the competition authority. The investigation started in 2012.
Hidroelectrica, Elsid and Electrocarbon admitted committing the facts and received reduced fines. The total fines in this case reached 165.85 million lei (about 36.6 million euros).
The decision will help Hidroelectrica in the law suits it has have with energy traders, since it shows that those contracts were illegal, said, for Agerpres, Remus Borza, representative of Euro Insol, Hidroelectrica’s receiver.
“This decision demonstrates that the contracts are illegal, so can not constitute grounds of law. The wise guys demanded damages of 600 million euros when we terminated the contracts with them, in 2012, and the Competition Council’s decision virtually cancels any chance for them to receive any money from Hidroelectrica”, explained Remus Borza.
During the investigation, CC examined the long-term contracts concluded between Hidroelectrica and some electricity suppliers and eligible customers on the wholesale electricity market, studying the scope, market conditions, the positions held in the market, duration of contracts, the amount of energy committed through these contracts, the contractual price, the impossibility of unilateral termination on the part of the producer.
CC found that cartel deals have blocked the access for other suppliers, electricity producers and eligible consumers, leading to a slow evolution of the market during the liberalization of this sector.
Other fines of this case were received by:
- Alpiq Romindustries: 21,728 million lei (approximately 4.8 million euros)
- Alpiq Romenergie: 87.821 lei (approximately 20,000 euros)
- Alro: 21.238.719 lei (approximately 4.7 million euros)
- Electrocarbon: 864.203 lei (approximately 193,000 euros)
- Electromagnetica: 9.021.308 lei (approximately 2 million euros)
- Elsid: 2.553.868 lei (approximately 570,000 euros)
- Energy Financing Team AG: 71.374.436 lei (approximately 16 million euros)
- Energy Holding: 12.359.852 lei (approximately 2.8 million euros)
- Luxten Lighting Company: 5.454.150 lei (approximately 1.2 million euros)
- Menarom-P.E.C (succesor of Euro-P.E.C.): 724.950 lei (approximately 162,000 euros).
The contracts, concluded in a preferential manner, without an objective selection process and in the absence of transparent procedures for trading electricity, provided the sale of an energy quantity greater than Hidroelectrica could produce (between 95% and 175% of the energy produced).
As a result of these contracts, annually was made unavailable an amount of 42% – 60% of electricity sold by producers on the competitive market for a period of 10-14 years. Regarding the prices under these long-term contracts, they were, permanently, lower than the average price recorded on the trading platforms CMBC (Centralized Market for Bilateral Contracts) and DAM (Day Ahead Market).
“All of the energy produced by Hidroelectrica was delivered on the basis of long-term contracts, other market participants being blocked from this source of cheap energy. Moreover, the contracts were concluded under the conditions in which all parties involved knew the information on the increased hydrological risk, meaning that there will be an insufficient amount of electricity available. Thus, to honor the contracts, Hidroelectrica has purchased substantial amounts of energy on the competitive market at a price higher than what it sold to its partners”, said Bogdan Chiriţoiu, CC chairman.
Between 2003 and 2012, Hidroelectrica has received about 450 requests for supply of electricity, which was unable to fulfil. At the same time, these agreements also affected Hidroelectrica competitors active on the competitive market segment of production and sale of electricity; they did not have the chance to make offers at prices that can compete with the ones in the long term contracts. Therefore, other producers could not access Hidroelectrica’s customers.
Also, contract terms for the supply of electricity provided in long-term contracts, in conjunction with contracting significant quantities, accounting for nearly all the electricity available, had the effect of limiting the option for Hidroelectrica to participate in PZU, which led to a liquidity decrease and electricity market distortions in Romania.
Moreover, by conclusion of these long-term contracts, the amount of electricity contracted by Hidroelectrica on the regulated market declined, thus reducing the amount of energy with low price that entered in the “regulated energy mix”, which implicitly led to impairment of the price for household consumers.
Another aspect found is that some counterparties of Hidroelectrica exercised their joint purchasing power during the lifetime of the contracts in question, coordinating their competitive behavior and conditions for trading.
Energy Holding, Alpiq Romenergie and Alpiq Romindustries have coordinated their behavior during the course of long-term contracts concluded with Hidroelectrica, to determine the conditions for trading, including related prices. The same behavior was observed for Elsid and Electrocarbon; evidence was found on the establishment of common contractual terms with Hidroelectrica.
“With the conclusion of these contracts, the competition in energy trading has been distorted, the parties’ intention being to consolidate their position and gain some economic benefits without exposure to risk associated with competitive market mechanisms”, said President of CC.