The medium and long-term agreements on the electricity market have not been properly managed and this has led to higher prices, explained the OPCOM President Victor Ionescu.
Starting this winter, the price of energy has increased more than fourfold, in tandem with the regional stock exchanges, in a certain period, but also due to weather conditions. Subsequently, however, the prices remained at a high level, which is the subject to a market analysis by the authorities – which will soon turn into an investigation, if necessary, as officials of the Competition Council said for energynomics.ro.
In fact, it is the first time the president of OPCOM said it bluntly: suppliers have to take a part of the blame because they have not benefited from a clear prognosis and have used too much the short-term market – the so-called “spot” market and the “day ahead market (DAM)”.
“There were not only situations in which the quantities contacted on term had no support… For May 2017, the contracting rate was 141%. For June it was 144% and the contracting rate for July was 141%. We consider that if these term agreements were concluded on a fair and clear forecast of those who provide the energy to final consumers and if they had a strict coverage of the open positions on the market, the spot market would have been virtually useless. We find, however, that in addition to the over 144% contracted volumes in May, more than 40% was needed in the spot market”, said Ionescu at a conference organized by energy-center.ro.
“The positions opened by all the market participants are in an inappropriate situation in regard to the last resort segments: the spot market and the intra-daily market. These long-term and medium-term agreements are not properly managed, as they based on this last resort process for the day ahead market and the intra-daily market. And from here we can continue with certain assumptions. There is a degree of responsibility of the suppliers”, continued Ionescu.
No analyst anticipated the high market price
The high price on the electricity stock exchange divides into two the energy market, on the one hand the regulator (ANRE) and the market operator (OPCOM), who claim that the tariffs are correct, at the opposite pole being the energy suppliers who blame the regulations and ask for an intervention from the authorities. All this in the context when the price of energy on the spot market of the OPCOM stock exchange is almost double compared to last year, reaching 276 lei per MWh on average last Thursday.
“The position of ANRE is that the prices at the moment reflect the market conditions. We are facing a very low hydraulicity situation that happened several times in the past, and the results were the same, a decrease in the sales offer in general, on the market, which was mainly reflected in a price increase in the DAM (spot market – e.n.). Thus, the price increase is a normal thing under these conditions. And this market reaction is considered a positive thing. If the market did not react under these conditions, we would have a problem”, said Natalia Vlad, General Manager of ANRE’s Energy Market Directorate, according to Agerpres.
She showed that ANRE has analyzed whether the prices have been influenced by other parameters. “We have a well-organized monitoring structure. The results were that during this period, on the joint analyze we conducted with OPCOM, we did not identified any behaviors that would distort the price on the DAM, that lead us to suspicion of manipulation “, continued the ANRE representative.
According to her, the suppliers should educate their consumers, so that there is a much better correlation between the agreements concluded between them on the retail market and the agreements concluded by the supplier on the centralized markets for the purchase of electricity.
Vlad also pointed out that energy traders chose to take higher risks on the DAM, in hope for higher gains, instead of using other OPCOM instruments with controlled risks, but also with lower returns. “Even if suppliers do not want to recognize it, it is clear that they did not use all the tools they had at their disposal in order to preserve the risks which came with a contract. They relied heavily on knowing their respective partners. Even on the OTC market (over the counter – e.n.), for which there should have been robust risk management compartments, contracts have been terminated”, also said the ANRE representative.
She also said that DAM is an unconcentrated market where there are over 300 participants, so it is unlikely that a player can influence the platform.
On the other hand, the representatives of the suppliers have argued that the high prices on the market today are the result of shortcomings in the regulations. The ANRE representative and the traders present in the room had tensioned contradictory talks upon this issue, reaching the point where they could not agree upon principles of market functioning.
For example, traders argued that it is not normal for a producer to buy and sell the same amount of energy within the same timeframe as this would have major repercussions on the price. The ANRE representative countered this idea by specifying that a producer has the right to optimize his operations and act as a trader if this can increase his gain, to buy when the price is low and to sell when the price is high.
At the same time, traders have shown that another regulation affects the price, respectively the consumer’s right to terminate the agreement with the supplier at every 21 days, which creates strong imbalances in the traders energy portfolios. ANRE’s response was that suppliers must explain to consumers that the price of their agreement should not be correlated with that of the DAM, which has become fluctuating.
One supplier pointed out that all of these prices will ultimately be reflected in the consumers invoice. The high prices that were recorded during the last winter on OPCOM were also found in the consumers invoice, which pay more than 8% on average from July 1st. “The consumer does not have to pay a small price, but a fair price. The consumer must understand that he also has the role of as a market participant”, the ANRE representative also pointed out.
