Bogdan Tudorache
The National Energy Regulatory Authority forces ELCEN to sell thermal and electrical energy at a price lower than the cost of production, which significantly affects ELCEN’s business and can lead to only one result – bankruptcy, says Sierra Quadrant, ELCEN’s judicial administrator.
Sierra Quadrant argues that, at present, by not recognizing real and obvious costs, ANRE’s policy regarding the costs registered by the producers decisively influences the process of approving the regulated sale prices for the thermal and electric energy. “This approach that defies economic logic can lead – in the case of any company, but especially one in the process of reorganization – only to one result: bankruptcy,” says the company.
The two main cost components undervalued by ANRE concern the costs of acquiring CO2 certificates and the fuel costs.
Regarding the expenses with the purchase of CO2 certificates, while reducing the number of certificates granted for free to ELCEN, their price increased considerably in 2018. Thus, on the international market, on the EEX platform (the largest carbon market in the world) the price reached from 8.70 euro/ certificate in January, to 23.53 euro/ certificate in December. On the domestic market, in the second semester of 2018, the cost of acquiring a CO2 certificate exceeded the threshold of 25 euro/ certificate (respectively, 25.19 euro).
According to Sierra Quadrant, ANRE intends to take into account, within the spending structure, a cost of only 15.5 euro/ certificate, much undervalued in relation to reality, provided that an estimated price within the auction on the Romanian Commodities Exchange BRM is of 25 euro/ certificate.
In 2019, ELCEN must acquire more than 2 million CO2 certificates (for both thermal and electric power generation). The number of certificates allocated free of charge for 2019 is of about 513,000, which means that there is a need for 1.6 million CO2 certificates that will have to be purchased at the market price. An elementary calculation shows that, at the price imposed by ANRE of 15.5 euro/ certificate, the recognized ELCEN costs will be of 25.30 million euro, compared to the real cost of 40.81 million euro, resulting from the purchase of the certificates at the predicted price. of 25 euro/ certificate.
To understand why ANRE’s underestimation of the price of CO2 certificates has no economic basis, one must underline the fact that within the european Commission were proposed as strategic objectives for 2030 to increase the energy efficiency up to 32.5%, as well as the use of renewable energy by 32% (from an estimate of 20% in 2020, for both criteria), which means that a significant number of certificates will be released from the market, which will have a negative impact on the price.
In the case of fuel costs, ELCEN has contracted from 01.10.2018 all the necessary gas quantity until 30.09.2019. The final cost for this quantity, resulting from the negotiated price with the ROMGAZ, the supplier, to which the storage tariff is added, is considerably higher than that of 68 lei/ MWh (provided by GEO 114/2018). However, the reference price of gas used by ANRE in the calculation formula for establishing regulated prices for electricity and heat is considered to be 68 lei/ MWh.
“We emphasize that, paradoxically, ANRE is also the institution that interpreted the provisions of GEO 114/2018 in the sense that all the natural gas commercial contracts concluded before 28.12.2018 remain in force until the end of their validity period. Thus, on one hand, ANRE recognizes the validity of the contracts in progress, and on the other hand it refuses to take into account the prices provided in these contracts, using in the calculation formula only the price provided in GEO 114/2018”, say Sierra Quadrant officials.