A post on Facebook and a series of statements following the Government meeting constitute the official communication regarding the changes brought to the Emergency Ordinance 27/2022 (OUG 27) (in RO) by which the rules in the energy markets are changed. First of all, the period of applicability of OUG 27 is extended until August 31, 2023. In other words, what the Government calls “the scheme for protecting the population and the economic environment” is extended by another three months.
Reduced coverage
However, the content of the scheme changes. More specifically, domestic electricity customers with an average monthly consumption in the previous year of over 300 kWh will pay a price capped at 0.80 lei/kWh for 255 kWh/month, with the difference being paid at the market price, calculated monthly. For consumption between 0 and 100 KWh, 0.68 lei/kWh will be paid, as before. For natural gas, the maximum price of 0.31 lei/kWh remains valid without a consumption ceiling.
“Through this decision we want to stimulate the population to make a consumption economy”, explains Minister Virgil Popescu in a post on Facebook.
On the other hand, the ceiling of 1 leu kWh is maintained regardless of the amount of electricity consumed for “public and private hospitals, public and private education, public and private providers of social services”. “SMEs, the food industry, other types of public institutions” will be supported for 85% of the amount consumed, for the difference the market price will be paid, “precisely to encourage, also at this level, energy saving”. As for natural gas, for non-domestic consumption, the ceiling of 0.37 lei/kWh is maintained for consumption below 50,000 MW annually.
Inaptly disguised under the idea of encouraging saving (if this is the objective, why not encourage energy saving in the public space, in education, etc!), the change marginally reduces the degree of coverage of the support scheme, which is excessively generous and above all based on measures insufficiently differentiated to properly identify the social and economic categories truly in need.
Massive market intervention
The most serious changes occur in connection with the energy market.
Ceiling for settlements A maximum settlement ceiling is introduced, “to encourage suppliers to purchase cheap energy” – a maximum of 1,300 lei per MWh. The provider will no longer receive settlement for amounts that exceed this ceiling. The measure risks discouraging supply activity, because normal market situations may lead to more expensive purchases; a fixed administrative ceiling is introduced, for a period of 12 months, in one of the most volatile market contexts, on a market dependent on imports.
Fine for “successive transactions” The authorities introduce a fine of 5% of the turnover, applicable by ANRE, for “successive transactions, which artificially increased the price of electricity or natural gas”. Minister Popescu did not want to specify which is the exact mechanism by which the successive legitimate transactions and those that should be sanctioned will be identified, in a manner devoid of subjectivity. The measure comes in the context of repeated accusations, but without specified targets, that some traders and/or suppliers are guilty of speculation. The pressure will shift to the regulator to define what exactly can be categorized as exploiting in a free market.
The Energy Transition Fund and export barriers are established
The post on Facebook does not refer to the new tax introduced in the energy sector, under the title of “solidarity contribution”. This is imposed starting from September 1, 2022 and until August 31, 2023, for “electricity producers, aggregated entities of electricity production, traders, suppliers carrying out trading activity and aggregators that trade quantities of electricity and/ or natural gas on the wholesale market”. The first amounts would have to be transferred by October 25, based on a methodology and a declaration to be approved by ANRE within 10 days of the entry into force of the emergency ordinance.
Production capacities commissioned after September 1, 2022, as well as companies providing public thermal services that produce electricity through cogeneration, are not subject to the new tax.
On the other hand, through the same article, the contribution to the Energy Transition Fund is introduced, also, for “any type of electricity sale transaction for export or intra-community delivery from the territory of Romania”. The calculation model in the draft GEO adopted by the Government suggests that the export of electricity will be completely discouraged.
Although it is called the “Energy Transition Fund”, the amounts collected in it will contribute to covering the costs of the support scheme.
Mandatory long term sale
Although it does not appear in the GEO as published in the Official Gazette, the Energy Minister also referred to the fact that the authorities want guarantees that “suppliers and distributors will be able to ensure their end customers and technological consumption through bilateral contracts”. To this end, “the state, where it is a shareholder, will ensure that the sale of energy will be on a long-term basis, for 5 years, in order to ensure price predictability and to eliminate market speculation,” Minister Popescu wrote on Facebook. This mainly concerns Hidroelectrica and Nuclearelectrica, which must have such sales strategies in place by 1 November. It seems a risky decision to force companies to behave rigidly from a price perspective in a volatile and inflationary market.