Consumers have lost confidence in the independent electricity suppliers, which are losing ground in favor of the already established big names and suppliers of last resort.
“Consumers, especially the large ones, prefer not to have impacts upon their budgets and to have fixed amounts of energy supplied, which they can rely on a long-term basis. A large company may suffer at cash flow level from instablity and prices modification. For a large consumer, which has a budget for utilities, these can destabilize its cash-flow. Thus, they prefer fixed agreements on a long term”, told energynomics.ro the director of one of the independent suppliers.
“It’s not like a position… that we would like to reduce. Basically, the consumer seeks for alternatives. We do not have a policy of exposure reduction”, said the quoted source, adding that it is also about a boomerang effect in the market: preconceptions lead consumers to large suppliers believing that they can negotiate, as they did with the smaller suppliers, but this does not happen.
A definite increase in the electricity prices
There are distortions in the market today, the price on the wholesale market is higher than the one at the Bursa Română de Mărfuri, according to a director of an independent supplier. “Almost all suppliers faced this situation (to decrease the sales – e.n.), many have chosne suppliers of last resort and the integrated suppliers, that also have distribution, continued to grow”, said the quoted source for energynomics.ro.
“The market prices on the BRM are significantly lower than pn the wholesale market, which, from my point of view, means that the market is not functioning right”, he also said.
“There are some major market distortions. And what happened in January-February it was a major distortion of the market, in my oppinion, but apparently (those responsible n.r.) have not been found… they were not identified”. “The electricity prices will increase, that’s for sure, even if integrated suppliers have some very… interesting prices for the final consumers, as the market will concentrate… Maybe then there is a vision, for having less competitors in the market, only the integrated players”, the source also stated.
Previously, the representatives of the market regulatory authority ANRE, stated that there were no concerted actions on the market.
The possible speculative attack upon the electricity prices from January to February, when the price increased four times above the annual average, led to a decline in consumer confidence in the independent suppliers, which resulted in a serious decline in sales from their part.
In the case of RCS&RDS, which provided 95% of its energy to the corporate consumers, the decline was of almost 30%. “In the first three months of 2017 we provided approximately 255,6 MWh. In March, we deliberately reduced the supply at 67 MWh, a 28% decrease compared to the monthly average in 2016”, says the report presented to the investors in the forthcoming listing of the company at the stock exchange.
“The electricity demand from our large business customers varies widely and is more difficult to predict than the demand from the small commercial customers or residential ones. Large and unexpected increases in the purchase prices of electricity, in late 2016 and early 2017, generated by the cold weather, but also by market failures, produced heavy losses to us. To be less affected by this volatility, we will concentrate our supply business towards the residential sector and small and medium commercial consumers, and we will decrease the volumes supplied to the large commercial customers. Our target is that by mid year to halve the volumes supplied to the large customers”, it is shown in the report.
“We estimate an EBITDA loss of 7 million euros, in the first quarter of 2017, from our electricity supply activities” also state the officials of RCS&RDS.
New insolvencies
In addition, the consequences of speculative attacks on energy prices continue to make new victims. Energy suppliers such as KDF Energy, Arelco and Transenergo, which previously had significant market shares have declared their insolvency and others will probably follow.
“These are the effects of the ‘manipulation’ in January. KDF and Transenegro have suffered from the so-called manipulation of prices in January-February 2017. Arelco interrupted its contracts, and some suppliers had contracts to buy from Arelco. Unfortunately, this caused a chain reaction”, said to energynomics.ro a source close to the supply market.
Suppliers were forced to default and banks have blocked their credit lines. “They discovered they had no cash, no bank guarantee and they were unable to honor their contracts,” said the source. “It is possible other companies would enter insolvency, once the prices on the balancing market will be published.”
The insolvency application from KDF was accepted by the Bucharest Court on March 28.
Recently, the National Energy Regulatory Authority (ANRE) said that 18 companies were under investigation for possible market manipulation in January-February 2017 period. Among the names ANRE mention, there were five companies that were to be fined by the Authority – including KDF Energy, Arelco Power Ltd., Alpiq Energy Distribution Services LLC and Romindustries SRL. Since February 15 ANRE withdrew the electricity supply licenses for two companies in Arelco trust. Both Transenergo and Arelco became insolvent.
