CCIFER, the French Chamber of Commerce in Romania, has recently launched a report on competitivity in Romania, and one of the eight sectors thoroughly analysed was the energy sector. Responsible for the review and the resultant proposed measures was Eric Stab, Chairman and CEO GDF SUEZ Energy Romania. We asked Mr. Stab for more explanation on some of the measures in the report and on some other hot topics of the day.

Mr. Stab, you have mentioned in the report the need for updating certain categories of secondary rules issued by the National Agency for Energy Regulation (ANRE), which are currently outdated. Among them you mentioned: the rules for switching the gas supplier. Can you please be more specific and give us some examples in this regard?

What we need is a bit more stability on the regulations, because there are some very important regulations on the line that change too often, and equally, as the market is changing, there are some regulations that are missing. At the moment, there are some issues with respect to storage obligation, when you are switching supplier. Each supplier has to store gas, but when a customer is switching it is also important that the next supplier is ensuring that it stores gas for the demand of that customer, because if not, it is of course a risk, especially during the winter, that the system will not be balanced. This is not properly regulated yet, this still needs to be addressed.

Is this related with how much the customer is charged now as a result of this storage obligation?

I don’t think this is the issue. If you look at the prices in Romania, for the population they are still the lowest in Europe. For the industry they have increased significantly over the last years, also as a result of the so called “road-map”, but the prices are still below the European average. I don’t think someone can say that companies or consumers are overcharged in Romania. The problem we have is that, because the system is changing, we need to insure that all the steps that are necessary are managed smoothly. For that, you have to anticipate, to understand what it is at stake.

In your report, you also mention the need for improving ANRE’s regulation on regulated tariffs. You say they are still incomplete and opaque, being applied with large gaps of time, which leads to many disputes between operators and ANRE. What it is that you think it should be improved?

The regulation is fairly complex. It is a complicated industry and you have to dig into it to understand how it is working. The problem we tend to have is that the regulation is not predictable enough. There are things that are basically changed at very short notice, that are not necessary fully in line with the regulations which has been initially announced. This is having a significant impact on the suppliers, the distributors and on their investment plans.

Is it related with how much of the investments ANRE recognizes in the tariffs?

Yes, but it is more than that. It is what has recently happened on the electricity networks with the level of remuneration of the so called “assets base” – in the middle of the regulation period, the remuneration was drastically reduced without explanation, just like that. These are things which basically generate a lot of concern among the investors especially in the context when you have to invest a lot.

On the renewables, now. Romania seems to have reached its targets, and some say that we have now a proper share of renewables in the energy mix. Do you think a subsidy system for renewables is still necessary for Romania?

The problem is slightly different. Yes, Romania is relatively close to having reached its objectives in respect with renewables, although this depends very much on the production of hydro. The production of hydro fluctuates a lot depending on the weather, how much snow there was during the winter, rain and so on. But that is only one aspect of the issue. The problem that all the investors have is that a lot of money was invested in the sector – 7 billion euros; it is probably the single sector of the economy that attracted highest amount of money and once the money had been invested, all the system has changed. Who is it that invested that much? Is the big companies that Romania needs as well to keep investing in all the other areas of the energy sector: into the networks, into other types of power plants, into production of oil and gas. When you have such an experience, you are not incentivized to keep investing. So confidence needs to be restored.

You still hope that somehow this cut in subsidies will be reverted?

The point is not about to come back to what it was before. The point is about restoring confidence and trust, which has gone. Which means finding solutions, there are proposals that have been made already by the investment community, the problem being of course that we then also need to have decisions. There it is a question to the authorities to find a way to restore confidence.

There is no word on your report on the big national projects, such as HidroTarniţa and the new nuclear reactors. Why is that? Do you find them important or not?

What it is important is the policy of small steps. We need to take small, determined steps into the right direction. This is what will basically generate the regular flow of investments and contribute to the modernization of the country. Those large projects are raising many questions. First, do we need them? We can have different views on this – many people are not convinced that such projects are needed. Then, because we are speaking of very large projects, we are speaking of huge investments. And again, who will take these huge risks, take Cernavodă – six to seven billion euros for this project alone – if you can not guarantee any kind of return. We are speaking a nuclear plant you basically have to manage it over 100 years, taking into account the decommissioning at the end: close to 10 years to build it, 40 to 50 years of operation and then 40 years to decommission it.

I don’t think these projects are the answer to the issues that the energy sector is facing. The answer to the issues are the small steps into the right direction.

RCS & RDS have recently announced their plans for creating a network of parallel, independent electric power distribution to the existing network, in Oradea. They also mentioned an order from ANRE which prohibited virtually any company to enter the market of electricity distribution. Do you think that we can have more competition in distribution of electricity?

It depends on what you mean by distribution. If the point is about developing small, isolated networks, why not? You can have small, local solutions that make sense, and there indeed can be more competition. If the point is about investing into other networks in parallel with those that already exists, it is simply nonsense. There is no country in the world where this is happening. Why? What are you going to do, how are you going to get money for this investment?

This is their problem, isn’t it?

It is their problem, but what they are doing is not that. What they are doing is investing into a clearly delimited area, where their solution is very insulated and makes sense. It doesn’t make sense to start now laying electric cables in parallel to the ones of E.ON, in Banat, or to the ones of Electrica, in Transilvania, or to of Enel’s, in Muntenia. That doesn’t make sense!

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The full version of this article can be read in printed edition of energynomics.ro Magazine, issued on June 2015.

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