Is energy a commodity or a natural state monopoly?

The unjustified increase in energy prices, which led to the impoverishment of citizens, inflamed the ruling coalition.

What scares us is that neither of the two parties in power are calling for the ideology they proclaim, and what should be a truly free market is being made a mockery of. A convincing example is the statement of Mr. Marcel Čolaku from a few days ago: “We saw that this liberalization, not to mention stupid, chaotic, as the NBR says, actually led to a rethinking of the smart people in energy.”

Social-democratic ideology claims that energy should be a natural monopoly of the state, with the help of which it will regulate the economy. We have a vivid example of France, where a state-owned company produces, transports, distributes and sells (supplies) electricity.

(Neo)liberal ideology claims that energy is a tradable commodity. It’s scary that “free market” advocates have no idea what an exchange means, a place where demand meets supply to determine the real price of a traded commodity.

I have repeatedly explained that what we call the “liberalized market” (or stock exchanges) is nothing more than a sham, where state-owned companies operate, which own almost 80% of electricity production, and the gas market means only two monopolistic producers ( OMV and Romgaz), together with some tricksters, “white-collar workers in the energy sector” who have no other goal than profit. “Small country, few tables!” The state wants as much money as possible and, as a result, appoints all kinds of citizens to manage companies, who have no idea about energy, but try with all their might to invest huge sums of money in the budget. The reward is big: some undeserved salaries, said to be appropriated by those who facilitated the appointment. When you know you’re a fraud in the energy industry, you shut up either because you don’t understand what’s going on or because you don’t want to give up that huge half of your salary, which in any case is more than what you deserve humble position where you come from. For “energy cheaters” it’s simple: legislation is created by them, and they put their people in positions where they get information and can influence legislation and decisions to maximize their profits. We have many examples that have been reported in the press, but no decision maker has taken action. Kleptocracy without borders and strategic corruption! (read the article here)

Over the past few weeks, we have taken all companies accredited by NARE as suppliers and removed the reporting data from the website of the Ministry of Finance: 147 companies with their turnover and profit for the last five years.

At a glance: last year (2021), the turnover of the Romanian energy industry increased from 52.1 billion lei to more than 90 billion, profits increased from 5.6 billion lei to 8.2 billion. It seems that in 2022 everything will increase three times. Since March of last year, the energy crisis began to manifest itself in Romania, long before any manipulation of the European energy markets with a Kremlin source. It must be repeated: the energy crisis in Romania is not a crisis created by the Russian Federation, but by the stupidity, incompetence, greed and betrayal of the decision-makers. (In future articles I will try to analyze the data collected above.)

The first conclusion: a serious debate should be launched in Europe on whether energy is a public utility, which would mean a public monopoly, or whether it is a tradable commodity! Let’s not forget, however, that in the last century most European countries had a monopolistic state organization of energy industries. Many experts from different fields should be invited to this discussion to determine whether we can technically store this commodity in such a way that the condition that production equals consumption is not fulfilled. Like it or not, the energy industry remains a network industry that generates high fixed costs. Technologies have developed and are developing, so we need specialists who will tell us what the energy industry will be like in the coming years.

The decisions of the past months have been bad!

The cap-and-compensate schemes adopted by the government have been questioned by the Federation of Energy Companies Associations, which suggests the government may not have enough money for compensation: “The current budget amendment does not include the sums needed to cover the proposed cap prices. by the Romanian state for the period April – December 2022 and puts at great risk the ability to continue the functioning of the entire energy sector.” We don’t think this is true if we look at the producers’ profits for the past year, when a similar restriction and compensation scheme worked for only two months: Romgazul – 2 billion lei, Hidroelectrica – 3 billion lei, Nuclearelectrica – 1 billion lei. The other day, AFER returned with the calculation that the state will earn 43 billion lei from this price increase.

An analysis of the gas market conducted by Professor Dumitru Ciselice shows that the restriction led to an increase in the purchase price of energy by 5.85 times and a 324-fold increase in cost of supply, cost of markets and profit.

Let’s consider the example of the “market” of electricity:

Transactions are carried out on OPCOM, the Romanian Commodity Exchange and the Electronic System for Public Procurement (SEAP). SEAP is mainly used by UAT and public companies. While we can find out the trade volume from OPCOM from the 2021 report, for BRM and e-licitatie.ro (SEAP), we have no way to know what the trade volume was in 2021. Experts estimate that OPCOM accounts for 60% of trading volumes.

Last year, 60,109 TWh were produced in Romania. The import-export balance is 2.1 TWh*. 63,447 TWh were traded on OPCOM as follows:

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