It is necessary to urgently start a large-scale campaign to inform and prepare consumers for the liberalization of the gas and electricity market, the Association of Smart Energy believes. This is one of the proposals of the association to the Government in an open letter for the purpose of preparing a strategy after the price limit for gas and electricity. Action must be taken urgently to avoid a doubling of gas prices in 2025, the letter said.

The gas price in gas sales contracts suspended until March 31, 2025 is at around 0.55 lei/kWh, a price that is likely to remain in place until at least the summer of 2025. Therefore, starting in April 2025, prices on bills will double. It is likely that in the summer of 2025, competition will timidly re-emerge in the gas market, but this will lead to slightly lower prices, at best from 2026. This option will bring all the risks that existed in the market before the gas restriction. prices (some abusive clauses, price increases after some clauses in the contract, etc.).

Suspension of some provisions of the Civil Code for 3 years is among the proposals

A post-cap strategy for natural gas, as envisioned by the Intelligent Energy Association

1. The urgent start of a mass campaign to inform and prepare consumers for the liberalization of the gas market

2. Professionalization of the “watchdogs” of the free market – Reorganization of ANRE, Competition Council, ANPC and their replacement in the way they work as major actions

reactive elements – fining violators of the law after abuse is reported, preventive actions and reduction of abuse against consumers and prevention of violations of the law.

3. Creation of a subject of alternative resolution of disputes in the energy market, which develops as a public partnership with a specialized non-commercial association.

4. Suspension for 3 years of the provisions of the Civil Code on the energy market, according to which suppliers can extend the supply contract without the client actually signing an additional contract/deed.

5. Market regulation:

• Organization of ANRE (directly and indirectly) some sessions/events on competitive bidding of natural gas, starting from April 1, 2024, to restore competition
• Gas subscription – Application of the model of equalization of consumption peaks in the winter period with the transfer of costs to the period with minimum consumption (warm period). Reserve capacity in distribution systems simultaneously with the introduction of binomial pricing in order to level the cost curve for consumers throughout the year and reduce the impact of bills on the consumer’s budget in cold periods. According to our estimates, this means a decrease in the price of gas by approx. 3% (according to 2021 data).
• The publication of a commercial markup in gas bills, which, according to our estimates, means a decrease in the price of gas approx. 2% (according to 2021 data).
• Separation of trading activities from providing details to reduce speculative activity in the market. We estimate, based on historical data, that if such a commitment existed in 2021, it would mean a reduction in gas prices of approximately 3%.
• Reporting the average price set in the gas market so that the correct price level is known and consumers no longer accept any price demanded by the supplier is so easy. Obligation for ANRE, stock exchange operators, to submit weekly and monthly reports published by the 3rd of the following week and the 5th of the following month on average weekly/monthly prices for the various types of energy. We estimate, based on historical data, that this implies a decline in gas prices in 2021 of approximately 0.5%.

6. Fiscal measures

• The reduction of VAT from 19% to 5% for the next year for all newly concluded contracts (does not apply to contracts extended by the Additional Act) is a measure that will reduce the average price of gas for the final domestic consumer by approx. 16%
• Introduction of a new progressive model of taxation of excess profits of suppliers, but with the sole purpose of reducing the level of price offers, and not collecting funds for the state budget.

7. Measures to reduce energy poverty and protect vulnerable consumers

• expansion of the scope of application of the law from “establishment of social protection measures for vulnerable energy consumers” to “measures to reduce energy poverty and social protection of vulnerable energy consumers”;
• establishment of energy poverty indicators and legislative establishment of energy poverty reduction target indicators;
• definition of the entity responsible for reducing energy poverty;
• special payment mechanisms for vulnerable customers who cannot pay the bill, such as: staggered payments during periods of high consumption, grace periods, annual equalization of bills, etc.;
• avoiding disconnection during periods of high consumption;
• measures aimed at increasing the energy efficiency of the thermal rehabilitation of the house, respectively, to make consumption more efficient, are included in the PNAEE goals of increasing energy efficiency in the residential sector.
• differentiated taxation of buildings by energy consumption class
• measures to involve energy suppliers in energy poverty reduction activities

8. Measures to stimulate the reduction of energy losses and increase energy efficiency for operators and consumers

9. Measures for market failure and energy emergencies – Energy Contingency Plan

How can legislation be changed to prevent possible future imbalances in the market

In the future, when the market will face repeated price increases of 20-30% at the level of several days (5-10 days in a row), we will no longer be able to talk about a full-fledged free market. A dysfunctional energy market with a large imbalance between supply and demand requires a different approach, which should be legislated. It is important to determine when such measures are applied.

Recommends the introduction of free market regulation actions within a specified period (gas, electricity), based on Law 21/1996 with all subsequent amendments, which

provided for in Article 4 (3) In exceptional circumstances, such as: crisis situations, a large imbalance between supply and demand and obvious market dysfunction, the Government may order temporary measures to combat excessive price increases or even block them.

Such measures may be adopted by a decision of the Government for a period of up to 6 months, which may be successively extended for no more than 3 months, as long as the circumstances that led to the adoption of this decision last.

Thus, we believe that based on paragraph 3 of Article 4 of Law 21/1996, it is necessary to amend Law 123/2012, which provides that in the event of an expected significant imbalance between supply and demand (20-30% for at least 10 days), the following measures will be applied:

• “Final price cap” for each supplier with a cap on supplier/manufacturer profit and a cost recovery mechanism,
• Temporary suspension of export,
• Introduction of an import basket so that the amount of imported energy (gas and electricity) is evenly distributed among all consumers,
• Short-term price cap on non-contract energy/gas
• Measures to cover the need for gas, electricity, etc. next winter: definition of the company’s strategic energy security concept in order to purchase gas/electricity to cover possible energy crises. When we come to an acute shortage of gas and electricity, we believe that it is necessary to activate Art. 24 and Art. 176 of the Law on Energy and Gas to activate the Energy Contingency Plan (in the event of unexpected crisis situations in the energy market/gas and in the event of a threat to the physical safety or security of persons, devices or installations or the integrity of the system, the transport and system operator proposes to ANRE and the relevant ministry taking security measures), which include:
• Measures to cover the need for gas, electricity, etc. next winter: immediate activation of strategic energy security companies (yet to be defined and implemented) to purchase/store gas that could prevent an energy crisis,
• Creation of strategic natural gas storage facilities.
• Implementation of a plan of measures to reduce the supply of natural gas/electricity to individual industrial consumers in the event of mass shortage situations and ways to compensate for the losses recorded by them;
• Implementation of a plan of measures to reduce the supply of natural gas/electricity to certain non-domestic non-industrial consumers, when situations of mass shortage arise, by reducing activity/access to the Internet (schools, kindergartens, administrative headquarters, offices);
• Rationalization of gas extracted from storages in foreseeable situations of mass shortage, with compensation for losses recorded by those affected by lack of access to their own gas from storages.
• Emergency introduction:

• – non-constant capacity reservation contracts;
• – contracts for the uninterrupted supply of gas and electricity;
• – New connections provided that an alternative energy source is available (dual power supply systems) for certain categories of consumers.

The liberalization of 2020 must not be repeated, it was a failure

These suggestions are based on lessons learned from the mistakes of previous years:

– Analyzing the situation with gas and energy prices over the past 20 years, they decreased compared to the average price only when there was competitive pressure. These were the only times when the market price fell steadily (sustainably, in the sense that the prices were not reduced administratively for a short period of time, and then in the following period the price was raised, also administratively, well above the market price, and therefore effectively the consumer as a whole paid much more than the market price – 2009, 2019, 2021 / sustainable, in the sense that there was no cross-subsidization of prices between consumer segments – the price for the public fell and the price for industry rose, leading to an increase in prices on goods for the population and, thus, it had significantly higher expenses in the household budget – 2007).

– The free market does not increase or decrease the price. The non-functioning of the free market, either due to abuse, or due to non-compliance with the principles of competition, or due to the lack of knowledge and information at the consumer level, or due to the lack of real resolution tools, some disputes caused price increases in the liberalized market of Romania outside of crisis periods.

– Liberalization of the gas and energy market in 2020 was a failure. The lack of proper preparation of consumers, which was superimposed on the abuse of some suppliers (due to the lack of actions of the “watchmen” of the liberalized market – ANRE, Council of Consurentei, ANPC – and above all the lack of an alternative dispute resolution body in the energy market), and then the gas crisis and record price increases , culminating in an inadequate crisis model of consumer protection, led to the erosion of trust in the concept of free choice.

– Rethinking taxation in the energy sector. A free market means less money in the government budget due to the application of taxes and excises on a smaller base, driven by lower prices due to increased competition.

– Gas and energy tariffs can be reduced only by improving efficiency and reducing costs. Increasing inefficiencies in the energy sector in recent years, increasing technological consumption and losses have led to significant tariff increases.