The Ministry of Energy wants to change the legislation on the cap-compensation scheme for electricity and gas prices under the pretext of gradual deregulation, releasing some volumes to the free market and reducing costs, which will lead to lower bills at the end of consumers. In fact, the market will still be under state control, even for an extra year, and as for the final accounts, they will not reach the level before the energy crisis, even if prices in European markets have fallen sharply.

For electricity, suppliers and representatives of the Ministry of Energy say in unison that bills cannot fall below the current limits of 0.68 lei/kWh and 0.80 lei/kWh. Before the energy crisis in January 2021, one-year contracts could be concluded for 0.25 lei/kWh, that is, at a price three times lower than the cheapest offer now.

CONTEXT

• The modification of the cap-compensation scheme of GEO 27/2022 is necessary in the context where the energy crisis has passed and the prices on the European markets have fallen significantly compared to the records of 2022, when this law was drafted, reaching more than 90% less. In fact, the current cap levels are too high for how far prices have fallen.
• The GEO 27/2022 regulations are valid until March 2025 and were intended to keep the energy market under control along the entire line from the producer to the consumer.
• The Ministry of Energy submitted for public discussion the draft amendments to GEO 27/2022, but without significant changes.
• In short, the project envisages a reduction from April 1 of the prices at which electricity and gas producers are obliged to sell, an increase in the profitability of supply, an increase by one year, until March 2026, the period of application of the ceilings to the final consumer.

What a project managed by a former vendor representative might have looked like two months ago

In the case of natural gas, the bill may be reduced starting from April 2024, representatives of the Association of Energy Suppliers of Romania (AFEER) said on Tuesday during a conference. They say that they cannot estimate the level of cuts, but there will definitely be a decrease.

To reach pre-crisis levels, bills would have to drop significantly, given that the ceiling is 0.31 lei/kWh. For example, in November 2020, it was possible to conclude a contract with a certain supplier for a period of one year at a price of 0.09368 lei/kWh, including transport services. Another contract, with another supplier, was concluded in January 2021, also for one year, a contract for 0.06 lei / kWh.

There will be no reductions for electricity below the limit of 0.68 lei/kWh and 0.80 lei/kWh. Below the third ceiling of 1.3 lei/kWh, there are already several proposals.

The opinion of suppliers is also shared by Adrian Vintilă, adviser to the Minister of Energy, former member of AFEER, as a representative of CEZ Vânzare. He argues that electricity prices cannot be lower than 0.68 lei/kWh, as costs would be too high, even if they were three times lower before the energy crisis.

We remind you that in the final bills the price is limited for household consumers at 0.68 lei/kWh, for monthly consumption from 0 to 100 kWh inclusive, 0.80 lei/kWh for consumption from 100 to 300 kWh h, and 1 30 lei/kWh, with a monthly consumption of more than 300 kWh. For non-household consumers, the maximum limit is 1 lei/kWh for 85% of the monthly consumption at the point of consumption, the consumption difference is set at a maximum of 1.3 lei/kWh.

“We continue the support scheme through measures to limit compensation. In addition, we are reducing the cost of electricity and natural gas, which will lead, under normal conditions, to lower bills for Romanians and for Romanian companies,” said the Minister of Energy, Sebastian Burduia, the other day.

Less from the manufacturer, more from the supplier

Adviser to the Minister Adrian Wintila, who was present at the AFEER event, said the draft would be out for public consultation by the end of the week.

He reported to the representatives of the suppliers, which he was a part of two months ago, that after the change in the legislation, the rate of profit increases from 2% to 10%.

Currently, GEO 27 provides that 2% of profit is added to the purchase price of electricity and natural gas.

Vintila also said that the supply component of the gas bill will increase from 12 lei/MWh to 15 lei/MWh.

More precisely, starting from April 1, 2024, the supply component is 73 lei/MWh for electricity supply activities, respectively 15 lei/MWh for natural gas supply activities.

The project provides discounts for manufacturers.

• The price of natural gas, which producers are obliged to supply starting from April 1, 2024, to household consumers and CET, is reduced from 150 lei/MWh to 120 lei/MWh.
• For electricity producers, the transaction cost through the centralized procurement mechanism (MACCE) will be reduced from 450 lei/MWh to 400 lei/MWh. The change in the legislation is that these manufacturers will be able to voluntarily participate in this mechanism from April 1. The Ministry of Energy claims that in this way energy is released to the free market.

However, when it exceeds 400 lei / MWh, a 100% surcharge is applied.

Why was it necessary to seriously change the legislation on the energy and gas market

Romania currently does not have a functional free market where long-term contracts can be concluded at favorable prices. In addition, there are no price signals either.

The market is blocked because it is completely regulated by price capping schemes, with restrictions from producers all the way down to consumers. But those limits have become too high, with prices in European markets down more than 90% from 2022 records.

On the spot markets, at the height of the energy crisis, a MWh of electricity reached a record level of more than 550-600 EUR/MWh. Now there are days when it is sold for 50 euros/MWh.

Gas prices on the TTF exchange in Amsterdam, a representative of the European market, fell to 26 euros/MWh this winter and exceeded 300 euros/MWh at the height of the energy crisis.

Read more also

• Government failure to manage gas and electricity prices: Caps are too high and no longer justified, but lifting them could wreak further havoc on the energy market