Electricity bill cap and offset legislation, which was supposed to solve the problem of rising prices that started last year, actually had the opposite effect: it made the problem worse, the state budget can no longer offset the bills, suppliers have nowhere to make money, distributors are no longer investing in the grid , and on the stock market today the price reached a historical record.

Marcel Cholaku, the leader of PSD, the ruling party, says someone is playing underground games in this market and that “energy scammers” are back, but he won’t say who it is.

Several energy experts pointed out that the measure would do more harm than good.

“The natural gas price ceiling is better for some suppliers than for consumers. A consumer with a price cap will pay twice as much next year because of the current cap law, and some suppliers are earning twice as much because of the cap than they would have earned without the cap,” said Dumitru Kisalice, president of the Smart Energy Association, in an analysis published early this year.

Capping or regulating energy prices is the worst, said Radu Dudeu, director of the energy policy group, in an interview with Spotmedia earlier this year.

For his part, Bohdan Chiritsoyu, president of the Competition Council, recommends directing aid only to vulnerable consumers, not all, and setting the ceiling at the highest possible level so as not to affect the state budget.

“Due to the limitation of compensation, according to the model that existed until now, the state pays the difference, and then I have two problems. One thing: it is expensive because it helps everyone. The lower the level of restriction, the more money the state has to take from the budget. And the second: the consumer no longer has an interest in looking for a cheaper supplier, if the difference is still paid by the state. Therefore, our recommendation was that the ceiling, if it is done, should be as high as possible, preferably without compensation if possible, and direct the resources of the state to those who need them more, the households, the more vulnerable, the poorer, who are struggling with bill payment, just like industrial consumers,” Chiritsou said in March at a conference.

The authorities did not take into account these recommendations and capped the price for everyone, at a very low level, and now cannot return the money to the suppliers, because it is not collected in the budget.

What Cholaku does not say. Are the “smarts” coming back?

Interestingly, Marcel Cholaku, leader of the PSD, gave a speech two days ago in which he strongly blamed the current legislation, although the party he leads is part of the government and approved all these measures together with the PNL, both in the Government and in parliament

He slipped information, but without bringing the idea to the end and without saying with the topic and sermon, who are the culprits.

Çolaku claims that someone inserted a provision in the last hundred meters of the draft law, according to which energy producers do not pay a premium for each transaction where the price exceeds 450 lei per MWh, and the average value is made for past contracts, which are at lower prices.

“We have excessive taxation of producers, but someone sneaked in to take the average price so that it falls below 450 lei, and I would really like the Prime Minister to find out who pushed this average price into the decree, so that we also know that we, who are underground, create games,” said Cholaku.

What Cholaku doesn’t tell us with subject and predicate is where that money went: did it stay in the accounts of energy producers or somewhere in the chain between producer and consumer?

But we also learn from him, in the same speech, that smart energy companies are back, that is, those intermediary companies that buy cheap energy from producers and sell it to consumers at a much higher price. We remember in the past, in the period of 2007-2010, there was a scandal with these smart guys, a scandal that changed all energy legislation in Romania, abolished bilateral contracts and introduced the obligation to trade all available energy on the exchange. .

“The great liberalization has again given rise to energy fraud and market speculation,” says Cholaku, without saying who they are.

Since last year, OPCOM knew what was coming next

Another very important piece of information that Cholaku said in his speech the other day was that the energy exchange operator OPCOM has warned the government that huge energy prices are coming.

“OPCOM, Mr. Ionescu (Victor Ionescu, Director General of OPCOM – no), warned former Prime Minister Florin Kitsa and Mr. Popescu (Virgil Popescu, Minister of Energy – no) what will happen in the energy sector during the next. And no action was taken, on the contrary, they laughed in his face,” added Cholaku.

But what the PSD leader says, clearly and very importantly, is that “the impact that the Ministry of Energy requires, namely 31 billion (lei – no), is an impossible thing for the budget of Romania.”

Record price on the energy exchange today

Meanwhile, prices continue to rise. The price of energy with delivery today on the OPCOM exchange, on the market the next day – PZU, reached a historical record of 3,083 lei per MWh.

We took PZU as a benchmark because, even though it is a spot market, it occupies approximately 50% of the market, i.e. half of the energy consumed in Romania is sold here.

OPCOM reports also show that in July 2022, the average price in the day-ahead market was 1,813 lei, four times higher than in July last year.

PSD offers price regulation for households

Faced with this situation, the PSD put forward two important proposals. The first is price regulation for residential consumers after the expiration of the one-year limit with the possibility of extension until 2025.

Such a measure would mean lower prices for the general public, but higher prices for non-household consumers, from small and medium-sized businesses to factories, leading to higher prices for their products.

That is, we will pay less for energy, and more for other products.

Another proposal of the social democratic camp is aimed at excessive taxation of the entire energy chain from producers to intermediaries and suppliers. This will limit market speculation and the possibility of huge profits for some traders.

Photo source: DreamTime.com