The Senate recently amended the electricity price cap and offset ordinance to mean that several categories of people will benefit from lower bills. There are some good ideas in the law, but if implemented poorly, they can do more harm than good.

The law has reached the Chamber of Deputies, where further changes may be made.

1. Families with at least three children will pay a capped price of 0.68 lei per MWh, as will those using medical equipment.

The idea is very good, that is, we help consumers who need it the most, but it is very difficult to implement. These consumers must be treated separately by suppliers. First of all, they will have to contact the suppliers, submit an application, send supporting documents, so that the supplier will issue a special invoice with the corresponding upper price.

For suppliers, changing the payment system for several categories of consumers is a logistical nightmare. This is time-consuming and expensive, and costs are obviously included in the invoice as well.

It would be best if these consumers received direct subsidies from the government, rather than through bills and suppliers. But now, instead of choosing the simplest and most direct path, the state effectively scratches its left ear with its right hand. Under the Senate bill, providers would first have to bear the difference in the invoice and then collect their money from the state. So the same money goes without any logic on a longer circuit.

2. More non-household consumers will also benefit from the price cap: small and medium-sized businesses, operators providing/providing public services, including Metrorex SA, places of worship, pharmacies, drug manufacturers and distributors, industrial park administrators, food businesses industry

And it’s a good idea, but it could have been made much simpler.

As in the case of residential consumers, the state decided to transfer some money from the state budget to the accounts of suppliers, instead of these consumers being able to go and buy energy directly from producers or suppliers on an exchange platform that already exists, but where no energy seller interested in participating.

The solution would be to oblige producers to sell part of the energy here. Large energy consumers also put forward such an idea, but the authorities did not approve it.

Why does the state prefer to act in this way? Because in the first stage, the small price paid by limited consumers, whether they are households or non-households, is covered by the suppliers. The problem is that the suppliers then receive money from the state a month late, which already creates big problems for them, including the risk of default and disruption of the entire market.

3. Setting a maximum amount of 1,300 lei per MWh for payments with suppliers.

The idea of ​​a ceiling for calculations by suppliers of the purchase price of energy is very good, so that there is no risk that they will cheat the state budget, that is, they will buy energy at an artificially inflated price, and then come to the state to ask for the difference. But the price of 1,300 lei per MWh is very low, much lower than the market price, which has not been below 2,500 lei for a long time. Basically, suppliers accumulate losses from the very beginning.

Because of this, the market is completely blocked. Since September 1, since GEO 119 came into force, no transaction has been carried out on the forward market, as suppliers only want to buy at 1,300 lei, and producers do not sell below 2,500 lei, and their supply and demand do not match. way to meet Producers, being state owned, cannot even sell at a lower price and claim that they will be subject to the Court of Accounts for not maximizing their profits.

The cap of 1,300 lei was introduced by the government in GEO 119, but has not yet been changed in parliament, although energy companies have warned that they will become insolvent if it is retained.

All this time, energy is traded only on the PZU, the spot market, where prices are much higher.

4. A provision was introduced in the Senate that requires energy producers to sell through direct negotiated bilateral contracts at least 70% of their own generation available from their own generation to end-user suppliers, Transelectrica, distributors and large industrial customers . .

For their part, suppliers with at least 100,000 customers in their portfolio and a consumption of at least 500 GWh in 2021 are required to sign contracts for a minimum term of three years, covering 70% of their customers’ consumption over the next three years. The delivery term for each concluded contract must be at least one year.

The idea of ​​long-term energy supply to end users is very good. But the market blocks the ceiling of 1,300 lei for the purchase of energy. Thus, it is not clear how agreements can be made between manufacturers and suppliers to ensure that each complies with its obligations under this legislation.

5. Another provision of GEO 119 that was not changed by the Senate is excessive taxation of energy traders.

The idea is good because the traders were the only ones who won in the market and who were not overpriced.

Unfortunately, as the ruling shows, cross-border trade activities, i.e. imports and exports, are also taxed excessively. First of all, this provision may be declared illegal by the European Commission, as it means obstacles to transactions between states and contradicts the idea of ​​a single European market.

Second, Romania needs to import electricity and gas during peak consumption, and there is a risk that no one will import these imports. Representatives of the Association of Energy Suppliers of Romania have already warned that in the frosty winter periods we may wake up with a shortage of energy or gas, which will mean the rationalization of consumption.

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