Bogdan Tudorache

The Association of Electricity Suppliers in Romania (AFEER) claims that the new Energy Law provides “some legal issues, which can cause controversy and create dysfunctions on the market”, according to the statement of the President of the Association, Ion Lungu. Thus, the new legislation introduces excessive fines and may allow the signing of bilateral contracts only for certain categories of players.

The new law, which substantially amends and complements the Law on Electricity and Natural Gas no. 123/2012, as well as other normative acts, is in force, after it was published in the Official Gazette on July 27. Thus, Law no. 155/2020 was greenlighted by the President of Romania in the form adopted by the Parliament.

“We appreciated the legislative approach initiated and supported by the Industries and Services Commission of the Chamber of Deputies, the new law bringing important provisions for all energy market actors. We needed clarification in the primary legislation, which in addition to some amendments and additions to the existing law, to bring this law in line with the provisions of Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal energy market, regulation which applies directly to each EU Member State from 1 January 2020 and has greater legal force than any opposite provision in national law. We mention that, in the Romanian Constitution, art. 148 par 2, the principle of the supremacy of European law is established, according to which ‘the provisions of the constitutive treaties of the European Union, as well as other binding Community regulations, have priority over the contrary provisions of domestic law, in compliance with the provisions of the Act of Accession’. Unfortunately, some legal issues have arisen, which can cause controversy and create dysfunctions in the energy market, and therefore we consider it necessary to reanalyze and correct it,” says Ion Lungu, President of AFEER.

“Our association continues to insist on the elimination of the limitations imposed, opoosing Regulation (EU) 2019/943, as well as on the revision of the provisions on contraventions.

We consider that national legislation maintains restrictions on the freedom to trade in electricity by granting the right to conclude bilateral contracts negotiated directly only to certain categories of participants in the electricity market, although Regulation (EU) 2019/943 emphasizes that ‘prices are formed according to supply and demand,’ and ‘market rules encourage the free formation of prices and avoid actions that hinder price and supply price formation.’

The domestic legislation is still inconsistent with the provisions of Regulation (EU) 2019/943,” states Lungu.

According to paragraphs 13 and 14, introduced in Article 23 of the new law, market participants who combine electricity produced by several energy sources or who combine the supply of several customers may conclude bilateral contracts with the owners of these sources, respectively with customers and suppliers.

In fact, also GEO no. 74/2020, not approved/ rejected by the Parliament, introduces another derogation from the provisions of par. (1), whereby ”on the competitive market, wholesale or retail, producers may conclude bilateral contracts outside the centralized market, at negotiated prices, in compliance with competition rules, for electricity from new energy production capacities, put into function after 1 June 2020.”

”AFEER notes that, unlike the other participants in the EU electricity market, which, according to Regulation (EU) 2019/943, have the right to trade long-term supply contracts on over-the-counter markets, through the new Law no. 155/2020 and GEO no. 74/2020 only certain participants have a derogation from the rule established in art. 23, par. 1 to trade only on stock exchange platforms operated by OPCOM.

Our opinion is that such provisions can increase prices on the domestic energy market, with negative effects both on the competitiveness of the Romanian economy, by increasing production costs and affecting macroeconomic indicators, by increasing energy imports. A proven fact is that Romania has became, in the last two years, a net importer, after being a net exporter of electricity for 30 years.”

Excessive fines

Another ambiguity reported by AFEER members refers to the regime of contraventions. According to the new law, “the supplier is obliged not to use incorrect or misleading commercial practices in the relationship with the final customer”, an unnecessary requirement to be mentioned in the Energy Law, such practices being subject to consumer protection legislation.

Moreover, “incorrect or misleading commercial practices” is not defined in the text of the law, and we therefore appreciate that the interpretation may be ambiguous.

The penalty system established by the new law (sanctions determined as a percentage in relation to turnover, respectively between 1% -5%, reaching for certain contraventions 10% of turnover) is excessive, which negatively affects the activity carried out by participants in the market. Also, in a discriminatory manner, electricity and natural gas suppliers, unlike all other commercial operators, regardless of the market in which they operate, may be sanctioned by ANRE, but also by ANPC, for the same act, with the application of fines set after other criteria (turnover), in another amount. AFEER expresses its fear that there is a risk of excessive abusive of penalties on the electricity and natural gas markets given that excessive practices are proposed to be sanctioned with major percentages of turnover (5-10%).

“The application of two contravention regimes for the same deed would only lead to the creation of a double sanctioning regime, applied by different authorities, differently, with different sanctions. The value of the fines must increase gradually, in order to give the participant the possibility to correct himself in case of mistakes.”

“In the opinion of our Association, there is no justification to amend Law no. 123/2012 in this sense, because there is already a legal framework provided by Law no. 363/2007, a normative act with equal power. This law defines incorrect and misleading practices, exemplifies them, establishes sanctions, being applicable to all operators in a market, whichever that may be, constituting the common law in the matter.

Therefore, AFEER calls for a reconsideration of the above provisions and, once again, calls for the Electricity and Gas Law to be fair, to ensure fair competition, to reintroduce the possibility for all market participants, not just some producers, to conclude directly negotiated bilateral contracts, to be compatible with the regulations of most European countries. The Association also insists on the need to adopt complete and clarifying secondary regulations, which cover in a justified and fair way the reported issues. In addition, AFEER maintains its opinion that, when drafting primary or secondary legislation, market, state and private actors should also be consulted.”