Competition’s decision to cap Hidroelectrica prices will only influence the balancing market – traders

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Bogdan Tudorache

Following investigations by the Competition Council, Hidroelectrica “pledges to offer for sale on the day ahead market (PZU/DAM) a quantity of electricity at a maximum price determined on the basis of the price provided in the forward contracts,” it is shown in a press release of the institution. Also, “Hidroelectrica pledges not to exceed a certain level of the price of electricity offered to increase power on the balancing market (PE). At the same time, Hidroelectrica pledges to separate, within the company, the activity of bidding on PE from that of bidding on PZU.”

Hidroelectrica is responsible for the production of 15-20% of energy in Romania, the vast majority being sold on the domestic market.

Could the intervention of the Competition, however, determine a trend of capping prices, following the influence of Hidroelectrica on DAM and PE, especially now, when prices are rising?

“The implementation of this set of measures will lead to direct and immediate benefits for all participants in the electricity markets, being likely to lead to an increase in the quantities traded by the company on the spot markets and a decrease in energy quantities representing the imbalances generated in SEN that can it negatively affects consumers, by increasing the price of electricity,” says the Competition.

However, traders don’t have a similar opinion. “Market influences are debatable,” a trader told energynomics.ro. “PZU is already coupled with other countries, and if you have high prices around, I would not say that it would influence (local price)… It may have an influence in the sense that the price of PE will fall, as, practically, the main issue for this investigation was at the balancing market, where prices in Romania are much higher than in other countries. Otherwise, the price of energy is the same as in the surrounding countries, but on the PE, the price in Romania is 2-3 times higher than in Hungary. But, anyway, after January 1, the rules on the PE will change and this price will decrease. Probably, that’s why this variant was proposed, a compromise solution was proposed, but a compromise that the market will decide anyway,” the quoted source also stated.

“However, there will be no influences on the energy market. Romania needs imports – if we do not import 1,000 MW this winter, we turn off the light everywhere… In winter there is not much hydraulicity. In addition, the closing price is not set by Hidroelectrica, but by other players. And the fact that you have a cheaper energy on PZU, but the one that closes the load curve (sets the closing price) is up, does not make any difference. What will really influence (this decision) is the balancing market. The price of energy will not be influenced at all,” the trader added.

The Competition Council’s investigation, launched in September 2018, aims at a potential abuse of a dominant position on the electricity production and trading market, manifested by a bidding behavior that limited the amount of energy traded on some market segments (mainly on PZU), in order to achieve significantly higher sales per PE.

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