Victor Grigorescu, Minister of Energy: The policy reform dilemmas

After five months in office at the Ministry of Energy, is required a serious discussion about the reform and putting the Romanian energy system on new bases. We all set off with the conviction that the reform is a painful process, that “the system” is hardly convinced of the need for change. That reform is a long process, that is serious, started before last autumn, and which will continue after this autumn. These starting points, valid at the end of 2015, are available today in the same way.

The reform does not consist in a single gesture with virtues of miracle. Removing of an incompetent or corrupt manager does not solve the problem of incompetence or corruption. The initiation of a broad debate to review the energy strategy does not put in our arms, starting tomorrow, a new strategic vision. The investigations conducted by the authorized institutions do not transform themselves into enforcements for the immediate recovery of damages. The laws are not adopted and do not change because a minister or a government want so, but after a correct legislative process, respecting the role of each state power. It requires concerted actions on multiple levels, and time for changes to take effect, gaining critical mass.

In Romania, the reformist effort started at the top does not generate sufficient attitude changes at the lower levels. In the first instance there is sudden paralysis. The “system” is not ready; it does not want or does not know how to cope with the new conditions. With few exceptions, the reformists are rather admired from the sidelines than followed as an example. Encouraged from the stands rather than from the ground. It is not enough. The reform must be undertaken by all those who ask aloud, with all its costs.

I will illustrate with three initiatives of the Ministry of Energy of the last five months: the elaboration of the national energy strategy, the coal sector reform and improving the corporate governance in state enterprises. I remember, however, that on November 17th, 2015, our first objective was the well passing of the cold season, without a winter program (ie the list of available production capacities and the minimum stocks of fuel that ensure the uninterrupted supply of energy, gas and heat). We passed last winter even if coal stocks were at the lower limit, we did not imported coal (questionable solution, used generously in recent years), and we properly organized our own resources and have successfully coped with it.

We launched an extensive consultation process to review the energy strategy. Over 300 accredited experts at the Ministry of Energy, in all areas of interest, participated and will continue to participate in debates. At the end of February, we published an updated document on the state of the national energy system. Debates followed in six thematic working groups, which identified the trends and issues of interest in the key sectors. All these debates were publicly accessible, and the result is available on the ministry’s website.

The purpose of this exercise is to properly substantiate the concept of the energy security, as a set of measures meant to ensure the continuity of energy supply in all conditions. The energy independence is not useful as long as the operation of wind and photovoltaic farms, of hydro power plants depends on the weather conditions. Similarly, it is not enough to ensure the consumption of natural gas from domestic production as long as, at low temperatures, the pressure in the system drops, even naturally, to the damage limit. The fact that 30% of the energy consumed in winter comes from coal-powered plants makes the problem to be one of national security and not a social problem, as was wrongly understood until now. To change the current paradigm, a visionary document is not enough; it requires a serious reform, a long-term commitment.

Consequently, we are committed to reform the coal sector, pushed by the disastrous situation in which the two companies were at the beginning of my tenure. Hunedoara Energy Complex (CEH) became insolvent under the burden of a debt of 1.3 billion lei and tens of insolvency applications. In mid-April, the Committee for mining, an advisory body set up specifically under the Ministry of Energy, confirmed the solution of restructuring CEH by reducing the activity through keeping two energy groups and two viable mines, meaning the other two will enter the program of closure agreed with the European Commission. On the other hand, Oltenia Energy Complex (CEO) recorded losses of about 900 million lei at the end of last year.

We immediately changed the Company’s management and limited the unnecessary expenditures, including the sponsoring of sports clubs that were equivalent to the annual salary of 330 employees. CEO is in the recovery process, requiring further efficiency measures discussed with the social partners, but also plans of modernizing the production capacities. All these were not put into practice without social convulsions, inevitable. Support for the reform came rather from those affected by the reforms than from those who, in recent years, have promised them illusory solutions. Jiu Valley or the Gorj problem, however, is not exclusively a problem of the Ministry of Energy or the Government, but a problem of the entire Romanian society and a long-term solution will require a broad social involvement.

Beyond the strategic approach or the specific issues related to the vulnerabilities of a sector, we attacked head-on the matter of corporate governance in companies where the state is a shareholder. I replaced managers at the top managements of companies in difficulty where the managerial performance was not desirable, opening a contest for leadership positions in major companies, where the Ordinance 109 was not implemented (CEO, Oil Terminal). We have published lists of board members to increase the transparency of the decision-making process. In the immediate future, we will launch recruitment for open jobs at Supervisory Board of Hidroelectrica, which will emerge from insolvency this year and return to a corporate management recruited on professionalism criteria.

I requested that those who are subject of a criminal investigation to leave the leadership positions in state enterprises, despite the objections relating to the presumption of innocence until a final court decision. I amended, together with other interested ministries, Ordinance 109 regarding the professional management, based on a collaboration project with international institutions, which strengthens the standards of integrity and provides a better performance evaluation of the company’s directors. Despite the support statements from the private sector, few top managers are ready to apply for posts in the public sector, whether of reasons regarding the salary or, simply, because of the lack of confidence in the continuation of reforms in the medium term. Without these elements of change, the reform will not have the consistency and the expected effects.

The reform dilemma is simple at first glance. To start with the obvious things that provides a minimum of fast results, to maintain the confidence in the process? Or to restore the system in the right direction, in the long term, so that it cannot return to the past mistakes. To give it correct operation principles resulted from the public debate, with stakeholders and other interested parties in order to avoid in the future big errors? In theory it’s a simple choice. I personally choose the option that seems more difficult in the current context: to restore the system in the right direction. The top argument for me is that you cannot change in a few months what was done wrong for years. If we want to know what normality feels like, then we must choose to build an edifice in the long term and to take responsibility even for the most difficult moments of our history.

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