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The crisis in January tested the resilience of the energy system and the market functionality

9 March 2017
Electricity
energynomics

The price variations recorded in January in the electricity market highlighted the speculative elements of a stock exchange, said Niculae Havrileţ, the president of ANRE, at a conference organized by the online publication energy-center, under the title “Lessons of the 2016/2017 winter”. The energy system proved to be very resilient in difficult conditions, including due to a diversifed mix in generation sector, where coal producers have provided the necessary system services.

The president of ANRE stressed out that Romania even exported electricity during the weeks of strong frost, which shows that there was not a problem of energy resources. It is one of the main elements that made Romania to be praised in the latest European Commission report regarding the energy market, for its energy system resilience and for the stability it provided in the region. “The speculators lost”, said Havrileţ, and the prices varied not that much in the first month of the year: the average price in Romania was with 3.5% higher than the European average (in the first week of January), with 18 % higher (in the second week), and with 10% lower (within the last two weeks of the month).

Ionel Ilie, general manager of CE Oltenia, insisted that the position of savior of the energy system, in crisis situations, can only be maintained through a better (secondary) regulation of the market, not only to enable the financial balancing of the company, but also the implementing of extensive investments in modernization and refurbishment. “It is false that the manufacturer based on coal has higher production costs”, said Ilie. CE Oltenia has a production cost of 170 lei per MWh and in 2016 managed to achieve „a price rollback of 190 lei per MWh”, which includes revenues from the system services and the cogeneration bonus. “We paid in 2016 65 million euros for CO2 certificates and another 30 million lei for the green certificates”, said Ionel Ilie. Since 2016, CEO has its own broker of CO2 certificates, which allows it to win a few tens of cent for every certificate purchased. The CEO official mentioned some changes of the secondary legislation which would allow for a fair and more functional market, mainly in the segment of auctions for system services. According to the ANRE President, these are already under scrutiny of the authority.

The system has withstood and Romania passed the crisis of the frost period, synthesized Niculae Havrileţ. The market has functioned very well, said the head of ANRE, who stressed out that we could not talk about manipulation in the electricity market, given that “there are no dominant actors, and the Romanian market – OPCOM – is coupled to regional markets”.

In his turn, the chairman of the Association of Electricity Suppliers in Romania (AFEER), Ion Lungu, who attended the debate, stated that everything began from the great competition that exists at the moment between the energy suppliers in Romania.

“It was a cold shower and probably ot was not entirely their [the traders, e.n.] fault. Some traders became insolvent, others are preparing to enter [into insolvency]. Everything starts from special competition which is currently on the market, from the very small margins and from the fact that they sought for solutions. They went up to the limit in assuming risks. One reason is the lack of flexibility on the wholesale market”, said Lungu.

ANRE has inspected 18 companies and identified total losses of 440 million lei

Havrileţ added that controls were carried out at 18 companies and seven to eight vendors have been identified, that have generated total losses of 440 million lei for the suppliers of last resort and for the network operators, losses that these operators will have to recover in court. “It is the first time the regulating authority did not socialize such costs. They are calculated in the account of such traders, some went bankrupt or became insolvent in dealing with the banks that have financed them”, said Havrileţ.

In mid-February, ANRE withdrew the supply licenses for the traders Arelco Power and Arelco Energy. On Friday, March 10th, ANRE published the names of five companies that din not fulfill their obligations under contracts signed un the Centralized Market for Universal Service (PCSU): Arelco Power, Energy Distribution Services, KDF Energy, Alpiq Romindustries  and Three Wings.

“We have completed several inspections, investigations, and we have concluded that certain traders have acted wrongly, endangering agreements with major consumers, generating cost elements for the network operators and for the providers of last resort. The supply license for these traders has been withdrawn, they were given fines and we consider that the most important thing is that the framework agreement, which is concluded for the open market – because these events only took place on the open market – we consider that those framework agreements should be carried out more carefully. As we warn every time in our monthly press releases, the consumers must be very careful on what the unilaterally delation means, when supplier leaves you without energy and you are forced to buy on the spot market, a very expensive market, or from the balance market. I think the rules that dominate the framework agreements for supply from the free market should be tightened”, said the head of ANRE.

In January, the energy price increased on the spot market and reached a historic record of 680 lei per MWh by the end of the month, triple compared to the first days of the year.

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