The Industry Committee of the Chamber of Deputies explains its amendments to Law 123/2012

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The Commission for Industries and Services concluded on Tuesday, May 16th, the report regarding the Law approving the Government Emergency Ordinance 64/2016 (issued by the Ciolos Government) aimed at amending and completing the Law on Electricity and Natural Gas 123/2012. In a press release published on the Chamber of Deputies website, the chairman of the Commission for Industries and Services, deputy Iulian Iancu (PSD Group), explains the reasons why a series of modifications have been proposed; some of these were criticized by a significant numbers of shareholders.

BRM criticises amendments to Law 123/2012 adopted by the Industry Committee of the Chamber of Deputies

Among the main changes made by the Commission for Industries, the obligation to sell all the produced, imported and exported natural gas on the wholesale platform on a transparent and non-discriminatory basis is included; on a Western European model – a single operator on the wholesale gas and electricity market, OPCOM, in order to increase the liquidity of the wholesale market by centralizing the trading activities; natural gas trading through long-term bilateral agreements, non-discriminatory access to the Natural Gas Transport Network including for the new BRUA pipeline; minimum criteria for accrediting operators for the retail market without limiting their number.

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The purpose of all changes is to create the legal framework for transparent, non-discriminatory and competitive gas trading, said the authors of the press release.

“In regard to the delicate subject of price liberalization, it must be said that, in the form issued by the Cioloş Government, the main change was the total liberalization of the price of natural gas, although Romania had negotiated a liberalization calendar until 2021. Unfortunately, the Cioloş Government did not consider that, before a total liberalization of the gas price, it would have to create a transparent, non-discriminatory and competitive trading framework and thus to eliminate the possibility for some operators to increase the price artificially and not on the basis of demand and supply”, said Iulian Iancu, chairman of the Commission for Industries and Services.

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The liberalization of the natural gas price came into force on April 1st, 2017, although the same Ciolos Government has introduced the vulnerable consumer support framework starting from April 1st, 2018 (Law 196/2016 of October 31st, 2016). “In other words, we first raise prices and only after one year we adress the vulnerable consumer issue in Romania”, warned Iancu.

“Prices increased by almost 27%”

The negative impact upon the final consumer was felt as early as April 1st, 2017: natural gas prices offered by producers and traders increased by almost 27%, from 60 lei/MWh to 72-80 lei/MWh, says the rpess release. Therefore, there is a risk that gas prices will increase by well over 80 lei/MWh at the beginning of winter 2017-2018, seriously affecting final consumers including the hot water supply and heat of the population.

In the explanatory note for the new form of GEO 64/2016, it is also stated that the ordinance is promoted in order to avoid the violation of art. 35 and art. 36 of the Treaty regarding the Functioning of the European Union and Art. 40, letter c) of the Directive 2009/73/EC. The articles mention “the abolition of the restrictions on gas trade between Member States, including the development of cross-border transport capacities” and “the quantitative export restrictions are forbidden.” Thus, these European provisions do not contain references to price liberalization, aspect also confirmed by the representatives of the European Commission from D.G. Energy.

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All stakeholders, namely economic operators associative structures, public authorities with attributions in the field, including representatives from Bucharest and Brussels (DG Energy of the European Union Commission), participated in the debates, the authors of the press release said.

In detail, these are the amendments and additions to GEO 64/2016 following the debates in the Commission for Industries and Services:

1. Creating the legislative framework for transparent, non-discriminatory and competitive gas natural gas trading:

  • the obligation to trade on the wholesale trading platform the entire quantity of natural gas produced, imported and exported in a transparent and non-discriminatory manner;
  • the operator of the wholesale gas market will be represented by OPCOM S.A., as well as on the electricity market, meeting the European Union’s energy strategy for achieving a single energy market in line with the resolution “Towards a European Energy Union”, adopted by the European Parliament in December 2015.

The goal is to increase the liquidity of the wholesale competitive market by centralizing the trading activities. These measures are the same as those established in Austria since January 2013, when the creation of a single national PVT and the management of PVT transactions through the Central European Gas Hub (CEGH) was established by the Gas Law. Similar situations, regarding the unique exchange operator, can be found in Germany, Great Britain, Belgium, Denmark, France, Italy, the Netherlands, Poland, Hungary, etc.

“Legal conditions have been created for natural gas trading through long-term bilateral agreements”

OPCOM S.A. already has an infrastructure developed at European and international standards for the support of the natural gas transactions and its activity is fully subject to the regulations issued and approved by ANRE and by the operational documents approved by ANRE.

  • legal conditions have been created for natural gas trading through long-term bilateral agreements, of which sales conditions will be determined by the seller, thus allowing any buyer in Romania or any other member state of the European Union;
  • the conditions for the non-discriminatory access to the Natural Gas Transport Network, including for the new BRUA pipeline, have been created for all economic operators in Romania and any other member state of the European Union;
  • minimum criteria have been laid down for the accreditation of operators for the retail market without limiting their number, which are mainly criteria of transparency and security of information;
  • market transparency by requiring that all prices and quantities established as a result of transactions on all centralized natural gas markets as well as all prices and quantities of the agreements on the regulated market, export agreements, import agreements, intragroup agreements, transfer prices and the related quantities are public in aggregate form and do not affect the commercial interests of the operators;

2. Implementation of the entry-exit system using the virtual trading point and performing the balancing for each gas day in the PVT – in line with EU recommendations – Romania being the last EU country that has not yet implemented this system that brings transparency and fluidity to the system;

3. Correcting existing errors, such as:

  • removing the distribution concession royalty from the distribution price, this being a competitive element negotiated with the contracting authorities and not a deductible tax;
  • the limitation of the justified costs for transmission and distribution operators strictly linked to the core business and profit which may not exceed 10%;
  • streamlining the procedures and shortening the time for obtaining approvals by transferring from the Ministry of Energy to the Territorial Administrative Units (UATs) the right to grant distribution and transport concessions;
  • for connecting isolated localities and houses to the natural gas network it was introduced the obligation of the distribution concessionaires to expand their networks according to the needs of the UAT development plans.

All these measures proposed by the Commission for Industries and Services for the amendment of the Government Emergency Ordinance 64/2016 are essential for the realization of a regional gas hub in Romania, concludes the release of the Commission for Industries.

The online platform www.hotnews.ro announced that, according to sources in the energy sector, DG Energy has sent a letter to the chairman of the Chamber of Deputies’ Industry Committee, Iulian Iancu, on May 16, stating that trading he entire quantity of natural gas through a single platform, respectively OPCOM, is not recommended. According to DG Energy, there a balance should be guarantted by allowing competition between trading platforms, and granting OPCOM exclusive rights could raise competition issues, said HotNews.

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