The Federation of Energy Utilities Associations (ACUE) draws attention to the major risks generated by unpredictable regulations and successive administrative interventions in the energy sector, which, in the absence of a solid economic foundation and a real dialogue with the industry, risk prolonging the existing imbalances and affecting the normal functioning of the market.
According to a press release from the federation, the negative impact of unpredictable regulations and legislation continues to represent the greatest risk for the energy sector in Romania, while also constituting the most complex obstacle to its development.
“The electricity and natural gas supply sector is the most competitive segment of the energy market, being, in reality, the area where competition operates. In contrast, the production sector is characterized by a limited number of producers, which places Romania, from a structural point of view, in a sellers’ market. This imbalance is directly reflected in the level of prices formed on wholesale markets. It is essential to emphasize that approximately 50% of the final price invoiced to consumers is represented by the price of the commodity – namely the purchase cost of electricity and natural gas. Attributing price increases exclusively to the supply margin denotes a limited understanding of the real price formation mechanisms, the invoice structure and the economic factors that influence the energy market. Promoting such interpretations, even through published and withdrawn legislative projects, generates major risks for the sector and sends profoundly inadequate signals to the market,” the press release states.
ACUE representatives emphasize that energy suppliers have the role of purchasing energy from wholesale markets, managing commercial risks (price, volume and imbalance) and building competitive offers for end customers, and they compete to attract and retain customers and ensure direct relations with consumers, through billing, collection and customer service.
“Suppliers do not set the wholesale market price and do not control regulated costs, such as transmission and distribution tariffs, taxes and VAT, and the supply margin is structurally limited in a competitive market,” the cited source states.
ACUE also signals that the role of the state in the energy market must be that of architect, guarantor and arbitrator of the correct functioning of the market, not as a discretionary actor in the formation of commercial prices. Legislative changes must be based on rigorous economic analyses and real consultations with market actors, and public policies must stimulate investments in new production capacities, diversification of sources and increased market liquidity.
“The protection of consumers, especially the vulnerable, must be achieved through targeted, transparent social policies financed from the state budget. Transferring social obligations to commercial actors or substituting market mechanisms with generalized administrative measures distorts price signals and affects the correct functioning of the market. In Romania, the state decided that suppliers should pre-finance social policy schemes by applying capping and compensation mechanisms ex-ante. For four years, social protection was achieved, in fact, at the expense of energy suppliers, who pre-financed the capping of final prices for all customers,” the ACUE press release, quoted by Agerpres, emphasizes.
According to the cited source, currently, the state’s arrears with suppliers amount to approximately 10 billion lei, without a concrete decision on unblocking the validation and payment process.
“Suppliers do not create the energy price, but transfer and optimize it for the consumer within the limits of the market, but the supplier’s name appears on the final bill. For this reason, suppliers absorb a large part of the public tension associated with price increases, although they control only a fraction of them. Exploiting public confusion through policies built on false premises is not only harmful, but also irresponsible. All these practices contribute to serious public misinformation and ignore the economic realities of the energy sector. Public policies based on erroneous premises risk distorting the market, instead of offering real and sustainable solutions for obtaining competitive prices in a liquid wholesale market,” said Dana Dărăban, executive director of ACUE, quoted in the press release.
The federation representatives also state that, in order for prices to be formed correctly, the market needs, first and foremost, liquidity, both in the natural gas and electricity sectors. Romania remains a net importer of energy, and past experience shows that the sustainable solution is not administrative intervention, but correcting structural imbalances by increasing domestic capacities and reducing dependence on imports.
“ACUE remains open to institutional dialogue and supports balanced solutions that protect consumers without compromising the functioning of a stable, liquid and predictable energy market. Predictability, transparency and compliance with the principles of the competitive market are essential for the correct functioning of the energy sector and for the real benefit of consumers”, the press release also states.
ACUE is a representative federation at the level of the electricity, oil, gas and energy mining activity sector, representing the interests of important companies in the field of production, distribution, supply of electricity and natural gas and services related to these activities. ACUE represents 23 companies in the energy sector, which amounts to over 25,000 employees and an annual turnover of over 5.5 billion euros.
On Wednesday evening, a draft Ordinance was published on the website of the Ministry of Energy, according to which the commercial mark-up applied in the wholesale trading activities and the supply of electricity and natural gas to final consumers was to be limited to 3% and 5%, respectively, for a period of 12 months. Shortly afterwards, the draft was withdrawn, the ministry stating that it was published as a result of a clerical error.
“The Ministry of Energy managed, over several months, an extensive process of analysis of several scenarios aimed at ensuring lower energy prices for all Romanians. These steps were based on constant consultations with all relevant actors in the energy market and the integration of the proposals received, within an internal technical process. The document temporarily posted on the website was published as a result of a material error. It was withdrawn as soon as the situation was identified, in order to avoid misinterpretations,” explained the ministry representatives.