The amendments brought in the Senate to GEO 119/2022 will create even greater dysfunctions on the energy market, and the Association of Energy Suppliers of Romania (AFEER) demands transparency and a real consultation of energy operators during the debates in the Chamber of Deputies, an AFEER release states.
“The energy market is being destroyed by GEO 119 and the amendments brought to the draft law in the Senate! We draw attention to the fact that GEO 119/2022 for the amendment and completion of Government Emergency Ordinance No. 27/2022 regarding the measures applicable to final customers in the electricity and gas market natural disasters in the period April 1, 2022 – March 31, 2023, with the amendments approved by the Senate to the draft law approving the GEO, will create even greater, almost insurmountable dysfunctions in the activity of operators in the entire energy sector, with the risk of destroying the functionality of the energy market. The situation in the energy market will be a dramatic one, if there is no real transparency and consultation of the participants in it, especially through the voice of the professional associations, in the debates within the specialized Committees of the Chamber of Deputies, respectively a clarification and modification of some legal provisions,” said Laurențiu Urluescu, president of AFEER.
AFEER appreciates that the implementation of the new legal provisions will create even greater problems and additional costs on the part of suppliers, as well as other operators in the energy market.
“We want to emphasize, once again, that support measures are needed for a number of consumers, who are in real need. It is good that support is given to vulnerable consumers, hospitals, educational and cultural institutions, churches, we understand the senators’ approach in this meaning. However, it is not clear how these measures will be applied. Suppliers need time to prepare and apply the new provisions, but above all, it is necessary to provide them with a series of data that will allow them the application of the new provisions, such as the list of families with three or more children, beneficiaries of the ceiling,” the press release also states.
It is also necessary for the state authorities to provide suppliers with data related to the companies’ activity. For example, pharmacies also benefit from price capping. However, most of these operate in premises rented from individuals or legal entities and in the suppliers’ portfolio such a place of consumption does not appear to be a pharmacy. Only a state institution can find out or have access to this information and it is absolutely necessary to make it available to the suppliers, so that the suppliers can comply with the law and issue an appropriate invoice to such a consumer, the source emphasizes.
The Senate also adopted the provision according to which suppliers with at least 100,000 customers in their portfolio and a consumption of at least 500 GWh in 2021 are obliged to buy 70% of the energy requirement through bilateral contracts for a minimum of 3 years.
“The measure is intended to be in support of consumers, but in reality it is not! We are currently facing prices at historic record levels. And in order to comply with the law, suppliers will have to purchase energy exactly in a moment of record prices. Practically, through this legislative provision, the authorities “freeze” the current huge prices for 3 years! The price on the market may decrease in the following period, but in the contracts concluded for 3 years, the record price will remain fixed. And this under the conditions in which the state authorities only recognize an average price of 1,300 lei/MWh, according to GEO 119/2022,” the suppliers’ statement also adds.
They indicated that, since September 1, since GEO 119/2022 came into force, no significant longer-term contract (for a week, a month or a year) has been concluded on the platforms managed by OPCOM. And on the spot market (PZU – Day Ahead Market) prices constantly exceed 2,000 lei/MWh.
In addition, the suppliers are obliged to buy energy for the customer portfolio from the year 2021, under the conditions in which any customer, domestic or industrial, can move to another supplier within 21 days. From 2021 until now, a customer could change his supplier several dozen times.
Another provision refers to the obligation of producers to sell 70% of the electricity produced only through bilateral contracts negotiated directly, that is, outside the centralized markets, with completely non-transparent quantities and prices; as the legislation does not detail, it means that all producers – large and small, even prosumers – are obliged to sell 70% of the energy produced to suppliers, distributors, Transelectrica and large consumers, AFEER says, according to Agerpres.
“However, for the national energy system (SEN), perhaps the most serious provision is the one related to over-taxation or, as defined in GEO 119/2022, ‘contribution to the Energy Transition Fund’. This 98% surcharge leaves, basically, the operators who carry out trading activities, once more, without money! A percentage of only 2% of the difference between the price at which electricity or natural gas is purchased and the price at which it is sold does not cover the costs. Especially when electricity or natural gas are imported. Only the financial costs and with the import capacity reservation exceed this percentage, without adding other costs that importers have! Under these conditions it is difficult to assume that it will be imported again. And this in the situation in which, for several years, Romania has been a net importer of both electricity and natural gas. Without these imports, especially in the winter period, the entire energy system will have to suffer. Or the consumers will suffer, because there won’t be enough natural gas or electricity for everyone, so some will be forced to reduce their consumption or close,” the suppliers say.
According to the cited source, following GEO 119, no forward transactions are made for either electricity or natural gas, the costs of import capacities have dropped by half (which shows the lack of appetite of suppliers for imports), banks no longer grant loans in the field of energy, there is a risk of financial blockage with suppliers, while they are reluctant to offer new customers and extend existing contracts.
Also, the ordinance leads to the commercial blocking of electricity and natural gas imports on the eve of winter. “Large amounts of energy are forcibly removed from the platforms of the centralized market, which is transparent, which leads to a decrease in the liquidity of the market and the lack of a correct reference price. Additional costs are induced and the activities of the suppliers are made more difficult,” the statement added.
Taxation with 98% of the gross margin makes import-export activities commercially impossible, because the costs related to these activities – transport, financial, etc. – far exceed 2%. In no European country is there such a surcharge as in Romania, which risks becoming a transit country, the document emphasizes.
Taxing 100% of exports, given that Romania is a net importer, is nonsense and will increase the appetite of neighboring countries to apply the same, which, for Romania, will be disastrous, because imports will no longer be possible not at all.
According to AFEER estimates, by applying the previous legislative provisions (without GEO 119/2022), the state would collect at least 42 billion lei from the energy sector and, according to the various authorities’ own declarations, it would have to reimburse approximately 30 billion lei for the whole year 2022. To date, only 4 billion lei have been paid to suppliers.
“One thing is as clear as possible: the ceiling is made with the money of the suppliers, but also of the banks. More recently, the senators have expanded the range of consumers who will benefit from support measures, also with the contribution of the suppliers, who, if they do not receive urgently the money that is due to them, risk becoming unable to pay! We draw attention, once again: if a large supplier or even a medium one fails, immediately, in the second move, it is possible that the supplier of last resort will also fail,” they also showed the representatives of the suppliers.