Utility payment deferral – change proposals from EPG

The draft law on the utility payment deferral for three months is based on a fair idea of social protection, believe to experts of the think-tank Energy Policy Group. However, the application of this idea is likely to fail, if the conditions of application are not well and coherently delimited. Most importantly, the category of beneficiaries must be clearly delimited, EPG points out in an analysis published for public debate.

Energy Policy Group launches several proposals for the draft law to be revised, in order to include “better circumscribed conditions – on the one hand, more restrictive, on the other, more generous – for the beneficiaries”:

  • in the non-household segment, the benefits ought to be limited to SMEs
  • the application period should be June-August or July-September, in order to allow for accessing this protection mechanism also “those who are expected to thicken in the coming weeks the ranks of individuals and legal entities seriously affected by the crisis”
  • the qualification requirements must be as non-bureaucratic as possible, therefore clearer and more reasonable, in order to be easily processed by the supply companies that will collect the applications for deferred payment

A necessary initiative…

On Friday, April 3, the Parliament adopted the draft law for granting facilities for taxpayers economic operators in Romania. In fact, the draft law, which was sent for promulgation to the President of Romania, addresses not only the economic agents, but also individuals. Art. 4 gives them the possibility to ask for deferred payment of monthly bills for utilities – “water-waste water, energy, gas, sanitation, telephone and Internet services, cable TV, except voice and mobile data services” – for a period of three months from the entry into force of the law.

More precisely, among the beneficiaries there are natural persons, affected “directly or indirectly by the measures imposed by the competent authorities during the state of emergency”, but also economic operators whose activity “has been stopped or [whose]revenues or receipts have diminished with at least 15% in the current month, compared to the average of the previous two months”. After the expiry of the three-month period, the amounts due are to be paid in installments, in the 12 months thereafter, without interest and penalties.

Further on, paragraph (3) specifies that “for covering the equivalent of the sums affected…, the Ministry of Public Finance makes available to the utility providers, through the State Treasury, rate credits with zero interest for a period of up to 18 months.”

… but too lax, too vague and overly generous

It is good idea, says EPG, with “undeniable merits of social protection and macroeconomic efficiency; it is currently being applied, with some variations, in industrialized states that have been hit hard by the Covid-19 crisis, such as Italy and Spain”. On the other hand, its successful implementation depends essentially on the good delimitation of the category of beneficiaries; here, the analysis identifies a series of shortcomings for the correction of which the “draft law must be sent back in Parliament”.

  • it is more appropriate for such a law to enter into force on 1 June or 1 July, because in the segment of household consumers, “the number of those in technical unemployment and people with independent activities seriously affected by the quasi-general stall of the economic activity [ …] will not reach a peak before mid-May”.
  • deferment from paying bills should be an option only for household consumers who really are in serious financial problems. The wording “all natural persons “directly or indirectly” affected is far too vague and creates both a problem of “moral hazard” and one of inefficient allocation of public funds during times of crisis.
  • the law must also have as beneficiaries all those who, for various reasons, already had an income below the minimum wage level in the economy, as well as those who have no income whatsoever and who, in fact, work in the non-taxed (“black”) market; they should be identified based on a certificate that ANAF can issue immediately.
  • the requirement for the Government to define ” the vulnerable consumer until May 1, 2020″, and to provide an aid scheme for this social category comes with a unrealistic close deadline
  • regarding non-household consumers, a minimum level of 50% decrease in revenue or income should have been imposed, compared to the average of the last six months, not just the last two months of activity. The draft law sent to the promulgation refers to economic operators whose activity “was stopped or [whose]revenues or income decreased by at least 15% in the current month, compared to the average of the previous two months”. According to EPG, a 15% monthly income or revenue decrease is easy to instrumentalize by most economic agents, through relatively slight delays in cash flow.
  • such a transitional mechanism of economic protection would justifiably apply only to SMEs, not to large companies.

About EPG

The Energy Policy Group (EPG) is a Bucharest-based non-profit, independent think-tank specializing in energy and climate policy, market analytics and energy strategy, grounded in February 2014. EPG’s regional focus is Eastern Europe and the Black Sea Basin. Its analyses, though, are informed by wider trends and processes at global and EU levels.


Leave A Reply