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ANRE raises the prices for natural gas without offering consumers any new perspective

2 June 2015

Open letter to President of ANRE Niculae Havrileţ on the occasion of a meeting with consumers, at the Central University Library “Eugen Todoran” Timișoara, on 29 May 2015, included in the Caravan “Fair Gas Price”.

Dear Mr. President

I welcome your initiative to introduce an obligation for gas suppliers to inform their gas consumers through a draft order to approve Regulation on briefing the final customers of electricity and natural gas.

The first condition that allows a company to exercise some control over the price is the situation in which consumers are not informed or their information about the good that the company offers is imperfect. For buyers, to try to obtain a better price involves information, knowledge, skill etc. Their absence allows sellers to obtain high prices for gas.

Firms have a natural tendency to impose a monopoly in order to secure profit

The free market, competition, means spending time and money for the seller and the most “dangerous thing for a seller”, infidelity. No company well positioned in a market does not want these risks.

Gas market liberalization entails eliminating monopolistic position of companies operating in this field, eliminating the possibility of influencing the price of gas on the market directly or indirectly, but first requires information at a consumer level.

As long as consumers will not be attracted to this game, they will not see the benefits of negotiating prices and they will not have a minimum set of knowledge, they will remain “captive” even in the liberalized market.

Gas market liberalization agreed by the Government in 2012, with the World Bank, EU and IMF, established the obligation of a set of measures by ANRE and gas suppliers, before 1 January 2015, the date of market liberalization for non-households customers. Even if this initiative comes very late, the necessity to inform consumers is essential.

As a supporter of the principles of liberalization, of transparent activities and of fairness, I believe that the way gas market liberalization was transposed in Romania, complicity and duplicity on the part of authorities made the correct principles to backfire.

To promote a free market is to think more about the future without forgetting the past, having the courage to be te conquered by innovative ideas after a sustainability analysis.

As the initiator of Fair Gas Price campaign, I have to notice that this order, as shown, will not create an informed consumer, a consumer able to face a liberalized gas market.

In support of this assessment I note the following:

  • The draft Order creates and obligation for the provider to inform only its end customers, an obligation already established by other regulations in force, and this requirement already has a poor implementation.
  • Information to transmit to customers do not refer to essential elements that would ensure market dynamism and development of market competition. In fact no company, even forced, will not open the eyes of their customers; to teach them how to go to the competition, how to refuse the price offered, how to negotiate the contract etc.
  • On substance, the draft obliges to carry almost everything is done now, but the key is that it entitles providers to increase outreach activities expenditure to 1% of their annual costs. Accordingly, it creates the legal formula of gas price increases, but the opportunity of siphoning this money or to target them to other areas (various other campaigns).
  • It creates a large discrepancy between suppliers operating on the regulated market and those active in the free market. Thus, providers in the free market will reduce their profit by these expenses, while for providers active in the regulated market, ANRE will raise the price of gas to not diminish their profits. In fact, the only ones who will pay these costs will be the households.
  • The functioning of the gas market, trading mechanisms and commercial procedures determines the need to teach the Romanian consumers, and this cannot be done just by publishing extracts from normative acts.

The draft Order presented is designed to say “look, something was done”, but in fact noting changes. Furthermore, this nothing will extract money from the pockets of household clients. It is another piece of legislation that makes a product more expensive, without a fresh perspective.

On the free market, the price of gas is formed after a negotiation between suppliers and consumers. Depending on their ability to negotiate, a price is obtained. This price has direct components (visible) and indirect components (invisible). If we assume that suppliers are aware of these issues, customers are less likely to know them.

In this context, we appreciate the need for national public campaigns to disseminate information, promote the culture of learning about the gas free market without raising the price of gas to household customers.

Liberalized gas market without informed consumers, encouraged intervening, supported to negotiate, able to analyze various offers, determined to act responsibly, prudently and without constraints, it will be another disappointment for the Romanian people.

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