Gas prices shouldn’t have increased for the entire population

In early January 2018, a communique issued by ANRE showed the necessity to increase gas prices for population, as CUG had increased. But what is CUG? CUG is the unitary cost of gas purchased by suppliers, which they resell to population.  We will do some hypothetical calculations, in the absence of official data, given that ANRE has not issued market reports since 2016.

Analyzing the unitary cost of gas (CUG) as average of costs in the Romanian gas market, the increase in gas prices for population according to the elements presented in ANRE communique dated 8 January 2018 seems fair. Liberalization of the price of gas purchased by suppliers that sell gas to population as of 1 April 2017 and the amendments to the gas law made in October 2016 determine great differences between the unitary costs of natural gas at the level of various gas suppliers to population. This situation makes some suppliers in the regulated market benefit from additional profits and other register losses. Even if the ACUE Federation, employers’ organization that represents the interests of some of the most involved, has rushed to issue a press release, pointing at gas producers, I believe the harm comes from elsewhere: Those who accuse are the guilty!

We will present a hypothetical calculation, on the unitary cost of gas (CUG) for one of the important suppliers that deliver gas on the Romanian gas market.

The situation before 1 April 2017

Before 1 April 2017, we had the following situation of costs with gas purchased by suppliers to be delivered to population.

• gas was purchased by suppliers from gas producers from domestic production at RON 60/MWh, according to a Government Decision, plus costs representing the cost with gas transmission and costs with the mandatory storage of gas for population. Suppliers have also purchased a small amount of gas from import for population, whose costs we cannot estimate, due to the lack of public data, and we assume it cancelled by the discounts to the price of RON 60/MWh that some suppliers have obtained,
• the cost of gas transmission was set by ANRE, the value calculated by me for one of the important suppliers in the market being RON 6.4/MWh.
• the cost of gas storage was set by ANRE, the value calculated by me for this supplier being RON 1.67/MWh (the storage tariffs were set by ANRE at RON 11.96/MWh and part of the gas stored and considered to be actually used by the supplier in the analyzed period at around 14%).
• adding to the cost with gas purchased from producers (RON 60/MWh) the cost with transmission (RON 6.4/MWh) and the cost with storage (RON 1.67/MWh), we get a CUG of RON 68.07/MWh.

This value is by RON 8.57/MWh lower than the CUG approved by ANRE, for April 2016 – 31 March 2017, of RON 76.64/MWh. In other words, if the assumptions made are accurate (based on the few existing public data), the population receiving gas from this supplier should have benefited in the winter of 2016-2017 from a gas price discount of 7.5%.

The situation for 1 April 2017 – 9 January 2018

Analyzing the elements of the unitary gas cost (CUG), for acquisitions of the same supplier after 1 April 2017, we have the following situation:

• the weighted average price of gas purchased on BRM (by order to initiate the acquisition) for 2017 (there were transactions for this supplier only with gas from domestic production) was RON 71.65/MWh. Suppliers also purchased a small amount of gas from import, whose costs we cannot estimate due to the lack of data and we assume it cancelled by the discounts to the average price that some suppliers have obtained through the bilateral contracts,
• the cost of gas transmission was set by ANRE, the value calculated by me for the same supplier analyzed being RON 6.4/MWh.
• the cost of gas storage was set by ANRE, the value calculated by me for this supplier being RON 1.19/MWh (the storage tariffs were set by ANRE at RON 11.96/MWh and part of the gas stored and considered to be actually used by the supplier in the analyzed period at around 10%).

Adding to the value of RON 71.65/MWh the cost with gas transmission and storage, we get a CUG of RON 79.24/MWh. This value is by RON 2.24/MWh lower than the CUG approved by ANRE, for 1 April 2017 – 31 March 2018, of RON 81.48/MWh. In other words, if the assumptions made are accurate, the population receiving gas from this supplier should have benefited in 2017 from a gas price discount of 1.9%.

The situation after 10 January 2018

Analyzing the elements of the unitary gas cost (CUG), for acquisitions of the same supplier after 10 January 2018, we have the following situation:

• the weighted average price of gas purchased on BRM (by order to initiate the acquisition) with delivery in 2018 (gas from domestic production) by this supplier was RON 74.13/MWh. The analyzed supplier will probably purchase an amount of gas from import for population, whose costs we cannot estimate due to the lack of data and we assume it cancelled by the supplier’s behavior to sell and buy the same day an amount of gas, apparently at loss, but in fact making a trick, which brings a double profit – an important gain from gas sale and the acquisition of more expensive gas from the exchange to justify its request to increase CUG for gas sold to population.
• the cost of gas transmission was set by ANRE, the value calculated by me for the analyzed supplier analyzed being RON 6.4/MWh.
• the cost of gas storage was set by ANRE, the value calculated by me for this supplier being RON 1.79/MWh (the storage tariffs were set by ANRE at RON 11.96/MWh and part of the gas stored and considered to be actually used by the supplier in the analyzed period at around 15%).

Being aware that the few public data available and used in these calculations do not accurately reflect the costs in determining CUG, we are transparency that the gas law sets as obligation to bring in the public space data that accurately present the legal unitary costs of natural gas for each supplier in the market, so that the population can understand: Why does it become poorer from an energy point of view?

Translation from Romanian by Romaniascout.