January 19, 2022

Industrial customers and certain household customers will be the main losers if gas market liberalization is postponed

Industrial customers and educated household consumers will be the main losers if gas market liberalization is postponed, in the context in which Ordinance 1/2020 does not enter into force, as we currently expect. At the same time, the beneficiaries would be some suppliers and importers of natural gas.

The Constitutional Court has recently admitted that Ordinance 1/2020 for the amendment of GEO 114/2018 is unconstitutional, after GEO 1 had already been rejected on February 10, 2020 in Romania’s Senate. The Ordinance would be debated in the Chamber of Deputies, which is the Decisional Chamber, and if it is rejected again the provisions of GEO 114/2018 will reapply.

If Ordinance 1/2020 is no longer in force, the main losers will be the industrial customers, which will be required to pay again higher prices than producers of similar goods in other countries, thus risking to lose marketplaces and even have important financial problems. Educated household customers, which could obtain better prices through liberalization, will also lose.

According to data obtained within the “Fair Gas Price” Project, the Intelligent Energy Association estimates that currently less than 5% of the household customers are educated and able to negotiate their contracts and obtain better prices for gas consumed.

At the same time, it is important to mention that the re-entry into force of GEO 114/2018 would involve the application of the contribution of 2% applied to the turnover obtained from electricity and gas sales, which will influence the price of gas for end-consumers (together with the other provisions).

Currently, only four months before the date set for liberalization, we are in the paradoxical situation of not knowing whether it will take place or not, whether suppliers must send offers for household consumers, whether these offers will consider the taxes and tariffs under GEO 1/2020 or those under GEO 114/2018. If GEO 1/2020 is repealed by the Parliament of Romania and gas market liberalization no longer takes place on July 1, 2020, the beneficiaries will be some gas suppliers that will obtain higher profits due to capping the price of gas for population and from the increase in the price of gas for industrial consumers.  Importers will also gain, as they will register higher profits from gas sales in Romania, following the market interventionism dictated by GEO 114/2018. For example, 2019 brought profit margins by up to 20% higher on the domestic gas market compared to margins obtained in the Balkans.

The Association recommends Romanian state authorities to clarify as soon as possible the direction in which the gas market is heading this year, as the current state can cause hurdles and confusion in addition to the already complicated situation of gas market liberalization.

The Intelligent Energy Association continues this year the “Fair Gas Price” Project, through which it teaches consumers how to act on a free market and how to protect themselves from certain “traps” under the gas supply contracts.

The Intelligent Energy Association supports gas market liberalization.  Although the term of four months for preparing consumers is quite tight, we believe that if state authorities concentrate their efforts they can help especially household customers to become educated and able to negotiate advantageous contracts.

The Intelligent Energy Association also supports the establishment of SALGAZ (Center for Alternative Settlement of Disputes in the Gas Sector), in accordance with GEO 38/2015, transposing Directive 11/2013, and tasking this center to urgently carry out a program of information and organization of courses for training household consumers negotiate their gas contracts on a liberalized market.

The Intelligent Energy Association brings together professionals in the electricity and gas sectors, who advocate for a fair gas price and for increasing transparency in Romania’s energy market. The mission of the association is to contribute to a better information of gas and energy consumers in our country.

Translation from Romanian by Romaniascout.