September 22, 2020

Bucharest residents should only accept after liberalization gas offers with discounts of 5.5-21% compared to the current price

Gas suppliers have started to send offers to customers for the period after market liberalization, due as of July 1, 2020. A first offer that I received from my supplier in April 2020 presents a price increase compared to 2019 by 163% for a studio owned in Bucharest and where I have an annual consumption of 500 kWh. Dissatisfied with the proposal, I notified the supplier and publicly warned on such practices in an article published on Intelligent Energy Association blog. Therefore, in May, the same supplier came up with another offer, much better, this time proposing a price by 0.8% lower than that paid in 2019. I think it is very important to continue writing about this issue, to encourage you to be equally persevering.

The pandemic leaves marks, so does the failure to pay attention to gas offers received from suppliers

We are in a context where many household consumers, with their eyes on the pandemic and the sanitary crisis, risk being in the situation where, after July 1, 2020, after liberalization, they will have a very high price. The legislation preparing the gas market liberalization, which would have had the role of supporting household customers, is either missing (I mention the lack of an institution for the settlement of disputes on the gas market (SAL), as autonomous, non-governmental, apolitical, of public interest legal entity, whose activity would be to mediate conflicts on the market, according to Directive 2013/11/EU), or it favors suppliers (Article 4 of ANRE Order 27/2020: “should household customers fail to conclude a gas supply contract, gas supply will continue to be carried out, but at the price related to the offer communicated to the customer”).

The third offer has big chance to be the best

Therefore, what I encourage you all to do is to request a second and third gas offer from your suppliers. What I believe is that there will be even a third gas offer from suppliers, most likely in June 2020. The price under it may be much lower, but this only if there is a reaction from consumers, showing at individual level their dissatisfaction regarding prices offered by suppliers, and also joining a global reaction at the level of public opinion regarding the non-competitive offers.

Focus on offers in Bucharest

I will make an analysis of the potential price levels, which should be discussed correctly at the level of Bucharest. I chose the Capital for analysis because this is where I started the analysis in April, but I will also try the same type of analyzes for other cities and regions in Romania. In various areas of the country, there are different distribution operators, each with another distribution tariff and thus the final price varies.

In Bucharest, there are three major categories of household consumers:

  • Located in apartments and who use gas for preparing food, with a relatively constant consumption during a month and which is around 100 kWh;
  • Located in apartments with an average area of 50sqm and who use gas to prepare food, for hot water and heating, with a relatively constant consumption during summer months of around 200 kWh and a consumption during winter months of around 1,100 kWh;
  • Located in individual homes with an average area of 100sqm and who use gas to prepare food, for hot water and heating, with a relatively constant consumption during summer months of around 200 kWh and a consumption during winter months of around 4,000 kWh.

Analyzing the price at which gas is sold on BRM (https://brm2.itcm.ro/piata-forward-gn/), I notice that it is approximately RON 0.05/kWh for summer months and about RON 0.074/kWh for gas to be delivered in the winter of 2020/2021.

Further, very understanding, I consider that my supplier purchases gas on the exchange at these prices, resulting in a different cost of hydrocarbons purchased for consumers during summer/winter, added to which are the costs with the transmission and distribution services and a trade markup of 2%.

For the first case, gas used to prepare food should have a Fair Gas Price not exceeding the value of RON 0.10179/kWh.

For the case where gas is used in an apartment (food preparation, hot water and heating), a Fair Gas Price should not be higher than RON 0.11352/kWh.

Next, for the situation where gas is used in a home (food preparation, hot water and heating), a Fair Gas Price should not be higher than RON 0,11712/kWh.

Instead of conclusion

Therefore, if we consider in calculation the estimated cost of gas (according to the current quotations on the gas trading platform, managed by the Romanian Commodities Exchange (BRM), the service tariffs and the trade markup of the supplier), a Fair Gas Price of hydrocarbons supplied in Bucharest for household consumers, for gas to be supplied after July 1, 2020, should vary between RON 0.10179 and RON 0.11712/kWh. These values involve minimum discounts between 5.5% and 21% compared to the level offered to me in May and which was RON 0.12352/kWh.

The reactions of consumers to suppliers are the only ways to determine them to make new offers to the level where the consumer can get a Fair Gas Price. The Intelligent Energy Association will continue the Fair Gas Price Campaign started in 2015 and in the following period will monitor the price offers on the market and make recommendations for gas consumers both through written analyzes and through webinars organized on media platforms.

Together we can reach a Fair Gas Price.

Translation from Romanian by Romaniascout.