Gas market developments after liberalization in Romania

Based on the legal framework established by adopting the Electricity and Natural Gas Law 123 in 2012 and the Memorandum of Romania’s Government with the IMF, WB and the EU, on the establishment of a buffer period for gas market liberalization. The Memorandum contained a timetable for the elimination of regulated prices, which started on 1 July 2013 and ended in 2015 for non-household consumers and in 2018 for household consumers. The timetable for the gradual elimination of the regulated gas price for household consumers established that as of 1 October 2018 the price of gas purchased for household consumers be at a level of RON 119/MWh. The price of gas purchased from domestic production in September 2018 is at around RON 73/MWh, which means that the price established on the free market at the end of the price deregulation timetable proposed by the Government of Romania is by RON 46/MWh lower than the administrative price established by the Government. At the end of the price deregulation timetable proposed by the Government of Romania, the price of gas established on the free market is by 63% lower than that administratively established by the Government.

The Intelligent Energy Association conducted a study on how the gas market evolved in Romania in the buffer period of 6 years established in 2012 for gas market liberalization. The analysis relied exclusively on data published on ANRE website and resumed to the analysis of prices in May each year, due to the fact that the last Gas Market Report published is for May 2018. Following the analysis carried out we can state that gas price evolution in Romania in the liberalization period (2012-2018):

• the average price of gas purchased for sale to end-customers increased by around 18% (the price of gas from domestic production, import etc.; average prices for May)
• the average price of gas purchased from domestic production, for sale to end-customers increased by around 36%
• the average price of gas purchased from import for sale to end-customers decreased by around 45% (the import share falling significantly in 2018 compared to 2012)
• the distribution tariffs of the main gas distribution operators increased by up to 21%
• the regulated price for household consumers increased by up to 25%
• the amounts applied by regulated suppliers as difference between the regulated gas price for population, the average gas acquisition price and regulated transmission and distribution tariffs increased by up to 90%.

Concluding:

• The evolution of the price of gas from domestic production can be explained by the fact that this price was maintained low for years, to allow covering the gas consumption demand from import, which was at a price by up to 3 times higher. The decrease in import gas prices and reduction of import share in the gas consumption balance determined the apparition of corrections on this price category and the elimination of state intervention in setting a price of gas from domestic production in an arbitrary and sometimes biased manner.
• The evolution of gas distribution tariffs raises question marks in relation to the investment, operational-qualitative and even quantitative activity.
• The evolution of the regulated price for household consumers finds explanations only in the justification of the increase in gas acquisition prices and distribution tariffs, the amounts applied by some regulated suppliers as difference between the regulated price of gas for population, the average gas acquisition price and the regulated transmission and distribution tariffs increasing significantly over the past few years.

Translation from Romanian by Romaniascout.