Why today a full gas market liberalization is no longer possible

The comfort zone chases away the idea of free market. People always expect someone else to think about their own good. Not even the fact that after 20 years since the start of gas market liberalization that resulted in an increase in gas prices by 20 times, in a lower quality of works, in an increased number of days waiting for gas connection, in a larger number of gas accidents etc., has caused people’s mentality to change. The comfort zone is the strongest resistance to their own welfare. Before discussing about price liberalization for population, we should discuss about campaigns to inform and educate the population, otherwise the effect will be disastrous in the long run. Gas market liberalization, agreed by the Government of Romania in 2012 with the World Bank, EU and IMF, set the obligation for ANRE and gas suppliers to implement a number of measures, before market liberalization. A schedule was approved for the increase in the acquisition price of gas from domestic production for customers in the regulated market, as well the program of measures to be taken before the full gas market liberalization.

The customer information program in 2012 was to be held during 2012-2018 and contained:

– 35 actions agreed to be fulfilled before market liberalization, of which only 10 actions were fulfilled;

– 5 continuous actions of customer information, but which haven’t been carried out at all.

Most actions were ANRE’s obligation. It was a big mistake, which has led to a strong increase in gas prices immediately after market liberalization for non-household customers, when some suppliers took advantage of the lack of specific knowledge at the level of consumers. Before removing the provisions of GEO 114 on gas market liberalization, it is necessary to hold a powerful Fair Gas Price campaign, in order to teach customers how to defend themselves from certain suppliers that will take advantage of the lack of specific knowledge on a free market.

Details https://asociatiaenergiainteligenta.ro/?p=2108&lang=en

The gas price trend on the Romanian market indicates that in the summer of 2020 the price of gas – the price of commodity – will get closer to the value of the capped price of gas from domestic production for the population, which makes ideal the cancellation of provisions of GEO 114, on capping gas prices and gas market liberalization. Analyzing the future trends of gas prices, such a situation will probably be met only after several years. The price of gas in a liberalized market is a unitary outcome of the market value and represents the amount for which a quantity can be exchanged on a given date, between a determined buyer and a determined seller, in a balanced transaction, after appropriate marketing, in which each party acts in an informed manner, prudently and without constraints. This definition reflects how far the customers in Romania are from acting on a liberalized market. The main causes are: Non-information and misinformation of consumers. The first condition allowing a company to exercise a certain control over prices is the situation in which consumers are not informed or information about the good provided by the company is not perfect. For buyers, trying to get information in the market involves skill, an expense of time, effort etc. Lack of perfection of information among buyers gives the possibility to sellers to introduce and maintain different prices for similar gas offers. I believe that the lack of perfection of information plays a more important role in the situations where the demand for that good is inelastic in relation to the price. The greater the stickiness, the less willing is the buyer to spend to obtain the best price. Less effort from buyers will result in a lower pressure exercised on sellers to offer lower prices. Non-information and misinformation of consumers were the basis of the so-called “Smart Guys in Energy”. Since the imperfection of information is widespread, it is certain that buyers will make mistakes. One of them is purchasing gas based on the idea of continuity and tradition.

Companies naturally tend to impose a monopoly in order to secure profit.

Collecting information about the market, customer, competition etc. means time and money for the seller; meeting between seller and buyer involves staff, time, information centers, money and, the most “dangerous thing for the seller”, disloyalty. No company wants those risks, but most of them want MONOPOLY. General and specific regulations prohibit the establishment of these monopolies (except for the natural ones), but the trend always exists in the market. Gas market liberalization involves the elimination of the monopolistic position of companies acting in this field, eliminating the possibility to influence the gas price in the market, directly or indirectly, but first requires consumer information. As long as consumers fail to gain minimum specific knowledge allowing a proper evaluation of gas purchased, they will remain “captive” even in the liberalized market. In fact, there is a great risk for the liberalized market to turn into a market of smart suppliers, which would benefit indirectly from liberalization, i.e. taking advantage of the lack of information at consumer level, fully benefiting from the financial effects that such a market would produce. The liberalized gas market without informed consumers, encouraged to intervene, supported to negotiate, able to analyze various offers, determined to act responsibly, cautiously and without allowing constraints, will only be another disappointment for the Romanian people and an important reason for “populists” to invoke “the need for monopoly for the sake of consumers”.

Translation from Romanian by Romaniascout.