AFEER: "The extension of the price cap will lead to the collapse of the energy system"

The Association of Electricity and Gas Suppliers of Romania (AFEER) calls on the authorities to respect the legal deadline for the liberalization of the electricity market, stability for April 1, 2025, warning that any extension of the price cap scheme would have serious consequences for the entire energy sector. AFEER representatives drew attention yesterday, during a press conference, that the current capping-compensation scheme is unsustainable, and the debts accumulated by the state suppliers, which exceed 8 billion lei, endanger the functioning of the energy chain - from supply, to distribution, transport and production.

According to AFEER, the price cap of 0.68 lei/kWh is unrealistic and a financial burden for suppliers. They emphasize that of this amount, 0.67 lei are only regulated costs, which makes the price of active energy almost zero. Representatives of the association classify this cap as an "electoral handout", which can no longer be maintained in the long term without destabilizing the entire industry.

Laurenţiu Urluescu, president of AFEER, stated: "Unfortunately, the capping-compensation scheme has become an electoral handout that we have been supporting for a year. Suppliers can no longer support this capping-compensation scheme, because there is a very high risk of non-payment, which will cause some companies to go out of business, which will have effects on the entire distributor-transporter-producer chain and, ultimately, would affect all consumers, who would risk reaching a supplier of last resort (FUI), which will have to find additional spot energy, at much higher prices. We are facing major cash-flow problems. For large suppliers, cash-flow is ensured by banks, where interest has reached 10% and is increasing. But there are suppliers who can no longer obtain credits, because they have reached the maximum limit. Therefore, what we need to do is return to the free market. Market liberalization should be done in April, when market prices are traditionally the lowest. Based on our calculations, the facts would increase by 23-28 lei per month for a monthly consumption of 50 kw and by 47-56 lei for a monthly consumption of 100 kw - a bearable increase for consumers. It is time to give up populism and make the transition to a functional market".

Regarding the risk of relevant suppliers exiting the market, from the data presented at the press conference, we noted that, if the supplier of last resort has a share of 20% of national consumption, and the company that exits the market has a share of 5% of the same consumption, then for their mandatory takeover, these companies will be obliged to increase energy by 25%, and this rapid additional supply for the next day will be made from the spot markets, with related guarantees. However, the next day, FUI must pay for the energy supplied, so if it has money in its account, it will be immediately, if not, the necessary amount will be taken from the guarantees presented, and the respective company risks being left without cash-flow for energy reserves needed for the next day.

According to AFFER representatives, the state's debts to suppliers, which finance the price cap scheme, have reached an alarming level of over 8 billion lei, up over 3 billion lei compared to October 2024. Currently, settlements are delayed by a year, with the most recent payments covering consumption from January 2024. In addition, the bulk of these settlement amounts have been sent to the National Energy Regulatory Authority (ANRE), but have not yet been validated, because according to Laurenţiu Urluescu, the verification process carried out by the Authority is extremely slow and bureaucratic. "There are hundreds of reports awaiting confirmation at ANRE. If there are questions about a single client, the entire portfolio is returned for clarification. It is an unacceptable situation, which prolongs the blockages and does not prevent us from operating efficiently," said the AFEER president.

Under these conditions presented above, the members of the AFEER Board of Directors offered that many suppliers have reached the limit of financial exposure, and the regulated margin of 73 lei/MWh no longer covers operational costs.

Therefore, in order to prevent a crisis in the energy sector, AFEER calls on the authorities to take the following urgent measures: liberalization of the energy market from April 1, 2025; immediate payment of outstanding debts to suppliers, at least those validated by ANRE; simplification of the procedures for validating settlements, in order to eliminate bureaucratic blockages; revision of capping mechanisms, so that they are more transparent and do not affect the financial sustainability of suppliers.

Without these measures, the energy sector risk to enter in a financial collapse, with severe repercussions on the economy and the population.