ENERGY FOR THE FUTURE OR TAXES FOR TODAY?  Do we still have a market economy?

The 114 Emergency Ordinance passed at the end of last year has led to discontent in the energy market as well, because it sets a tax of 2% on the turnover of companies in this sector and caps the price of natural gas and electricity to 68 lei/MWh, between April 1st, 2019 - February 28th, 2022.

The opinions are different in the industry, as part of the debate " ENERGY FOR THE FUTURE OR TAXES FOR TODAY?" held on February 14th. BURSA, players in the industry and representative of the authorities have emphasized both the negative and the positive effects of the ordinance.

Energy expert Ovidiu Demetrescu, the moderator of the event, has concluded that Emergency Government Ordinance 114 reveals some real issues - the existence and functionality of an energy market and of a natural gas market, if they are truly functional and if they are beneficial for the current context.

The law also points out the issue of a strategy and consistency in the decision making process, the specialist further said: "As long as the rules change mid-game, it is bad for consumers, producers, suppliers, distributors and transporters, across the chain". In his opinion, the ordinance has been passed very hastily and without an impact assessment, this being its greatest drawback.

Ordinance 114/2018 has been requested by those who benefit from its implementation, because just like we have a mix of energy, we also have a mix of interests, and those who stand to gain from that Ordinance are those operating on the regulated market and have a guaranteed profit, said Niculae Havrileţ, advisor in the Ministry of Energy. He mentioned that traditional gas suppliers are the ones who have asked the passing of Ordinance 114 and they are also the ones who stand to benefit from it. Household consumers are also the ones who stand to benefit from the application of the new regulations.

A basic element for the issuing of this ordinance has been the degree of pauperization of the population, according to him.

In the opinion of Septimiu Stoica, member on the Board of Directors of the Romanian Commodities Exchange (BRM), companies in the sector will reduce their costs to survival mode, and consumers will spend less. "In the area of major consumers there is a shortage that is beginning to make itself felt", he says, and said that since Ordinance 114 has been issued, the regulated natural gas market has almost stopped existing.

There are foreign investors who are very interested in what is happening nowadays in Romania, and now their intention is to invest in the Romanian partnerships has significantly decreased, Mr. Stoica further said.

The greatest impact of Ordinance 114 is that it upsets everything that has been built over the last years, says Vasile Ciolpan, the head of the Energy Sales Department of Romgaz. He said that it is getting very complicated for this ordinance to be enacted, without implementation norms.

The new taxes represent a vicious circle which affects the investment capability, says Claudiu Creţu, special receiver of ELCEN, who said that the company he represents wants for the capping of the price of natural gas to apply to the centralized producers of thermoelectric energy, as end consumers are those who benefit from thermal energy as well, not just natural gas consumers.

While Mihai Bălan, Policy Officer at the Romanian Wind Energy Association, thinks that the Ordinance 114 will scare off private capital, since there are no public funds to replace it, Sorin Boza, the chairman of the Directorate of Complexul Energetic Oltenia (Oltenia Energy Complex), states that energy taxes are bringing the company to its knees, but that the 2% turnover tax enacted through Emergency Government Ordinance 114 represents for CE Oltenia an amount of approximately 60 million lei, in other words just 5% of the total amount which the company spends on CO2 certificates, a cost which reaches 1.4 billion lei.

Alexandra Borislavschi, executive director of the corporate governance and M&A added that the measures included in Emergency Government Ordinance 114/2018 do not represent the ideal manner to resolve the market distortions: "The ordinance, even though is it not the 100% correct way of regulating (ed. note: these distortions), notes the fact that we have a market dysfunction, that something isn't working, that we are not mature enough for the liberalization that has taken place, that the structure or the mechanisms of the market are not perfectly functional. We are a country in the process of maturing and we still have some road to travel before we get there. Sometimes we react by trying to adjust things along the way".

The capping and regulation of the prices of electricity and natural gas has been introduced following a deficiency in the energy market, as companies in the energy sector can't ensure a real competition, and the prices of electricity and natural gas were going to increase in the following period, said Corneliu Bodea, the president of the Romanian Energy Center - Centrul Român al Energiei (CER).

As far as Wednesday's talks in the Parliament concerning the provisions of the controversial ordinance, in which he has participated, the president of the CRE said that the president of the Senate, Călin Popescu Tăriceanu has announced that following talks with PM Viorica Dăncilă, the elimination of the 2% of turnover contribution is being considered.