English
"THE NAME OF THE GAME: SPECULATION
Buyers keep the prices high on the day ahead-market
The issue of the increase of prices on the spot energy market has been debated and dissected by plenty of «specialists» in the field. From the NBR governor and the Energy minister, the president of the ANRE and of the AFEER, to others without public titles. I also did so briefly, in BURSA and on Facebook.
The name of the game in the energy market is "Speculation".
On a free market, such as the Energy market, on an exchange that follows all the rules, speculating an opportunity is not something worthy of condemnation, quite the contrary.
But we are dealing with a scenario that is a little different. Let's analyze briefly who is being speculated and who is doing the speculating.
It is consumers that are being speculated, both industrial and household and similar ones. It is consumers that will foot the bill.
Who is doing the speculating: in the absence of the contribution of wind energy (wind doesn't blow when it's very hot), 90% of the energy production is that of state producers. The state, through its producers Hidroelectrica, CEO, Nucleareletrica, CEH, speculates the economy and household consumers.
The causes of the current crisis have been those enumerated by those who have expressed their opinions, more or less willingly, and here they are:
- The postponing of the call for tenders for the Last Resort Suppliers (FUI);
- the heat wave and the increase in consumption by about 10-12%;
- a drop in the debit of the Danube (we're not dealing with a tragedy like in 2011, 2012 - it is not a case of Force Majeure in hydroelectric energy!).
And that's about it.
I want to add another cause: the crisis of January - February 2017, which hasn't ended.
The heat wave and very warm weather, the low hydraulicity were known since March 2017. The January-February 2017 crisis was overcome with difficulty and with losses. What have the suppliers, traders and distributors who have survived the January 2017 crisis learned? How have they prepared for a new crisis, but not of cold, but of heat? They didn't learn anything and they woke up with a new crisis, hoping that starting with March, prices would recover. Well they didn't and it was obvious pretty quickly that producers would not let go of the higher ground they've won.
What did the authorities do in the new situation?
- the ANRE said that it sees no anomalies in the operation of the market and that it can't intervene;
- the Ministry of Energy has met several times with the ANRE, and said that it would do something, but it didn't know what exactly and waiting for the ANRE to tell it what that something would be. It has informed the Competition Council about the possible existence of some hints of a «cooperative» of producers;
- the ANRE has opened its own investigation;
- the Competition Council is making analyses.
In all this time, «the cooperative» is speculating.
Electrica CEO Cătălin Stancu, perhaps concerned with the losses posted and the gloomy outlook of the continuation of the heat wave with the auction of August 10 getting near, - energy for the Last Resort Suppliers (FUI) -, has advanced an interesting idea: the capping of the prices on the Day-Ahead Market (PZU). Sure, we can invoke the precedent of the capping of prices on the Balancing market, except the situation is not comparable. On the balancing market there are only limited sale offers of quantity - price and a guide - DEN - which decides who accepts who. It is not an exchange. The PZU is an exchange, there are sellers and buyers. There is a sale offers and requests to buy. The intersection of the sale and purchase curves determine the MCP - Market Closing Point. What prices do you want capped, Mr. CEO? What's stopping you, all the major buyers on the Day-Ahead Market, meaning the major suppliers and distributors, from capping the purchase prices? If you want, we can analyze together the aggregated curves, to find that in fact, it is the buyers that keep the prices high on the Day-Ahead market!"
JACK CUTIŞTEANU, Petprod CEO
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