"Nuclearelectrica" joins the "club" of energy producers that conclude secret contracts

Last year, the BURSA newspaper was the first to disclose the cases of the energy producers (the complexes of Craiova, Turceni and Rovinari) which skirted the law by selling energy to consumers directly instead of via auctions, as they are required to do by an order of the Minister of the Economy. At the time, the officials of the producers said that the contracts were "confidential".

This year, producers continued to sell energy through secret contracts, and another member joined the "club". In the first six months of 2011, "Nuclearelectrica" - the only producer that didn"t conclude this kind of contracts last year - sold 17.1% of the total energy traded during the reviewed period through contracts it negotiated with providers and end-users, as stated by the management of the company.

The producers are selling electricity through direct negotiation with consumers, which do not participate in the auctions of the markets of the OPCOM (the operator of the Romanian energy exchange), despite that ever since 2008, the minister of the Economy passed an order, by which they are required to sell their available energy in a transparent manner. According to officials of the Ministry of the Economy, in order to sell energy directly, producers need to obtain a derogation from the order of the Minister.

The managers of the companies that trade energy through direct negotiations offered us various explanations, without providing us with concrete data on the trades concluded outside the transparent market.

Ion Lungu, the president of the Association of Electricity Providers of Romania (AFEER), considers that "any deal made on the competitive market needs to be transparent and non-discriminatory".

He said: "Even though I consider that all the deals should be made on the OPCOM markets, we can"t force producers to do that and so I am in favor of rules that would further reinforce a transparent and non-discriminatory market".

• "Nuclearelectrica" sold energy to consumers at prices ranging between 165.4 and 187.4 lei/MWh

The management of "Nuclearelectrica" (SNN) told us: "Eligible consumers do not have licenses from the ANRE and therefore can"t participate in the auctions of the OPCOM by which the SNN sells energy wholesale. That is why basically all the suppliers conclude contracts with end users through direct negotiation. We have concluded this type of contracts because we intend to gradually move into the retail energy market. In the case of contracts negotiated directly, on the competitive market, the identity of partners, the volumes of energy that were bought and the prices of the contracts are confidential.

Sales to eligible consumers are made on the retail market, in the liberalized, deregulated sector of those markets. The order of the minister refers to sales on the wholesale market and it is only for this kind of deals (ed. note: retail sales) that derogations from the Order of the Minister are given".

In the first quarter of 2011, SNN sold energy to end users at prices ranging between 165.4 and 187.4 lei/MWh, the quoted sources said.

In the first six months of 2011 SNN sold almost 5.3 million MWh, up 1.5% over the volume of electricity traded in the first half of 2010 (approximately 5.2 million MWh).

Between January and June 2011 SNN had 753 million lei in revenues, up 5.1% from 715 million lei in H1 2010.

Out of the total volume of energy traded by "Nuclearelectrica" during the reviewed period, 60.4% was sold through regulated contracts, 6.7% through the day-ahead spot market, 15.8% through auctions on the PCCB (Centralized Market for Bilateral Contracts) and 17.1% through contracts negotiated with providers and end users, the management of the company said.

Between November 1st 1998 - after the creation of the current "Nuclearelectrica" - and June 30th, 2005, the selling of electricity by the SNN was being done based on a long-term regulated contract, which covered the entire output of Unit 1 of the Nuclear Electric Plant of Cernavodă, at the price set by the ANRE. The contract was concluded with "Electrica", and later a redistribution was performed between the eight newly created branches of "Electrica", according to data from the website of the SNN. Starting with July 1st 2005, as a result of the coming into effect of the new Commercial Code of the Wholesale Energy Market, a regulation based on the Directives of the European Commission concerning the energy market, new regulated contracts were concluded with the branches of "Electrica" - already in the process of being privatized - for delivering energy in order to sell it to captive consumers and to cover its own technological consumption in the distribution networks.

At the same time, the SNN began the sale of a certain percentage of its output on the competitive market, based on contracts negotiated with eligible consumers and competitive providers. The aforementioned percentage increased from about 15% in 2005 and to 30% in 2009. Also, the SNN began to participate in the day-ahead spot market (PZU), to sell the differences between the volume of energy forecasted to be produced on the next day and the contracted volumes of energy, or to buy energy in the event of power drops or unplanned interruptions at the Nuclear Electric Plant of Cernavodă.

• The Rovinari Energy Complex sold 9.08% of the volume of energy traded in the first semester of the year directly

The Rovinari Energy Complex sold directly, through negotiation with other exporters, 9.08% of the total volume of energy delivered in the first semester of 2011, its representatives said, and they emphasized: "We did not have any contracts to sell electricity that were negotiated directly with eligible consumers in the first quarter of 2011. The export contract was concluded by direct negotiation with the suppliers at a time when the electricity market all over Europe is in a recession. For this purpose, we received a derogation from the order 445/2009 of the Ministry of the Economy".

According to the quoted sources, "the energy was sold at the best price in the market".

During the reviewed period, 42.24% of the electricity produced by the Rovinari Energy Complex was sold on the regulated market. Also, 23.35% of the electricity delivered was sold on the Day-Ahead market, and 8.78% on the Market for Bilateral Contracts (PCCB).

• The Craiova Energy Complex sold almost half of the energy produced in the first six months of the year through direct negotiation

Almost half of the energy sold by the Craiova Energy Complex (CE) in the first half of the year, more specifically 40.52%, was traded on the retail market by participating in auctions held by eligible consumers and in insurance contracts with other producers, said Constantin Bălăşoiu, the general manager of the company. According to him, "the average price recorded on the retail market includes the cost of green certificates, the contribution for cogeneration, excises, which leads to a significant increase compared to other market segments, on average being 30% bigger than any price recorded on the centralized market of the OPCOM".

The representatives of the OPCOM said that, in the first semester of 2011, the highest price on the Day-Ahead market was 337 lei/MWh. On the Market for Bilateral Contracts (PCCB), the highest price was 213.65 lei/MWh, and on the PCCB-NC (The Market for Centralized Contracts with Continuous Negotiation) the maximum price was 221 lei/MWh.

The representatives of the Complex of Craiova told us: "There are 23 eligible consumers buying energy through retail contracts based on auctions that they organized themselves. We do not have any direct contracts with the suppliers, only with the eligible consumers on the retail market. They are requesting bids and they select their seller through an auction".

In the first half of 2011, the Craiova Energy Complex sold 2.47 TWh of electricity, worth a total of 551.8 million lei, compared to the 2.05 TWh (515.7 million lei) sold in the first semester of 2010.

Out of the volume of energy sold between January and June 2011, 23.91% was traded on the regulated market, 32.18% on the Day-Ahead market and 3.39% on the Market for Bilateral Centralized Contracts (PCCB).

• The Turceni Energy Complex sold energy directly to producers and suppliers, at an average price of 199.92 lei/MWh

The Turceni Energy Complex only sold energy directly "to producers (assistance contracts) and providers". The volume sold was 775 GWh, representing 22.3% of the entire volume of energy sold in the first half of 2011, said Octavian Graure, the general manager of the company.

He said: "The Turceni Energy Complex did not sell energy directly to eligible consumers. It only sold energy directly to "Electrica", "Hidroelectrica", the Rovinari Energy Complex, the Craiova Energy Complex, "Electrocentrale" Deva, at an average price of 199.92 lei/MWh".

According to the official of the complex, the Turceni Energy Complex concluded the directly negotiated contracts "based on the Commercial Code of the Wholesale Electricity Market (assistance contracts), and the contracts with < Hidroelectrica > and < Electrica > were concluded on the basis of a derogation of the Ministry".

In the first six months of 2011, the Turceni Energy Complex sold 3.465 GWh (worth 665 million lei), and in the first half of 2010 it sold 2,976 GWh (worth 501 million lei).

41% of the energy sold during the reviewed period was traded on the regulated market, 16.5% on the Day-Ahead market, 10.9% on the Centralized Market for Bilateral Contracts (PCCB) and the Centralized Market for Bilateral Contracts with Continuous Negotiation (PCCB-NC). 9.3% of the energy sold was sold on the Balancing Market (PE).