10 March 2015
1. Background
On 3 March 2015 the Romanian Competition Council (the “RCC”) issued a preliminary Report, including findings and recommendations (the “Report”) following a sector investigation of the electricity market in Romania carried out from 2008 to 2013.
In addition to the findings and recommendations set out in the Report, the RCC has also opened several separate specific investigations concerning the production and trade of electricity in Romania as well as the market for electricity supply. Such investigations may lead to the application of pecuniary sanctions of up 10% of the concerned companies’ turnover, should the RCC find an infringement of the Competition Law.
We included below the main findings and recommendations of the Report. Although these recommendations are not binding upon state-authorities, such as the regulatory authority in the energy field, they could be taken into consideration in the course of future amendments of the legislation.
2. Main findings and recommendations in the Report
- In relation to the obligation to trade on the centralised markets
The RCC assessed the obligation enacted under the Law 123/2012 on the electricity and natural gas whereby transactions with electricity can only occur on the centralized platforms, no over the counter transactions being permitted. The aim of the interdiction is that of safeguarding transparency, non-discrimination and competitiveness on the electricity market.
In the Report, the RCC expresses its concern that this prohibition generates barriers to electricity export for power producers, which might be contrary to European Union law. At the same time, the RCC concluded that the prohibition may block investments in the sector as long as the market participants are not allowed to use financial instruments specific to the electricity market. Consequently, the RCC recommended that either this prohibition be removed or at least amended so as to reduce barriers to export and better risk management.
- In relation to the lack of financial instruments on the electricity market
Following the assessment of the trading instruments available on the Romanian electricity market, RCC concluded that market players do not have available appropriate financial instruments which usually allow the management of risks specific to the participation on the
electricity markets. The RCC refers specifically to the financial instruments regulated under the Directive 2004/39/CE on markets in financial instruments.
The RCC recommended that a compared analysis of the financial instruments available in other Member States be performed and further, that adequate financial instruments be implemented in Romania.
- In relation to the applicable transmission fees
The RCC also assessed the regulatory framework regarding the two components of the transmission fee, i.e. the injection tariff and the extraction tariff, and their differentiation throughout the country and held that no objective justifications have been found to support such differentiation.
- In relation to grid connection fees
Another aspect assessed by the RCC was related to the competition on grid connection works market (especially for connection to power distribution grid). Currently, even if the entity that wants to be connected to the grid and bears the connection costs chooses a certain works contractor, it cannot directly enter into an agreement with that contractor and the relevant amounts must be paid through the power grid operator.
The RCC deems that the control that power grid operators have on the flow of funds may influence competition on the market and therefore concluded that the future user of the network should be entitled to choose the contractor for the works and pay it directly, without the power grid operator acting as an intermediary.
This newsletter is for general information only and is not intended to provide legal advice. For further information, please contact office@filipandcompany.com.
