A new Law no. 155/2020 (the “New Law”) amending Law no. 123/2012 on electricity and natural gas has been published in the Official Gazette and, save for certain specific provisions, enters into force on 30 July 2020.
Please see below a selection of some of the main amendments brought by the New Law in relation to the natural gas market.
1. Exception to the obligation to obtain natural gas distribution licence
The New Law introduces cases when the distribution of natural gas can be carried out with a licence issued by the Regulatory Authority in the Energy Field (“ANRE”):
a) in the case of closed distribution systems recognised as such by ANRE decision; and
b) by managers of industrial parks or free zones set up in accordance with the relevant applicable legislation, within such parks or zones.
The New Law also clarifies that the persons entitled to carry out activities without holding licences or authorisations enjoy the same rights as the holders of the relevant licences and authorisations.
2. New authorisations and licences for hydrogen production facilities
Hydrogen production facilities are now regulated. ANRE needs to issue authorizations for the design and execution of hydrogen production facilities, and licences for their commercial operation.
3. Cost of royalties not recoverable from service tariff
The New Law provides that gas transmission, storage and distribution operators bear the royalty paid for the concession for public assets and the relevant service (transmission, storage and distribution), without being able to recoup the cost via the tariff for the relevant service.
4. New grounds for ANRE to refuse issuance of authorizations/licences
As a novelty, ANRE cannot authorize or licence applicants whose controlling shareholders or directors were, in the past, controlling shareholders or directors of licence holders who defaulted on payment obligations arising from trades on the natural gas market.
5. Stricter obligation for the transmission and distribution operators to ensure connection to the transmission/distribution system
The obligation of the TSO to ensure third party access to the transmission system within the limits of the transmission capacity has been replaced by the New Law with the obligation to connect to the transmission system all applicants, within 180 days from obtaining the building permit. The recovery of connection costs is to be made via transmission tariffs, per ANRE regulations.
Similarly, the obligation of distribution operators to ensure the connection of third parties to the distribution system within the limits of the transmission capacity has been replaced by the New Law with the obligation to connect to the distribution system all applicants, within 90 days from obtaining the building permit. The recovery of connection costs for household consumers is to be made via transmission tariffs, per ANRE regulations. It is unclear though how the costs for the connection of non-household consumers are going to be borne and recovered.
Moreover, the legal provisions allowing the transmission operator to refuse third party access to the transmission system and distribution system operators to refuse connection to the distribution system in certain cases set out by law have been repealed.
6. Re-insertion of gas storage obligation
The New Law re-inserts the obligation of natural gas suppliers to store natural gas in underground storage facilities in order to ensure the continuity of supply for its clients and bearable prices for them. The obligation had recently been taken out of the Energy Law by an Emergency Ordinance entered into force less than a month ago.
7. Obligation of distribution operators to finance and execute connection works
Under the New Law natural gas distribution operators must finance the design and construction of the connection installation for non-household end clients in their distribution concession area, up to a length of 2,500 meters. The relevant expense is to be recognized by ANRE in the distribution tariff. The deadline for connection may not exceed 90 days from the date of obtaining the building permit.
Non-household clients who requested the connection of a consumption place have the obligation to use it and maintain its destination for 5 years from commissioning of the connection installation. Failure to do so triggers the obligation of the relevant client to refund to the distribution operator part of the value of the design and construction works as per ANRE regulations.
8. ANRE to set rules for liquefied natural gas (“LNG”) and hydrogen
The New Law mandates ANRE to draft technical and commercial regulations on the operation of the LNG/hydrogen terminal and related tariffs, within 6 months from receiving an application for the authorisation of an LNG/Hydrogen terminal.
9. Misdemeanours and sanctions
9.1. New misdemeanours and sanctions
The New Law introduces additional misdemeanours, such as, for example, violation of certain provisions of Regulation no. 1227/2011 (e.g. on prohibition of insider trading and market manipulation, data collection obligations, registration of market participants), the refusal of participants in the wholesale gas market to allow the conduct of investigations/unannounced inspections by ANRE on their premises, the refusal to provide or the provision to ANRE of misleading or incomplete data and information requested for the purposes of ANRE’s investigations.
Substantial fines will apply for such violations, ranging from 1 to 10% of the sanctioned entity’s turnover for the previous year. For instance, acting in violation of the prohibitions of insider trading and market manipulation carries fines from 5% to 10% of turnover. The same range of fines applies to gas suppliers using misleading or unfair commercial practices in relation to end customers.
Fines ranging from 1 to 3% of turnover apply to wholesalers who refuse the conduct of investigations/unannounced inspections by ANRE on their premises or who refuse to furnish, or furnish inaccurate, incomplete or misleading data to ANRE, in the conduct of its investigations.
Wholesalers who fail to comply with the obligation of offering gas on the centralized markets, as sellers or buyers, within the percentages prescribed by the applicable legislation, are liable to fines from 2% to 10% of turnover. Similar fines apply to distribution operators who miss the gas grid connection deadlines under the law.
For recurrent breaches of these prohibitions, the relevant authority withdraws the sanctioned entity’s licence, based on a final court judgment. For some of these newly added misdemeanours, ANRE’s right to impose sanctions becomes time-barred in 36 months from the misdemeanour being committed (as opposed to 2 years in the case of other misdemeanours).
9.2. Calculation of turnover for non-residents
The New Law clarifies that fines levied on non-residents would apply against the revenues obtained by the sanctioned entity in Romania in relation to the licenced activity and recorded in its financial statements.
9.3. Extended deadline for ANRE to apply the sanctions
The New Law also extends the limitation period for ANRE’s right to impose certain misdemeanour sanctions from 24 to 36 months.
9.4. Exclusion of right to pay half of the fine within 15 days
Under the general misdemeanour sanctions regime, the person sanctioned with a fine may pay half of the relevant amount in 15 days from receipt of the minutes acknowledging the sanction and fine.
The New Law excludes the application of the 15-day term for misdemeanours under the Energy Law (as amended).
The provisions of the New Law relating to misdemeanours and sanctions take effect on the 60th day after publication of the New Law in the Official Gazette (which occurred on 27 July 2020).
10. Deadline for implementing regulatory framework
ANRE has 90 days from the effective date of the New Law to develop the regulatory framework for implementing the amendments brought by the New Law.