Changes to the electricity and natural gas law (electricity market)

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 in 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 electricity market.

1. New licences – for power storage and aggregation

Under the New Law the commercial operation of power storage facilities is a regulated activity, requiring a licence issued by the Regulatory Authority in the Energy Field (“ANRE”). For storage facilities ancillary to existing power generation plants, the power generation licence is to be amended to also cover the operation of such facilities.

The New Law also includes provisions on aggregation (whereby a person combines the power of several clients or the production from several sources with respect to sale, purchase or tendering it on any power market) as an activity requiring a licence. Additional details on this activity will likely be set via ANRE regulations.

2. Power sale and purchase agreements permitted prior to obtaining the power production licence

With the aim of facilitating the funding of investments in power generation facilities, the New Law allows power producers to enter into power sale agreements before obtaining the generation licence. However, save for producers operating power generation plants with an electrical power under 1MW, the licence needs to be obtained at least 60 days prior to delivery of the electricity generated by the new plant. If the producer defaults on the obligation to obtain the licence by this deadline, the power sale and purchase agreements are to be terminated for cause (in Romanian ‘reziliate’) and remain without legal effect as regards the delivery of power.

3. Broader exception to the obligation to obtain power distribution licence

In its current form, Law 123/2012 set out two main exceptions to the obligation to obtain power distribution licences, namely (i) for distribution grids where technical connection approvals were issued for users with approved power totalling below 1 MW; and (ii) for operators of grids servicing exclusively users with consumption places in one or more buildings.

The New Law broadens the scope of exceptions to the obligation to obtain power distribution licences:

a) in the case of closed distribution systems recognised as such by ANRE;

b) for distribution operators or managers of industrial parks or free zones set up in accordance with the relevant applicable legislation, within such parks or zones; and

c) for grids distributing power outside industrial parks or free zones, to consumer places with approved power below 3 MW.

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.

4. Conditions for granting power distribution licences to persons other than concessionaire operators

The New Law introduces a principle already reflected in ANRE’s regulations, according to which a person (the “Distribution Licence Applicant”) may obtain a power distribution licence only if the power distribution operator having a concession right in the relevant area consents. At the same time, the New Law clarifies that the concessionaire distribution operator must motivate the refusal to grant the consent. Further, the refusal must be justified based on objective technical and/or economic criteria.

If the concessionaire power distribution operator refuses to grant its consent, it must ensure that the intended users can connect to its grid in conditions of economic efficiency at least as good as those offered by the Distribution Licence Applicant, including with respect to the applicable distribution tariff. In our reading, this requirement should remove the right of the concessionaire operator to refuse the consent in cases where the Distribution Licence Applicant was able to offer a cheaper connection solution and lower distribution tariff.

5. Temporary rights over forestry land

Under the New Law, as an exception to the Forestry Code, authorisation and licence holders engaging in construction, maintenance, repair and operation of power facilities are entitled to use, on a temporary basis, public property land pertaining to the national forestry fund without paying rent.

To occupy, on a temporary basis, private land pertaining to the national forestry fund or afforested meadows and pastures, authorisation/licence holders and concessionaires are required:

a) to pay compensation to the owners within 30 days of concluding an agreement with them;

b) to remit into dedicated accounts the amount of compensation if the owners are not known; and

c) to set aside the indemnification amount at the disposal of owners who fail to report for the conclusion of the agreements or refuse to conclude an agreement, within 60 days of being notified to enter into a contract for the use of their land.

6. Obligation of distribution operators to finance and execute connection works

The New Law introduces substantial obligations for distribution operators in relation to the financing and execution of connection installation works. These would materially change the currently applicable rules (based on which grid users are typically required to bear the costs with respect to the connection installation) and would further, on the one hand, be beneficial to developers of new production capacities, while on the other hand impact the budgets and investment plans of distribution operators.

Thus, under the New Law, power distribution operators (we assume the holders of concession rights) 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. As the New Law does not differentiate between connection installation for production and respectively consumption places, we understand the above obligations are applicable with respect to both of them.

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.

7. Rights and obligations upon transfer of distribution grids

Under the New Law, the holder of a distribution grid (other than a concessionaire) who intends to transfer it or who is unable to carry out the power distribution service must offer the relevant grid for sale to the distribution operator holding concession rights in the relevant area. The sale value must be properly substantiated and certified by an independent chartered expert. The concessionaire operator has the obligation to acquire it within 120 days of the certified sale value being communicated to it.

8. Misdemeanors and sanctions

8.1. New misdemeanors and sanctions

The New Law adds new misdemeanours to the list in relation to which ANRE may impose sanctions. Among them, failure to provide data and information or the provision of inaccurate, incomplete or misleading data and information requested by ANRE, non-compliance with legally binding decisions by the Agency for the Cooperation of Energy Regulators (ACER) and the violation of European Regulations. Other newly added misdemeanours include the refusal of electricity wholesalers to allow unannounced investigations/inspections by ANRE and the refusal to make available for inspection the electronic devices storing the data and information under investigation.

New sanctions are imposed or higher sanctioning limits are set under the New Law for certain existing or newly regulated transgressions. For instance, violations by market participants of certain obligations under Regulation (EU) no. 1227/2011 on wholesale energy market integrity and transparency (the REMIT Regulation) or the use by electricity suppliers of misleading or unfair commercial practices carry fines ranging from 5 to 10% of the turnover. For violations of Regulation (EC) no. 714/2009 on conditions for access to the network for cross-border exchanges in electricity, market participants are liable for fines ranging from 1% to 5% of their turnover. Failure by corporate entities on the wholesale energy market to comply with ANRE’s requests in the conduct of investigations or inspections, including by not providing information or providing inaccurate, incomplete or misleading information, is punishable by fines accounting for 0.5% to 1% of turnover.

Recurrent misdemeanours carry heavier penalties. For instance, repeated violations of the REMIT Regulation or a supplier’s recurrent use of misleading or unfair practices may result in withdrawal of the licence, based on a final court ruling.

8.2. 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.

8.3. 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.

8.4. Exclusion of right to pay half of the fine within 15 days

Under the general misdemeanor 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 misdemeanors 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).

9. 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.

This information is not legal assistance. For further details, please contact us.

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