LACK OF PROTECTION FOR VULNERABLE CONSUMERS MEANS MORE STATE INTERVENTIONISM THAT DRIVES THE INVESTORS AWAY / ENRONERGYNOMICS.RO


25.05.2019
The Employers Federation of Petrol and Gas – FPPG launched the most comprehensive study on the dynamics of the local natural gas market: “The Natural Gas Market in Romania. How do we guarantee the security and competitiveness of the sector?”

The study, conducted by consulting firm Emerton, defines and argues the reasons that hinder the development of a liberalized, fair and balanced market. The report identifies four main obstacles to the creation of a competitive gas market in Romania:

1.     The Romanian gas market has very limited interconnections with the natural gas market in the EU

2.     Liquidity on the Romanian wholesale market remains low and irregular despite the introduction of centralized market obligations

3.     Competition in the households retail market is limited

4.     Vulnerable customers are not effectively targeted by the mechanism in place

Starting from the observation that “the major obstacles identified on the Romanian gas market are interdependent”, the study identifies 6 objectives needed in order to mitigate the impact of these obstacles:

1.     Deregulation of the wholesale price

2.     Encouraging upstream investments

3.     Increasing interconnections with the EU gas market

4.     Increasing liquidity on the wholesale market and developing a reliable price index

5.     Increasing competition in the households retail market by increasing attractiveness

6.     Increase protection for vulnerable customers

The essential chapter of the Emerton report is the listing of the 12 proposed measures, as well as the interdependencies and the positive &negative feedbacks between these measures.

Deregulation of the wholesale price
1. Cancellation of the price capping introduced by GEO 114/2018
Increase the protection of vulnerable consumers
2. Changing the current definition of vulnerable consumers (VC)
3. Introducing a temporary social rescue mechanism for VC with a gas price capping at RON 68 / MWh
4. Create a sustainable VC scheme
Increasing interconnections with the EU gas market
5. Continuation of BRUA-stage 2 development (export capabilities)
6. Increasing import capacities from EU countries, especially from Hungary
Increasing liquidity on the wholesale market and developing a reliable price index
7. Adaptation of centralized market obligations (for medium / long term products)
8. Establishment of training obligations on the spot market
9. Changing balancing regulations to increase the wholesale market liquidity
10. Ensuring that trading platforms offer compensation services
Increased competition in the households retail segment
11. Revision of the methodology for calculating the regulated tariffs for household customers by associating the cost of purchasing natural gas (CUG) directly with the wholesale price in Romania
Encouraging upstream investments
12. Revision of indexation of royalties, which should be based on the Romanian wholesale price instead of the CEGH price.

At the launch of the study, at the Sustainable Romania conference in Aula Magna – Academy of Economic Studies,Sebastien Zimmer, Partner Emerton and the lead author of the study, stressed the importance of defining the vulnerable consumer: “The lack of adequate protection of vulnerable consumers limits political acceptability to link household tariffs to natural gas wholesale prices, which perpetuates the need for regulated and non-transparent tariffs that reduce the attractiveness of the retail market for new players.”

In turn, Franck Neel, FPPG president, stressed that the organization supports natural gas accessibility for Romanian end-users: “This is possible by increasing the households retail market competition and adapting the level of protection afforded to those vulnerable consumers” .

25.05.2019 · ROMANIA