Romania to issue gas price cap, tax rise on traders

Author: Aura Sabadus

2019/03/27

LONDON (ICIS)--The Romanian government is set to press ahead with a price cap for domestically produced natural gas on 1 April despite opposition, following a proposal on 27 March to amend an emergency ordinance.

The proposed amendment to the ordinance, which was issued in late 2018, will be debated on 28 March and was expected to remove a New Lei 68.00/MWh (€14.276/MWh) limit on prices at which producers and suppliers can sell domestic volumes.

This rule will enter into force on 1 April for three years, unless there is an intervention in the coming days.

The draft ordinance indicated the government plans to exempt cogeneration and coal-fired electricity producers from a 2% tax on turnover.

Other power producers will stil have to pay the tax.

Under the rules amended in the end of February, businesses such as trading companies and suppliers will have to pay a 2% tax on gross margins.

Potential distortion

Dumitru Chisalita, president of the Romania-based Intelligent Energy Association, said the proposed tax exemption breaches domestic and EU competition regulations.

He said the tax would deepen discrimination against certain companies and could lead to legal action from some participants.

In addition, the cap on prices for domestically produced gas means these volumes cannot be traded.

Due to this energy regulator ANRE has produced a methodology for the allocation of domestic gas to certain consumers.

Only 83 consumers were a part of this list, with some suppliers allocated volumes far below their forecasts for household demand.

These companies will be forced to import gas at much higher prices.

Chisalita said: “It’s totally unheard of. Not even in Ceausescu’s [Romania’s former communist dictator] days, did the government discriminate so blatantly against consumers.

“At least in those days, the ministry of economy used to draw up a list to include all the millions of consumers in the country and then allocated the gas.

“Now, they came up with a list of consumers who would benefit from the cheap gas. How did they come up with this list, what criteria were used to select those consumers?”

Other market participants echoed the views, with some adding that the price cap on domestic gas, the allocation procedure and tax exemption amendments were discriminatory and impossible to implement.

ANRE did not respond to ICIS requests for comment.