Romania pushes for cap on energy bills, generation tax

Author: Aura Sabadus

2021/10/22

KYIV (ICIS)--Romania is expecting to introduce a temporary cap on electricity and gas tariffs to 15 million consumers amid concerns over record energy prices this year, while at the same time imposing a tax on electricity producers.

COMPENSATION SCHEME

The compensation scheme for end users, which could be adopted by parliament as early as 25 October, would apply between 1 November 2021-31 March 2022.

George Niculescu, secretary of state in the ministry of energy, said on the sidelines of the Ukraine Gas Investment Congress in Kyiv the measure would cost the state budget New Lei 1.3bn (€263m) but insisted it was necessary to shield consumers from soaring market prices.

Romania currently operates a support scheme which covers five million consumers.

However, the government decided to expand it to most of the population as electricity and natural gas wholesale prices have soared to record highs.

Under the latest proposals by the government amended in the Senate, households whose consumption is forecast to reach 1,500KWh over the upcoming five months will be eligible to pay New Lei 291.00/MWh (€58.83/MWh) for electricity.

To compare, the Romanian front year baseload price assessed by ICIS stands at New Lei 630.00/MWh.

The natural gas price could be capped at 33% of the gas price included in the supply contract to households. The cap would apply to gas consumers with a total projected consumption of 1,000 cubic metres over the next five months.

Small and medium-sized enterprises (SMEs) might also benefit from tax rebates, including a reduction in value added tax from 19% to 5%.

SMEs consuming electricity would be exempt from paying taxes related to green certificates and high-efficiency cogeneration as well as an excise levied on the first 200MWh consumed monthly.

The excise threshold for SME consumers of natural gas was lifted to 500MWh.

If the scheme is approved, the government would be paying the difference between the capped tariff and a formula including the average of the regulated components of the final tariff and a reference price for electricity and natural gas.

TAX ON POWER PRODUCERS

The government also proposes to slap an 80% tax on the difference between the final sale price of electricity and a threshold of New Lei 450.00/MWh. The tax would apply to electricity producers.

The Romanian Association of Electricity Suppliers (AFEER) criticised the proposal and urged the government to scrap it. The association pointed out that electricity producers have different costs which meant that in some cases their production bills would exceed the proposed cap.

Georgescu insisted AFEER was not directly affected by the proposed measure, which only applies to producers.

However, a Romanian-based trader said the measure would be everyone’s concern as it would create widespread distortions in the market.