opinion article by Ciprian Glodeanu, Partner and Cristina Gavrila, Partner at Glodeanu & Partners

After almost a year from the launch of the infringement procedure against Romania for failure to transpose the provisions of Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU, Romanian Government proudly announced, the very last days of 2021, the amendment of the Energy and Gas Law No. 123/2012 which will, according to Romanian officials, “will increase competition and market dynamics, with a beneficial impact on price for the final consumer” and “lead to the restructuring of the energy market and to its opening, by eliminating the centralized market and giving the possibility to conclude bilateral power purchase agreements on the organized or over-the-counter markets.” (Mr. Virgil Popescu, Romanian Energy Ministry)

Through an emergency procedure, namely the issuance of an Emergency Ordinance (GEO No. 143/2021 dated 28 December 2021 for the amendment and supplementation of the Energy and Gas Law No. 123/2012, as well as the amendment of other normative acts – GEO 143/2021), the Government, announcing measures aimed at addressing currently though issues for the Romanians, namely increase of the energy and gas bills, has implemented the much-promised EU legislation, allowing the renewable energy market a long due comeback, eliminating the restrictions on the conclusions of bilateral power purchase agreements (PPAs) (except for state-owned producers, commissioned before 1 June 2020, subject to the provisions of GEO No. 109/2011 on corporate governance of publicly held companies, which have the obligation to trade at least 40% of their annual energy production through agreements concluded on the energy markets, other than the day-ahead market, intra-day market or the balancing market), which should make renewable energy projects more bankable.

Given the mechanism chosen, i.e. the emergency ordinance, the currently discussed provisions are still subject to change. According to Romanian law, emergency ordinances should be approved, through law, by the Parliament (and this can be done with or without amendments to the initial text). 

Also, GEO 143/2021 contains merely general principles, which should be detailed by the Romanian Energy Regulatory Authority (ANRE) in, what we anticipate being, elaborate secondary legislation. GEO 143/2021 provides that such secondary legislation shall be issued by ANRE within 6 months as of the entrance into force of the GEO at hand (except for the methodology on quantitative compensation applicable to prosumers with installations up to 200KW to be granted until 31 December 2030, which should be prepared by ANRE within 60 days as of the entrance into force of our GEO). Therefore, by 1^st of July 2022, we should have the full legislative package in place to implement all the provisions of this new piece of legislation. 

With respect to the transitioning period, GEO 143/2021 provides that all normative acts issued based on the Energy and Gas Law No. 123/2012 remain applicable, except for the provisions contrary to the amendments and supplements brought by GEO 143/2021. It will be up to the “market practice” to determine what is contrary to the amendments brought by GEO 143/2021 or not. 

We note that at the date hereof, there are no documents made available by ANRE on its website, for public consultation, for the implementation of the provisions of GEO 143/2021.

Practically, Romanian Government eliminated the previous requirement that all the energy is traded on the centralized market, eliminated the concept of regulated energy market and amended the provisions on the functioning of the energy market by introducing the possibility to trade energy on different markets and energy exchange, as well as the possibility to trade through long term PPAs concluded outside the regulated market and entering into directly negotiated agreements on the wholesale competitive market or as a result of bids on the regulated markets. As regards the business environment, it is said that such amendments will lead to a restructuring of the energy market and its full opening. The impact is announced to be favorable by removing restrictions affecting the liberalization of the energy market and the development of new energy generation capacities.

For the general public opinion however, the Romanian officials announced this GEO 143/2021 to be the beginning of the end of the stringent current issues that Romanians and Romanian economy is facing, namely, the increase of the energy and gas bills. The new legislation (i) provides for the possibly of City Hall to co-finance the expansion of natural gas networks, (ii) the “prosumers” concept is introduced, and such will benefit from quantitative compensation and (iii) all household customers will benefit from free connection to the energy and gas networks. 

The new legislation instates the right of household customers, small businesses and micro-enterprises to change the energy supplier or market participant involved in the aggregation without any “change commission”, but also stipulates that, “electricity suppliers or market participants involved in the aggregation may charge final consumer commissions for the termination of fixed-term and fixed-price electricity supply contracts in the event of their early termination by such final consumer”. There are specific requirements to be met to apply such termination commission, however, it is a fee to be kept in mind when deciding to change the supplier.

As mentioned, the “prosumers” concept is also introduced, stipulating that those who “own units of electricity from renewable sources with an installed capacity of up to 400 kW per place of consumption can sell electricity produced and delivered in the electricity grid to energy suppliers with which they have concluded contracts for energy supply, according to ANRE regulations”. Correlatively, “energy suppliers are obliged, at the request of prosumers who produce energy in power generation units with an installed capacity of up to 200 kW and with which they have concluded electricity supply contracts: (a) to make in the invoice of the prosumers in question a quantitative compensation, i.e. to bill only the difference between the amount of energy consumed and the amount of energy produced and delivered in the network, and (b) to mention in the invoices of the prosumers, in case the amount of energy produced and delivered in the network is greater than the amount of energy consumed, the difference between the quantity delivered and the one consumed, the prosumers being able to use the amount of energy carried over for a maximum period of 24 months from the date of invoicing”. 

The quantitative compensation of prosumers with installations of up to 200 kW will be granted until 31 December 2030, in the context of measures and actions related to achieving the commitments on the share of energy from renewable sources in 2030 detailed in the National Energy and Climate Plan, in accordance with an ANRE methodology (to be issued), and after this period, the respective prosumers may sell the energy produced under the conditions provided for prosumers with an installed capacity of 200 kW to 400 kW.

By derogation from the tax legislation, prosumers, individuals are exempted from the payment of all fiscal obligationsrelated to the quantity of energy produced for their own consumption, as well as for the surplus sold to suppliers.

As opposed to the previous provisions stating that the Government, at the proposal of ANRE and with the approval of the Competition Council, may limit the excessive increase or block them for maximum 6 months, period which can be extended for 3-month successive periods, provided that the circumstances that lead to taking such measure continue, through: (a) setting a maximum price limit on the centralized market, and (b) limiting the income from the regulated activity, and such recognized and deferred costs from the regulated activity are fully recovered, in accordance with the procedure issued by the competent authority, GEO 143/2021 provides that suppliers are free to set the price at which they supply energy to clients. In furtherance, the protection of household customers affected by energy poverty and of those vulnerable shall be done through social policies or any other legal means, save for public intervention in establishing the energy supply process. 

By way of exception, at the proposal of ANRE and of the Ministry of Labor and Social Protection, the Government, with the approval of the Competition Council, may intervene in the formation of prices for the supply of energy to household vulnerable consumers or to those affected by energy poverty, but subject to notifying such measures to the European Commission within one month as of their adoption. Also, any and all public interventions in the formation of prices for the supply of energy must: (a) pursue a general economic interest and not go beyond what is necessary to achieve that general economic interest; (b) be clearly defined, transparent, non-discriminatory and verifiable; (c) to guarantee equal access to customers of energy economic operators in the European Union; (d) be limited in time and proportionate in respect to their beneficiaries; and (e) not to lead to additional costs for market participants in a discriminatory manner. The notification to the European Commission should provide for: the reasons why the objective pursued cannot be achieved to a satisfactory extent with other instruments, the way in which the requirements and conditions for intervention are met, and the effects of the notified measures on competition. The notification should describe the categories of beneficiaries, the duration of the measures and the number of household customers affected by the measures and explains how the regulated prices were set. In any case, the public interventions in the formation of prices for the supply of energy must comply with the provisions of Regulation (EU) 2018/1999, even if there are a significant number of households affected by energy poverty (art. 3 para. (3) lit. d) and of art. 24).

The above, together with amendments in respect to (i) the amendment and supplementation of ANRE’s powers, (ii) the amendment and supplementation of the provisions regarding the licenses and authorizations of energy operators, (iii) the requirements for a legal entity, residing in another Member State, to perform activities in Romania, (iv) the obligation to prepare an investment and development plan for the transportation grid for 10 years, as well as ANRE’s obligation to monitor it, (v) new concepts, active clients, vulnerable clients and their definitions, rights and obligations, together with some changes regarding the gas sector, have all been included in the government emergency ordinance issued at the end of 2021 and for which the energy market expects the secondary legislation to be issued and the law for the approval of the GEO to be passed in the Romanian Parliament.