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ROMANIA: An Introduction to Energy & Natural Resources

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Chambers || Energy Law Overview 

The Romanian energy market went through some major changes during 2020. Also, there are several opportunities worth mentioning:

Liberalization of Gas and Power Markets 

On 1st July 2020, the gas market for household consumers became completely liberalized.

As of 1st January 2021, the Romanian power market has also been fully liberalized and power prices for household consumers are no longer regulated by the Romanian Energy Regulatory Authority (“ANRE”), with the aim of ensuring competition between suppliers on the market and the increase of bundled energy products.

Household customers are able to change their gas and power supply contracts in order to obtain the best price and the best services that suit their profile.

In this context, one of ANRE’s main objectives is to increase competition on the retail market, especially by discouraging unfair commercial practices.

With the complete liberalization of the gas and power market for households, more investigations are expected to be initiated by ANRE, especially as the Competition Council has already flagged offers and contracts that may include clauses preventing customers from changing their natural gas suppliers.

The Romanian Competition Council announced its intention to keep constantly monitoring the energy market, as well as collaborating with ANRE and ANPC (the Consumer Protection National Agency) in order to improve consumer access to the relevant information for making informed decisions and to prevent potential actions blocking customers from signing with a certain supplier.

The Competition Council is expected to intervene by investigating alleged cases of abuse of a dominant position and anticompetitive agreements.

Fines by Reference to Turnover for Unfair Commercial Practices or for Breach of REMIT

The sanctions that may be imposed by ANRE have increased since 25 September 2020. For example, economic operators using unfair commercial practices may be sanctioned by fines of up to 10% of their annual turnover.

Also, explicit provisions have been included in the national energy law regarding the breach of REMIT and the sanctions that may be applied by ANRE have increased substantially.

Within the new legal framework, any market participants manipulating the wholesale energy market may be sanctioned with fines of up to 10% of their annual turnover. Therefore, it is important for market participants to take all measures to prevent such behaviour on the energy markets.

Intensification of Investigations by the Energy Regulator

The investigations carried by ANRE have intensified: since the start of its activity in 2018, the specialized division of ANRE has conducted investigations against 33 electricity and natural gas producers and suppliers, finalizing 17, with another 16 ongoing investigations expected to be finalized in 2021 - 12 on the wholesale electricity market and 4 on the wholesale natural gas market.

ANRE focused mainly on verifying market manipulation suspicions, sanctioning 7 energy suppliers with fines totaling RON3,000,000 (approx. EUR600,000).

ANRE has also been granted access to the systems of the Agency for the Cooperation of Energy Regulators (ACER) and is now able to analyse and use for its investigations the data collected by the European agency.

Windfall Tax 

An important legal amendment linked to the liberalization of the natural gas market introduced in 2020 was the “windfall tax”. The “windfall tax” represents a 90% tax imposed on the difference between (i) the actual purchase price at which a supplier buys natural gas and (ii) and a reference price of RON68/MWh. These legal provisions apply for the sale of natural gas to household customers and heat producers, but only for the natural gas used to produce heat in cogeneration plants and in thermal power plants intended for public consumption.

The reason behind the “windfall tax” was to create a special fund dedicated to the protection of vulnerable consumers of natural gas. Therefore, only 10% of the amount resulting from the difference between the actual purchase price paid by the supplier and the reference price of RON68/MWh could in such case eventually be kept by the supplier, while the balance of 90% will go to the state budget.

Opportunities and Trends 

Opportunities related to the renewable energy market are triggered by the Green Deal. The national state aid scheme is currently being rethought to be compatible with the European Green Deal, so that financing may be prioritised for supporting economic transformations related to climate change.

Renewable electricity producers are also looking into investing in fast-start gas power plants to balance electricity production from renewable sources.

In terms of investments, according to the government's draft energy strategy for 2020-2030, Romania plans to invest over EUR22 billion in its energy sector by 2030. Romania also aims to meet more than 30% of its energy needs from renewable sources by 2030.

Regarding the natural gas segment, the focus is expected to be on the development of the national gas transmission system on the BRUA (Bulgaria - Romania - Hungary - Austria) corridor and on the Romanian section of the southern gas corridor for receiving natural gas from the Black Sea.

Furthermore, by 2030 Romania plans to replace several coal-fired energy groups with combined cycle units powered by natural gas and units based on renewable energy sources.

The government's draft energy strategy also includes the construction of two additional reactors at the nuclear power plant in Cernavodă.

Energy operators present on the Romanian market are also invested in ensuring a smooth transition to green energy and the digital transformation in the energy markets.