The National Regulatory Authority for Energy (ANRE) yesterday adopted an order setting the methodology for calculating gas prices as a result of liberalization of transactions as of 1 April. The order issued on Wednesday amends and supplements the Methodology for setting the revenue per unit related to the regulated supply activity, carried out in a regulatory year, and approving regulated prices in the natural gas sector, and is intended to explain the modality of formation of the regulated price for end-consumers following the elimination of the regulated price for gas acquisition by suppliers from producers.
Thus, while so far the Executive established by Government Decision a price of gas intended for population at which the producers were forced to sell to suppliers, as of 1 April the price set by GD is the one at which the suppliers are forced to invoice gas to population, regardless of the acquisition price.
Difference between the actual acquisition price (liberalized), recognized by ANRE, and the price set by the Government will be the main element of the unitary correction component, which can be recalculated quarterly/half-yearly/yearly during a year.
In other words, the Government sets an estimated price of gas acquisition for the year X, the supplier pays a free price for gas necessary to supply its own household customers and, if it is higher than the price set by the Government it will subsidize household customers for a period of one year (although there could also be a quarterly or half-yearly subsidy), following to recover the "subsidy" allocated to them in the following year directly from them. That if ANRE recognizes entirely the acquisition prices, because ANRE order mentions that the Authority will recognize not the actual price, but the lowest price between the average price paid by the respective supplier and the average price paid by the other suppliers, either on the centralized wholesale market or under bilateral contracts.
Also, according to the order issued on Wednesday, ANRE splits the market of suppliers into those with less than 100,000 customers and those with more than 100,000 customers, average prices being calculated for each category. The order provides that the value of indicator of price difference between the price set by GD and the actual price paid by suppliers is, as of 1 April, 0. This means that the estimated price of the Government for this date is equal to the one at which producers are currently forced to sell gas to suppliers to supply household consumers, of RON 60/MWh. Moreover, if in winter gas consumption increases significantly, and thus the gas demand and the price, ANRE will not recognize the actual acquisition price, but maximum the acquisition price of gas extracted from the underground storage facilities.
According to the order, "in the exceptional circumstances of significant increase in consumption, requiring for this purpose additional sources to cover the unpredicted consumption difference, the analysis of costs incurred, for the purpose of their recognition, will be made in line with the precautionary principle, considering that the acquisition price should be lower than or at most equal to the acquisition price of gas extracted from the storage facilities
taken into account to assess the unitary fixed amount. For gas extracted from the underground storage facilities, related to the mandatory stock for the regulated customers, the price recognized is the average price calculated based on average prices corresponding to the correction modality (wholesale transactions on the centralized market/bilateral contracts), recognized monthly by ANRE for the license holder, in the injection period, plus the tariffs related to the provision of underground storage services approved by ANRE and the financing costs".
Subsidizing for "social protection" reasons for a year of the difference between the average market price and the price set by GD could create problems especially for small suppliers and could lead to a total result opposed to the one intended by the order, to liberalize the market. If they don't have the
necessary liquid assets, they could withdraw from the market, resulting in an even greater concentration (currently the two large suppliers, E.ON and GDF Suez, control anyway approximately of the household consumers market), and not a greater competition.
Initially, the Government should have identified the "vulnerable consumers" to protect only them. The order adopted by ANRE confirms the statements made on Tuesday morning by ANRE President Niculae Havrilet, according to which "ANRE will continue to set the final price for household gas consumers. The price will be determined annually, the possible differences following to be recovered in the following year". Havrilet also said ANRE would calculate the final price as of 1 April starting from the current price of RON 60/MWh for gas from domestic production, but in the future the authority will no longer be able to give reference prices. "We believe that this price is a very good foundation to form prices freely and we will see next year if it increased and how
much", ANRE president said.
At the same time, he explained that, if during the following gas year, i.e. April 2017 - April 2018, there are very big differences between the market price and the price taken into account by ANRE for the final price, the possibility of quarterly or half-yearly adjustments will be considered. "That, if there are differences higher than 5%. If the differences are not higher than 5%, we will go like that until the next year and see then", Havrilet also showed. He claimed there was no risk for the price of gas from domestic production to reach the level of imported gas prices, as long as the import demand is about 2% in a year.
Havrilet also said ANRE would launch as of next week a gas price comparator for household consumers, valid throughout the country where the gas supply service exists. "We support the change of suppliers in the household segment. Currently, we completed the price comparator. It is in tests and in April it will be found the website. (...) Probably it will be functional as of Monday", Havrilet showed. According to him, the comparator will allow consumers to see what are all the suppliers that can supply gas and their offers.
"You introduce the contact details, mentioning where the place of consumption is, the locality, the surface intended for heating and offers of suppliers,
which are forced to post their offers on the website, will appear automatically. For example, in Austria you insert the postal code and how many square meters the apartment has and there are 70 offers. An average offer is given, how many are below average and how many above average, to be easier to search. There are all types of offers, with payment facilities, with various conditions and so on.
This is very important. We cannot imagine liberalization in the household market without a price comparator", ANRE President explained. According to Havrilet, the Regulatory Committee of ANRE will establish and publish by 31 March the final regulated prices of gas to be paid by population to suppliers. ANRE head estimated that they would be by 1-2% higher than the current ones.