100 days of Fair Gas Price campaign

 

by Dumitru Chisalita, Energy Expert

We believe that only the free market can set the fair price for gas, but provided that customers have the necessary knowledge, are well and properly informed and are not subject to pressure from suppliers. In the free market, the price is formed following a negotiation between suppliers and customers. Depending on their capacity to negotiate, a selling price is obtained. This price has direct (visible) components and indirect (invisible) components. While we suppose that suppliers are aware of these issues, customers are less likely to know them. In this context, informing the customers is essential to determine negotiations in the market and to allow getting lower prices. But prices don’t fall by themselves. Prices fall as a result of interaction between seller and customer. Natural decline in consumption during the summer months (demand is lower than the supply), the trend of reduction of import gas prices as a result of its correlation with oil prices, the absence of storage tariff in the price etc. allow the customer to negotiate a price which, in the view of the summer of 2015, can be 10-12-15% lower than the current price. The price might fall, but only if non-household customers initiate negotiations with suppliers. The Fair Gas Price campaign appeared from the desire to contribute to the formation of the gas market, by informing customers, but also as a reaction to the way in which the switch from the regulated market to the free market took place for non-household consumers, being marked by the dominant position of suppliers (suppliers which sold gas at regulated prices to non-household customers until December 31st 2014) in relation to non-household customers. The campaign is not headed against anyone, nor is it aimed at supporting anyone, the critical attitude being for the constructive and corrective purpose to set a free gas market, beneficial for all players.

The “master-plan” for gradually switching from the regulated market to the free market, agreed 3 years ago by the Government of Romania with the international financial institutions, contained two directions:

  • The gas price deregulation schedule, ensuring a gradual gas price increase, from the regulated price to the market price. It was implemented by the Government of Romania under several Government Decisions.
  • The plan for the dissemination of information to customers, ensuring the preparation of customers for January 1st 2015, which mainly stipulated obligations for the gas market regulator, which had to be carried out during 2012 – 2014 and which haven’t been fulfilled.

Analyzing the obligations that had to be fulfilled before gas market liberalization, we notice that:

  • of the 35 actions agreed to be fulfilled before market liberalization (January 1st 2015), only 10 actions were fulfilled;
  • of the 5 permanent actions of customer information, none has been fulfilled so far;
  • of the 25 actions that haven’t been fulfilled, most of them (12 actions) are ANRE’s responsibility.

Gas market liberalization for non-household customers at the beginning of 2015 highlighted practices through which suppliers have imposed damaging commercial clauses for customers, clauses which result in a gas cost different from the contractual price. Non-households that have initiated negotiations with gas suppliers considered price negotiation. Suppliers that defined customer profile have r reacted quickly and offered gas at an “attractive” price, taking advantage of naivety of customers in interpreting clauses of the contract provided by the supplier. Thus, a number of “traps” were laid to customers, bringing the specific gas costs above the price quickly embraced by customers. Clauses introduced in contracts by some suppliers have exceeded by far the normal framework: significantly higher amounts booked in the transmission system, annual consumption schedules imposed to the customer, forcing customers to make daily hourly nominations and renominations, limiting or disrupting supply without notice, setting obligations only for consumers, without the possibility of being negotiated, excessive rights for suppliers, allowing them that regardless what happens during the performance of the contract to unilaterally terminate the contract etc. But the icing on the cake in terms of manipulation of capacity in the transmission system, in the interest of suppliers that had captive non-household customers consists of using it as a blocking element, in taking over customers from other suppliers, by imposing the takeover along with gas customers of transmission capacities much larger than those the customers need. Suppliers, in order to avoid losing customers, use an ANRE Order under which it has established the obligation “capacity follows the customer”. Absence of a unitary legislation throughout the production/import – end-customer chain determines the inapplicability of this principle in a transparent manner. The notion of capacity is only defined for the transmission system, this tool missing from the other activities and especially at the level of end-consumer connected to the gas distribution system. For this reason, in fact the non-household customer does not have an individualized capacity reserved and this situation allows the existing supplier to consider almost any capacity that it has to transfer when a customer leaves. With the passage of winter, suppliers are interested in giving up capacity booked in the transmission system, because in the warm period it represents a dead weight.

Suppliers for non-household customers, using this legislative “mismatch”:

  • blocked the intention of departure of customers that have found more advantageous offers;
  • reduced their own costs, transferring them in an abusive manner to others;
  • reduced the possibility for non-household customers to get lower prices by charging them, when they change the supplier, with costs of transferred capacity;
  • used this situation to propose to customers with the intention of leaving certain advantages in exchange for giving up their intention;

Nonperformance of the gas market starts from the lack of market regulations, some of them being obligations of ANRE arising from Law 123 and which haven’t been met in the 3 years after the apparition of the law and which show no signs of being achieved. The lack of legal framework and especially of an impartial watchdog, as ANRE should be, leaves room for the “wise guys”. This law was published in 2012, and in order to apply it was required that ANRE established the “implementation norms” as regulations, methodologies, codes etc. Even if ANRE, the Parliament of Romania (which coordinates ANRE’s activity), the civil society, through Expert Forum reports on ANRE’s role in the market, present us the activity of the institution in superlative terms, the reality shows that 30 obligations set by law and other 8 we believe absolutely necessary for the functioning of the gas market haven’t been fulfilled, although the terms were long exceeded.

The Fair Gas Price campaign has weekly issued warnings through the network created by the platforms:

Facebook https://www.facebook.com/PretCorectLaGaz?ref=hl

Twitter: https://twitter.com/PretCorectLaGaz

Blogs: www.dumitruchisalita.ro, www.adevarul.ro, www.enpg.ro, www.energy-center.ro, www.energynomics.ro, www.bizenergy.ro, www.contributors.ro, www.adevarulfinaciar.ro

and in English http://romaniascout.ro/category/fair-gas-prices

100 days from the beginning of the Fair Gas Price campaign, we believe it has paid off:

– ANRE took over some of the ideas, applying them:

  • The framework procedure on settling the complaints of end-customers to electricity and gas suppliers
  • The procedure on drawing up the technical and economic study for objectives/pipelines needed for connection
  • Establishing a free hotline to inform consumers about the change of electricity and gas suppliers
  • The final gas price decreased in the first 3 months of 2015, according to the National Energy Regulatory Authority

– Consumers took courage, signaling to both Fair Gas Price team and other institutions irregularities in the market

– Suppliers tried other approaches than those used on the occasion of gas market liberalization for non-households as of the beginning of the year

– The public started to ask other questions about the gas market, than “How much will the gas price increase?”

Image courtesy of Simon Howden at FreeDigitalPhotos.net