The Gas Halloween

by Dumitru Chisalita

Transparency, competition and non-discrimination in the gas market, concepts which are found in European treaties, regulations and directives, words which are found in the Romanian legislation, words which are found on everyone’s lips, but with quasi-inexistent applicability in Romania. Behind these words, the opacity, oligopolies and discrimination are elements that still dominate the Romanian gas market.

The Intelligent Energy Association organized on 25 October 2016, in collaboration with Energy-Center, the first roundtable, with participation of ANRE President and Secretary of State for the gas sector in the Ministry of Energy, during which there were discussions on the efficient and effective application of transparency, competition and non-discrimination in the gas market, respectively discussions on the implementation of Emergency Ordinance no. 64/2016 amending and supplementing the Electricity and Gas Law no. 123/2012.

The Emergency Ordinance is, in my opinion, the only regulatory document from the beginning of the gas market liberalization process, which far from being perfect, came and determined the transformation of words – transparency, competition, non-discrimination – into concepts that can be applied, measured and verified, with help of procedures, instructions and methodologies.

The Ordinance treats the fundamentals of market liberty, which can radically change behavior in the market. It creates the prerequisites for verifying the behavior of players and the disclosure of their true intentions, while verifying the facts by anyone and at any time.

Thus, there is a possibility to destroy the myth:

• sacrificing certain gas suppliers for “the welfare of the Romanian people”;
• institutions watching over the “welfare of the population”

In fact, this Ordinance mentions things that should have been realized ad-hoc in the last 16 years in the gas market and not imposed by law:

• to make proof of gas acquisition for population in conditions of minimization of the cost of resources allocated (I believe that in the recent years costs haven’t always been minimized for gas acquisition for population, this being one of the items that led to price escalation),
• to make proof of purchasing gas for population through procedures ensuring the possibility for any supplier to participate in the selection process, in order to obtain a fair price (limiting participation of certain suppliers in the gas acquisition process determined that the price of gas sold-purchased was not always the fair one);
• to make proof that conditions of market competition are ensured (gas purchased in the recent years was often based on the existence of a single commercial relationship, without the intention to consult other offers and even less so having actions regarding gas acquisition through competitive procedures based on supply and demand);
• to make proof of gas acquisition through procedures ensuring transparency (the gas supply activity is lacking any procedures – good practices – showing the intention to ensure the transparent sale-purchase of gas and subsequently allowing verification whether facts coincided with intentions);
• to make proof of ensuring conditions of transparent access to the market (the gas supply activity is performed especially behind bilateral contracts, hidden, without presenting to the general public the conditions of access to selling offers, the way in which the supplier makes sure it takes all measures to get a fair price, that it does not use dumping prices, that there is connection between the contractual provisions and the price or discounts granted etc.);
• to make proof of ensuring the conditions of non-discriminatory access to the market (the gas supply activity in Romania did not allow all players access to gas offers, having numerous selective barriers which actually restricted massively competition and market development).

I highlighted several key words in this Emergency Ordinance, words which are avoided by certain players in the gas market, which understood that their absence from a clear context make the terms transparency, competition and non-discrimination only empty words which they can use before anyone, without any possibility of reproach. The ordinance replaces the words with obligations, which has sparked panic among actors in the gas market, who see their positions threatened. It is my opinion that, as it has happened before in other cases, their reaction was particularly vehement, probably lobbying a lot to not see this Emergency Ordinance approved.

Boycott, by most large players, of discussions about the application and subsequent verification of the degree of transparency, competition and non-discrimination, at the roundtable organized by the Intelligent Energy Association and Energy-Center publication, is enlightening in this respect.

As it has happened on similar occasions in the past, it is likely to soon have other investigations from the European Commission, following complaints from “benevolent” companies in Romania, going all the way to resuming the theme of blocking gas exports.

Suspect is the fact that Parliament has decided to proceed with the enactment of the Emergency Ordinance no. 64/2016 after several days from its approval and even before the issue of the Government Decision setting the mandatory percentage rates for trading on centralized platforms. The emergency of discussing it in the Parliament determines my fear that some lobbyists have done their job well this time and there is a danger of extracting the key words from the GEO, so that it remains only general and continue allowing the current practices.

I believe the principles of this Ordinance have to be defended by all those who want a FairGasPrice, by all those who want to end oligopolies in the gas market, those who want to have real conditions for the decrease in gas prices and not conjectural ones.

At the same time, I believe this Ordinance, although necessary, it is not sufficient and other many actions are necessary to realize a liberalized and functional gas market, which is why the Intelligent Energy Association will launch on Halloween (31 October 2016) the Country Project: Starting over in the gas market in 10 steps.

Note: Halloween is originally a Celtic holiday, the day when it is thought that the border between this world and the other weakens, allowing spirits, good or bad, to cross it.

Let’s invite together the honest “spirits” to stay and banish the bad “spirits” from the gas sector.

The article was originally published in Romanian here.

Image courtesy of Suriya Kankliang at FreeDigitalPhotos.net