The Fair Gas Price Caravan met with gas consumers in Suceava

by Dumitru Chisalita

The day when the price of gas increased for consumers in the regulated market, the Fair Gas Price Caravan discussed with gas consumers in Suceava about the effects of gas market liberalization. We believe that only the free market can determine 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.

The characteristics of gas markets are the following:

1. Regulated gas market, characterized by:

• equal sign among all customers;
• unconditional acceptance of commercial provisions (price, modality of payment, guarantees);
• the fact that the price is set based on costs, regardless if justified or affordable, without benefiting from discounts in case of early payments or constant consumption;
• the fact that it is the market where naturally the price is superior to the price in the free market.

2. The competitive gas market:

• each client may customize its offer;
• it may try to negotiate everything.

In the regulated market, state institutions are “concerned” of consumer welfare, but with their “fist in its mouth”. 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. 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 during summer is lower than the price during the cold season. The price can drop, if customers initiate negotiations with suppliers. 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. The unanimously accepted conclusion was that gas market liberalization eliminates the role played by some institutions in directing revenues to certain private companies.

Image courtesy of graur codrin at FreeDigitalPhotos.net