On the background of numerous discussions and complaints with respect to the impact of the legislative changes brought by the Government Emergency Ordinance 114/2018 (GEO 114) over the economic environment, at the end of last week, the Government has adopted the Emergency Ordinance no. 19/2019 amending and supplementing certain normative acts (GEO 19), meant to address some of the concerns that have been raised by the representatives of the industries affected by the measures taken by GEO 114. GEO 19 has entered into force Friday, 29 March 2019.

With respect to the energy and gas sector in particular, GEO 19 amends certain provisions of Law no. 123/2012 on energy and gas (Law 123/2012), either directly or by amending the recent changes brought by GEO 114, the most significant adopted changes being presented below.

  • Capped selling price for gas resulting from domestic production activity applicable solely in relation with suppliers of household customers and heat producers The newly adopted GEO 19 removes the non-household consumers as beneficiaries of the capped selling price for gas resulting from domestic production activity. As such, according to GEO 19, starting with 1 May 2019 (not 1 April, as previously regulated) and until 28 February 2022, the capped selling price of RON 68/MWh that gas producers are under the obligation to observe when selling natural gas quantities resulting from domestic production is only applicable in relation to (i) the suppliers of household customers and (ii) the heat producers, solely for the quantity of gas used for the production of heat in cogeneration and in the heat power plants intended for the population consumption. Also, in the timeframe mentioned above, in order to ensure the entire consumption needs of heat producers and household customers, gas producers are under the obligation to sell gas mainly to gas suppliers or clients, in the conditions regulated by ANRE and solely for the quantity of gas used for the production of heat in cogeneration and in the heat power plants intended for the population consumption, from the current production and /or from the storage facilities.
  • New sanction for failure to comply with the imposed sale value for gas resulting from domestic production activity According to GEO 19, failure to comply with the provisions regulating the capped selling price for gas resulting from domestic production activity is sanctioned with a fine in amount of 10% of the turnover achieved in the preceding year.
  • Rate of return on invested capital During the regulatory period of 2019-2024, for calculation of the transmission and distribution tariffs of energy, the rate of return on invested capital is 6.9%, representing the average cost of the capital invested and expressed in real terms, before taxation. The amendment brought by GEO 19 on the rate of return comes as a measure that was expected by the economic operators in the energy sector, as such rate was being capped at 5.66% for the year 2019 by order of the president of ANRE passed last year, leading to serious discussions on the profitability of suppliers and distributors and the impact this measure may have on investments into the grid.

Furthermore, by amending the Government Emergency Ordinance on the organization and functioning of ANRE, the 2% annual contribution on the turnover achieved by the license holders in the energy field and natural gas is now regulated separately for certain categories of license holders.

  • Annual contribution due by certain categories of license holders Different from the regulated 2% contribution on the annual turnover achieved by the license holders in the field of energy and natural gas, the annual contribution to be due by the holders of commercial exploitation licenses for the production capacities of coal-based electricity, as well as for the production of electricity and heat in cogeneration shall be established annually by order of the president of ANRE. Is to be noted that the annual contribution will not be eliminated for the license holders mentioned herein, but the amount of such contribution will remain at the ANRE’s discretion. The GEO 19 does not provide for the level of the annual contribution to be due by the categories of license holders mentioned above. Assuming there will be a material difference on the level of the annual contribution due by the coal-based electricity producers, there might be suspicions on illegal state-aid being granted.