AMENDMENTS TO GEO 27/2022 ON ELECTRICITY AND NATURAL GAS PRICE CAPS AND TO GEO 119/2022 AMENDING GEO 27/2022

On 11 November 2022, Emergency Ordinance no. 153/2022 ("GEO 153/2022") amending and supplementing Government Emergency Ordinance no. 27/2022 ("GEO 27/2022") on measures applicable between 1 April 2022 and 31 March 2023 to end customers in the electricity and natural gas market, as well as amending and supplementing certain regulatory acts in the energy sector and amending Government Emergency Ordinance no. 119/2022 ("GEO 119/2022") for amending and supplementing Government Emergency Ordinance No. 27/2022 on measures applicable between 1 April 2022 and 31 March 2023 to end customers in the electricity and natural gas market, as well as for amending and supplementing certain regulatory acts in the energy sector, was published in Official Gazette of Romania No. 1091, entering into force on the same date.

The preamble to GEO 153/2022 makes reference to the provisions of Regulation (UE) 2022/1.854 of the Council of 6 October 2022 on an emergency intervention to address high energy prices, including the provisions of Article 8 thereof regarding the principles which the Member States are required to observe in the development of the national crisis measures.

The main change introduced under GEO 153/2022 is aimed at regulating the centralized electricity purchase mechanism in the energy market. Below is a selection of the amendments and additions brought under GEO 153/2022:

1. Overview of the centralized electricity purchase mechanism

The centralized electricity purchase mechanism (the "Purchase Mechanism") requires OPCOM S.A., the Gas and Electricity Market Operator, ("OPCOM"), as sole acquirer, to purchase electricity from Producers (as this term is referred to below) and to sell the electricity so purchased to Purchasers (as this term is referred to below).

The Purchase Mechanism shall be valid between 1 January 2023 and 31 March 2025.

The Purchase Mechanism shall apply to producers with a total installed capacity of 10 MW or more (the "Producers"), except for:

(i) economic operators, producers of electricity from renewable energy sources, for technologies and installed capacity produced from: a) hydropower used in plants with an installed capacity of not more than 10 MW; b) wind energy; c) solar energy; d) geothermal energy; e) biomass; f) bioliquids; g) biogas; h) waste fermentation gas; and i) sludge fermentation gas from wastewater treatment plants.

(ii) power generating capacities commissioned after 01 April 2022; and

(iii) producers with combined heat and power capacities delivering heat to the Centralized Heat Supply System (SACET).

As of the enforcement of GEO 153/2022, Producers may sell the electricity produced only under the conditions set out in the Purchase Mechanism.

For the purposes of the Purchase Mechanism, Purchasers shall be (i) electricity suppliers that have concluded contracts with final customers, and (ii) the electricity transmission system operator and the electricity distribution system operators, to cover their own technological consumption of the networks they operate ("Purchasers").

2. The Purchase Mechanism

OPCOM organizes an annual purchase procedure (the “Annual Purchase Procedure”), as well as an additional monthly purchase procedure for the quantities of electricity that are to be delivered in the following month (the “Monthly Purchase Procedure”). The calendar is established by OPCOM and published on its own website.

Under the Purchase Mechanism, OPCOM (i) purchases electricity from Producers at a price of RON 450/MWh, and (ii) sells the purchased electricity to Purchasers at a price of RON 450/MWh.

A. Annual Purchase Procedure

Producers’ forecasts

By 24 November of the year preceding the year of application, Producers are required to send to CNTEE Transelectrica S.A. (“Transelectrica”) and OPCOM information regarding:

a) the forecast quantity of electricity to be delivered to the grid in the year of application;

b) in the case of Producers contracting balancing services, the forecast quantity of electricity necessary to provide the contracted balancing services;

c) the quantity of electricity from the output of the year of application that was already contracted for sale at the enforcement date of GEO 153/2022;

d) the quantity of electricity available for the year of application, broken down by months, resulting from the difference between (i) the forecast quantity of electricity to be delivered and (ii) the quantity of electricity necessary to provide balancing services, according to letter b) above, and the quantity of electricity already contracted for sale, according to letter c) above.

Transelectrica further validates the Producers' forecast quantities of electricity to be delivered to the grid in the year of application and the forecast quantities of electricity required to provide the contracted balancing services, taking into account the higher value between the value sent by Producers and the value calculated by Transelectrica, calculates 80% of the validated forecast values and sends them to ANRE together with the quantities of electricity from the output of the year of application that have been already contracted for sale on the enforcement date of GEO 153/2022.

ANRE verifies the forecast output values sent by Transelectrica and sends to OPCOM the forecast quantities of electricity available to be traded under the centralized electricity purchase mechanism in the year of application, broken down by months (“ANRE Approved Producers’ Forecasts").

By 20 December of the year preceding the year of application, OPCOM sends the ANRE Approved Producers’ Forecasts to Producers.

Purchasers’ forecasts

By 10 December of the year preceding the year of application, Purchasers are required to send to OPCOM annual consumption forecasts, as well as the quantities of electricity that have already been contracted for purchase at the enforcement date of GEO 153/2022, broken down by months.

OPCOM further centralizes the consumption forecasts and the quantities of electricity that have been already contracted for purchase and sends them to ANRE.

By 20 December of the year preceding the year of application, ANRE validates the consumption forecasts and sends the following information to OPCOM (“ANRE Approved Purchasers' Forecasts”):

a) 75% of the validated consumption forecasts, reduced by the quantities of electricity set forth in the power purchase agreements that have already been concluded – in the case of the transmission system operator and the distribution system operators;

b) 80% of the validated consumption forecasts, reduced by the quantities of electricity set forth in the power purchase agreements that have already been concluded – in the case of the other Purchasers (i.e., suppliers);

Forecasts’ comparison and determination of quantities for trading

OPCOM totals up the ANRE Approved Purchasers' Forecasts and the ANRE Approved Producers' Forecasts, taking into account, for the Annual Purchase Procedure, 50% of the aggregated electricity quantities. The quantities of electricity thus obtained are compared in order to cover the electricity consumption.

If the amount of electricity that Producers are required to sell is lower than the amount of electricity necessary to cover consumption, OPCOM shall reduce the amount of electricity needed to cover consumption as follows:

(i) in the case of the transmission system operator and the distribution system operators, all consumption will be ensured according to the ANRE Approved Purchasers' Forecasts;

(ii) in the case of the other Purchasers (i.e., suppliers), the quantity will be reduced proportionally after the deduction of the quantity of electricity referred to in point (i) above.

If the amount of electricity that Producers are required to sell is higher than the amount of electricity necessary to cover consumption, OPCOM shall reduce proportionally the amount of electricity the Producers must sell.

The annual and monthly quantities of electricity resulting from the Annual Purchase Procedure shall represent firm obligations for Producers and Purchasers (“Firm Quantities”).

B. Monthly Purchase Procedure

Additional Quantities Forecast by Producers

Not later than the 15th day of the month preceding the month of delivery, Producers must establish and send to OPCOM, on their own responsibility, monthly forecasts for the quantities in excess of the Firm Quantities.

Additional Quantities Forecast by Purchasers

Not later than the 15th day of the month preceding the month of consumption, Purchasers must establish and send to OPCOM monthly forecasts for the quantities in excess of the Firm Quantities. 

Forecasts’ comparison and determination of quantities for trading

OPCOM aggregates the Additional Quantities Forecast by Producers and the Additional Quantities Forecast by Purchasers. The quantities of electricity thus obtained are compared in order to cover the electricity consumption.

If the amount of additional electricity that Producers are required to sell is lower than the amount of additional electricity necessary to cover consumption, OPCOM shall reduce the amount of additional electricity needed to cover consumption as follows:

(i) for the transmission system operator and the distribution system operators, all additional consumption will be ensured according to the Additional Quantities Forecast by Purchasers;

(ii) for the other Purchasers (i.e., suppliers), the quantity will be reduced proportionally after the deduction of the quantity of electricity referred to in point (i) above.

If the amount of additional electricity that Producers are required to sell is higher than the amount of additional electricity necessary to cover consumption, OPCOM shall reduce proportionally the amount of additional electricity that Producers must sell.

The monthly quantities of electricity resulting from the Monthly Purchase Procedure shall represent firm obligations for Producers and Purchasers.

3. Contribution to/from the Energy Transition Fund for the electricity sold under the Purchase Mechanism

The contribution to/from the Energy Transition Fund (“Contribution”) for the electricity sold under the Purchase Mechanism shall be paid as follows:

(i) if the Contribution is higher than the monthly value of the CO2 allowances for the electricity sold under the Purchase Mechanism ("VCO2"), Producers shall pay the difference between the Contribution and VCO2.

(ii) if VCO2 is higher than the Contribution, Producers shall receive the difference between VCO2 and the Contribution.

4. Introduction of new sanctions

Noncompliance with the obligations set out under the Purchase Mechanism may result in OPCOM, Producers and Purchasers being sanctioned with a fine ranging between 1% and 5% of the annual turnover generated in the financial year preceding the sanction.