Well past the imposed transposition deadline (i.e. 31 December 2020), on 29 April 2021, the Ministry of Energy published for transparency purposes the draft law on the transposition into the national legislation of Directive (EU) 2019/944 of the European Parliament and of the Council on common rules for the internal market for electricity and amending Directive 2012/27/EU (the “Draft Law”).

Aimed at improving the Romanian regulatory framework governing the electricity market, the Draft Law is intended to implement a rather important legislative reshuffle through amendments made to Electricity and Gas Law no. 123/2012 ( “Law 123/2012”), following the general principles imposed by the Directive 2019/944 for the EU electricity market, which shall be competitive, customer-centered, flexible and non-discriminatory. The Draft Law has been long awaited given the need for change in at least some particular areas.

The extent to which the Draft Law will eventually manage to satisfy the market expectations and hopes is hard to predict. The legislative process is just at dawn and the current Draft Law may suffer important changes throughout the process. Also, the process may be long but the pressure from the market is higher than ever. Hopefully, the new electricity law in a form capable to satisfy all market players / interests will be ready sooner rather than later.   

Out of the newly proposed provisions, we have selected below just a few to underline some of the main directions of change:

1. New concepts on the electricity market

The extent of the intended changes transpires from the very Article 3 of Law 123/2012, as proposed to be amended under the Draft Law. New or (significantly) amended definitions and concepts have been provided. Out of them, we wish to highlight the apparently more relevant ones such as (i) defining “electricity supply”, which, by way of clarification, is now aimed at encompassing (our emphasis) the “activity of selling electricity to customers, including the resale thereof, as well as the supply of electricity to the places of consumption owned by the supplier” and (ii) integrating and slightly expanding the definition of “energy from renewable sources or renewable energy” (currently provided only under the special law dedicated to renewable energy) which includes non-fossil renewable energy sources, namely wind, solar (solar thermal and solar photovoltaic) and geothermal, environmental energy, tidal energy, wave energy and other ocean energy, hydroelectric energy, biomass, waste fermentation gas, sludge fermentation gas from wastewater treatment plants and biogas. Integrating this concept in the electricity law is more of a statement regarding the importance of renewable sources in the architecture of the electricity framework in general.  

The Draft Law also expands the scope of the roles of participating players on the electricity market by widening the “market participant” concept. This is now designed to include “both natural and legal persons that buy, sell or produce electricity, are involved in the aggregation or are dispatchable consumers or energy storage services consumers, including by placing trading orders in one or more electricity markets, including the energy balancing market”. The Draft Law gives (back) to (large) consumers some instruments to act on the electricity market in more sophisticated ways. Along these lines, the Draft Law proposes the concept of active client which should be guaranteed that they are not subject to disproportionate or discriminatory technical requirements, administrative requirements, procedures and charges, and to network charges that are not cost-reflective.

The above is complemented by new concepts, such as “citizens energy communities” i.e. legal persons that can participate on the market and may be involved in the production, including production from renewable sources, distribution, supply, consumption, aggregation, energy storage, energy efficiency services, or in charging services for electric vehicles, or may provide other energy services to its members or shareholders. As clearly shown by the current market trends, the electricity rules tend to be demystified and the electricity framework is prone to come closer to communities.

2. The functioning of the electricity market. How can one trade?

The Draft Law also aims to bring important amendments to the functioning of the competitive electricity market. It establishes the types of transactions that can be concluded on the wholesale competitive market, namely (i) directly negotiated bilateral transactions, (ii) transactions concluded following the conduct of auctions on organized markets, including the electricity balancing market, and (iii) electricity import and export transactions. Importantly, the concept of “electricity market/s” was expanded in order to also cover the over the counter electricity markets. Basically, in line with the EU regulations, the Draft Law (a) expressly provides the possibility for market participants to trade electricity on the basis of directly negotiated agreements, in compliance with competition rules, and (b) implicitly lifts the express ban currently set forth under article 23 para. (1) of Law 123/2012.

The Draft Law equally regulates the market participants’ right to trade electricity as close as possible to real time, and at least before the closing time of the intraday market gate, with the possibility to trade electricity at time intervals at least as short as the imbalances settlement interval, both on the day ahead market and intraday market.

The Draft Law distinguishes between the market operator and designated market operator with the latter in charge specifically with tasks regarding the unique coupling of the day ahead markets and intra-day markets.

3. New rules regarding DSOs and TSOs

In line with Directive 2019/944, the Draft Law further clarifies the tasks of distribution systems operators (DSOs) and transmissions systems operators (TSOs).

Briefly, as regards DSOs, the scope of their rights and competencies is clarified / updated including by reference to the purchase of products and services necessary for an efficient, reliable and safe operation of the distribution system, the cooperation with TSOs for an effective participation in the retail, wholesale and balancing markets of market participants connected to their network, the approval of the connection of private recharging points and with public access to distribution networks, according to the rules established by the regulatory authority.

Pursuant to the Draft Law, DSOs are prohibited from owning, developing, managing and operating storage facilities, except in cases expressly approved by the regulatory authority and subject to specific conditions.

The Draft Law anticipates the framework intended to regulate certain incentives for the use of flexibility in distribution networks. DSOs shall be encouraged to procure flexibility services, including congestion management in the regions where they operate, in order to improve operational efficiency and the development of the distribution system. Such flexibility services shall be purchased from entities that provide services for distributed production, dispatchable consumption or energy storage and shall promote energy efficiency measures, where the services significantly reduce, in terms of costs, the need to upgrade or replace electricity capacities and support the efficient and safe operation of the distribution system.

As regards TSO(s), the Draft Law prohibits them from owning, developing, managing or operating energy storage facilities, except as approved by the regulatory authority similarly to DSOs. The Draft Law provides the obligation of TSO(s) to develop a 10-year investment and development plan for the transmission network and to present it (as updated) to the regulatory authority at least every two years.

Pursuant to the Draft Law, TSO(s) shall not be allowed to refuse a new connection point due to additional costs arising from the necessary increase in the capacity of the system elements within the immediate perimeter of the connection point or the connection of a new production facility or a new energy storage facility, by invoking a possible future limitation of available network capacity, such as congestion in remote parts of the transmission system. 

However, TSO(s) may limit the guaranteed connection capacity or provide connections subject to operational constraints in order to ensure the cost-effectiveness of new production facilities or new energy storage facilities, provided that such limitations have been approved by the regulatory authority. The Draft Law imposes however, as a guarantee, the authority’s obligation to ensure that all limitations on guaranteed connection capacity or operational limitations are introduced under transparent and non-discriminatory procedures and do not create unjustified barriers to entry. At the same time, where the production facility or energy storage facility bears the costs of ensuring unlimited connection, no limitation shall apply.

4. New obligations for electricity suppliers and the reinforcement of customers’ rights

The Draft Law, in line with the directive which it transposes, clarifies and reinforces existing customer rights and introduces new ones. Such reinforced customers rights include the following:

  • the final customers’ right to be provided upon their written request, by suppliers, with clear, transparent information regarding the fair conditions of electricity supply, which shall contain, in a visible manner and in plain and concise language, a summary of the key contractual terms, including but not limited to information on the supply price, payment terms and deadline for the conclusion of the electricity supply agreement;
  • the right of household customers and microenterprises with an estimated annual consumption below 100,000 kWh, to be informed of the existence of the supplier comparison tool, including of tenders for electricity supply contracts made available by the regulatory authority. In addition, at least these categories of consumers must be provided by the supplier with standard offers, in order to allow them to compare several offers;
  • the household customers’ right to participate in collective supplier switching schemes;
  • if the supplier intends to amend the contractual terms, the Draft Law stipulates the final customers’ right to be given adequate notice in this respect and, furthermore, to be informed about their right to terminate the contract when notice is given. At the same time, any change in supply prices shall be notified to final customers at least two weeks in advance, and at least 30 days in advance to household customers;
  • household customers shall have the right to receive adequate information on alternative measures to disconnection, well in advance of the scheduled interruption date (such as disruption support, prepayment systems, energy audits, energy advisory services, alternative payment plans, debt management advice).
  • furthermore, as regards the customers’ right to change their supplier/the market participant involved in aggregation, the Draft Law also provides that customers shall be entitled to such a switch within a maximum of three weeks from the date of the request and, by no later than 2026, the technical process of switching suppliers shall take no longer than 24 hours and shall be possible on any working day. We also note that, for the purpose of further strengthening the supplier change process, the Draft Law provides that the regulatory authority shall operate an integrated IT platform whereby end costumers can change their electricity supplier. The regulatory authority may however delegate this activity to a service provider which is not affiliated to a supplier or grid operator.

As a particular note, pursuant to the Draft Law, electricity shall also be supplied at dynamic prices through the conclusion of dynamic price electricity supply agreements, which shall reflect the prices variation on spot markets, including the day ahead and intraday markets, at intervals at least equal to the settlement interval of the market. In case of such agreements, the supplier must provide final customers with full information on the advantages, costs and risks of contracts for the supply of electricity at dynamic prices, including the need for an intelligent metering system.

On the supply front, we may also note more tailored provisions on direct supply activities, electricity suppliers and producers being entitled to supply their own premises, subsidiaries and their customers through direct supply lines, without being subject to disproportionate administrative procedures or costs. Along these lines, the provision set forth under the existing regulatory framework which makes direct line supply conditional upon the absence of a reasonable offer (from an economic and technical perspective) to connect to the national power grid was expressly repealed.

5. A sturdier regulation regarding aggregators

The Draft Law regulates the concept of “dispatchable consumption” i.e. the change in electricity load by final customers compared to their normal or current consumption patterns in response to market signals, including in response to hourly or variable incentive electricity prices, or in response to the acceptance of the end customer's offer to sell the reduction or increase in demand at a certain price on an organized market, individually or by aggregation.

Equally, the Draft Law further refers to aggregation agreements for customers included. Customers shall be free to purchase and sell electricity services, including aggregation, other than supply services, independently from their electricity supply contract and from an electricity undertaking of their choice.

As mentioned, the above is only a selection of the intended changes which are much broader. The effort to bring the Draft Law on the table is hailed by market players, which will now devote efforts to contribute in the public consultation phase to the further tailoring of the draft law to the actual market needs and expectations.

After the completion of the public consultation procedure, an updated Draft Law will leave the Ministry of Energy’s desk and enter the main legislative procedure before the two chambers of the Romanian Parliament. The process will end, provided that the President’s promulgation will not raise any claims for lack of constitutionality, which will correspondingly delay or overturn the process. Considering the infringement proceedings already initiated against Romania for failing to notify the complete transposition of Directive (EU) 2019/944[1], one should aim at a more streamlined and focused legislative process overall.