In view of the sustained rise in the prices of electricity and natural gas, the Romanian Government has been under increased pressure to extend the consumers support measures first introduced under Government Emergency Ordinance no. 118/2021 on the establishment of a compensation scheme for the consumption of electricity and natural gas covering the period 1 November 2021 – 31 March 2022, which received Parliamentary approval and further amendments under Law no. 259/2021 (Law 259/2021), as both have further been amended.
As such, with these initial support measures set to expire on 31 March 2022, the Romanian Government has decided to extend the emergency regulatory intervention in the energy sector through the adoption on 18 March 2022 of the Government Emergency Ordinance no. 27/2022 on the measures applicable to final consumers on the electricity and natural gas market between 1 April 2022 and 31 March 2023, as well as for amending and supplementing certain regulations in the energy sector (GEO 27/2022). While the decision of the Romanian Government to extend the support measures has been known for a while, the final scope of these measures was intensely debated in the recent period. Now, with the final form of GEO 27/2022 having been adopted, we aim to provide a general overview of some of the main measures, which will impact both energy market players, as well as household and non-household consumers of electricity and natural gas, for the period 1 April 2022 – 31 March 2023 (Applicability Period).
While GEO 27/2022 entered into force on 22 March 2022, the date of its publication in the Official Gazette of Romania, it will still be subject to a Parliamentary approval procedure, which may result in either its approval with amendments, without amendments, or to its rejection (resulting in a repeal of all the provisions thereof).
1. Regulated maximum prices for consumers
1.1 During the Applicability Period, the final price invoiced to consumers of electricity by suppliers/distribution operators that ensure the resale of electricity is set at the following maximum values (VAT included):
- RON 0.68/kWh for household consumers whose average monthly consumption at the place of consumption in 2021 was below or equal to 100 kWh;
- RON 0.8/kWh for household consumers whose average monthly consumption at the place of consumption in 2021 was above 100 kWh but below or equal to 300 kWh;
- RON 1/kWh for non-household consumers.
1.2 During the Applicability Period, the final price invoiced to consumers of natural gas by suppliers is set at the following maximum values (VAT included):
- RON 0.31/kWh for household consumers;
- RON 0.37/kWh for non-household consumers whose annual natural gas consumption in 2021 at the place of consumption has not exceeded 50,000 MWh, as well as for producers of thermal energy that supply non-household consumers;
1.3 For household consumers from condominiums, connected through a shared installation with a single meter, the natural gas / electricity consumption for each household is determined by dividing the total annual consumption of the homeowners' association by the number of households that are part of the respective condominium. This is applicable as well for residential neighbourhoods where suppliers have concluded supply agreements with the town halls, real estate developers or homeowners' associations. GEO 27/2022 references this calculation mechanism as being utilized for classifying household consumers under either of the two maximum regulated prices for electricity established based on the average monthly consumption.
1.4 For household consumers that cannot benefit from the maximum regulated electricity prices established under GEO 27/2022, based on their average monthly electricity consumption figures from 2021, but whose consumption in 2022 would classify under either of the two consumption brackets, as well as for household and non-household consumers which were connected to the grid after 1 January 2022, electricity suppliers will issue settlement invoices in February 2023, for their previously invoiced consumption during the Applicability Period, using the final price corresponding the consumption bracket applicable for the respective consumers.
1.5 In the event that the prices applicable to a final consumer under an ongoing contract are below the maximum regulated prices established under GEO 27/2022, the contractual prices shall remain applicable.
2. Provisions applicable to suppliers / distribution operators that ensure the resale of electricity
The final price invoiced to consumers which benefit from the maximum regulated prices provided under GEO 27/2022 shall be established by each supplier / distribution operator that ensures the resale of electricity by reference to the following components:
- the acquisition component (AC) – defined as the difference between the final invoiced price and the sum of components b)-d) below;
- the supply component – set at RON 73/MWh for electricity supply and RON 12/MWh for natural gas supply (with the exception of consumers taken over under the final instance regime, in which case the supply component is RON 80/MWh for electricity and RON 13.5/MWh for natural gas);
- components represented by the tariffs established according to the applicable regulations, for the services provided by the operators of the distribution / transmission systems of electricity / natural gas, including for the services provided by the operators of the underground natural gas storage depots, in force during the Applicability Period;
- components represented by VAT, excise duties, the contribution related to the support scheme for the promotion of high efficiency cogeneration based on the demand for thermal energy, the value of the green certificates related to the scheme for promoting production of energy from renewable sources.
The average purchase price (APP) shall be determined by each supplier / distribution operator that ensures the resale of electricity, for each month of the Applicability Period, by taking into account:
- the cost of the electricity / natural gas purchased under all term delivery contracts and from the day-ahead market / intraday market, including the equivalent value of natural gas from the underground natural gas storage depots, as well as the transfer value between the production and supply activities in case of producers who supply electricity / natural gas to final customers;
- the equivalent value of the achieved imbalance, but not exceeding 5% of the cost of the electricity / natural gas provided under letter a) above.
For consumers taken over under the final instance regime, the final instance suppliers determine the APP under a separate calculation, considering the cost provided under letter a) above incurred for ensuring the consumption of such customers and the equivalent value of the achieved monthly imbalance, which is not capped at 5% of the cost in this scenario.
Suppliers / distribution operators that ensure the resale of electricity will be entitled to receive reimbursements for the amounts determined by reference to the quantity of electricity / natural gas invoiced to final consumers (Q) during each month of the Applicability Period, based on the following formula:
Rm = Qm x (APPm – ACm)
Rm – reimbursement amount for month "m"
Qm - quantity of electricity / natural gas invoiced to final consumers during month "m"
APPm – average purchase price determined for month "m"
ACm – acquisition component determined for month "m"
- The monthly settlement requests (under the format provided in Annexes 1 and 2 of GEO 27/2022) are submitted by suppliers / distribution operators that ensure the resale of electricity to the National Agency for Payments and Social Inspection (ANPIS) for reimbursements related to household consumers, respectively to the Ministry of Energy for those related to non-household consumers, and in copy to the National Authority for Energy Regulation (ANRE).
- Within 5 working days from submitting a monthly settlement request, each supplier / distribution operator that ensures the resale of electricity must upload certain supporting documents, listed under GEO 27/2022, to the IT platform operated by ANRE, together with the sworn statement in the form included under Annex 3 of GEO 27/2022. ANRE will establish the amount of the compensation for each supplier / distribution operator that ensures the resale of electricity within 30 days from receiving the settlement requests, provided that it does not identify any issues with the submitted documentation and information.
- ANRE will send the values determined as reimbursable to ANPIS, respectively to the Ministry of Energy and the latter shall effect the payments to the suppliers / distribution operators that ensure the resale of electricity within 10 days from receiving the documents.
3. Tax on additional revenues of electricity producers
- During the Applicability Period, the additional revenue (AR) realized by electricity producers shall be taxed at 80%, with the exception of production capacities that are commissioned after the entry into force of GEO 27/2022.
- It should be noted that producers of electricity from fossil fuel based technologies are no longer exempt from the tax on additional revenue established under GEO 27/2022, as was the case for the initial form under which this measure was first adopted, for the period 1 November 2021 – 31 March 2022, under Law 259/2021.
- The AR is determined based on the methodology included under Annex no. 6 of GEO 27/2022, by multiplying the monthly quantity of electricity physically delivered (Q) with the difference between the average monthly selling price of electricity (AMSP) and the set price of RON 450/MWh, provided that the AMSP is higher than RON 450/MWh, resulting in the following formula:
AR = (AMSP – 450) x Q
- The AMSP is determined by dividing the net monthly revenue (NMR) by Q, while the NMR is determined as the difference between the monthly revenues (MR) and the monthly expenses (ME). The related formulas, as well as the definitions applicable to MR and ME are reproduced below:
AMSP = NMR/Q
NMR = MR – ME
MR – Revenue from the sale of electricity with physical delivery, from own production, from its transfer between the production and supply portfolio and / or purchased and from financial transactions carried out in the month preceding the declaration of the applicable tax
ME – Financial expenses and expenses for purchasing electricity for transactions with physical delivery, as well as expenses related to access to energy markets: injection tariff, market administration expenses, transaction fees and the cost of CO2 certificates. Actual production costs for producing one MWh of electricity shall not be included under the ME
- The quantity of electricity sold by producers to the transport and system operator (CNTEE Transelectrica S.A.), for covering its own technological consumption, is not taken into account in the calculation of AR (should be deducted from Q under the above formula, if the case).
- The tax determined in accordance with the provided methodology is declared and paid by producers for each month during the Applicability Period, until the 25th day of the following month. Within 15 days from the entry into force of GEO 27/2022, the National Fiscal Administration Agency will issue an order setting out the form and contents of the related tax statement.
- Electricity producers may submit rectifying statements, without additional calculation of tax penalties, within 15 days from the publication by OPCOM (ie, Romanian Gas and Electricity Market Operator) of the final prices related to the balancing market for the settlement month.
- According the provisions of the methodology for the calculation of the AR, the calculation method will be applicable both in relation to the additional tax imposed under GEO 27/2022 for the Applicability Period, but also in respect of the calculation of the tax imposed on the additional revenues of electricity producers between 1 November 2021 and 31 March 2022, under Law 259/2021.
Non-observance of certain obligations imposed under GEO 27/2022, including the ones related to the maximum regulated prices for electricity and natural gas, represents an administrative offence subject to a fine ranging from 1% - 5% of the annual turnover from the previous financial year.
- With respect to the obligations of electricity producers to declare and pay the tax on additional revenue, in accordance with the provisions of GEO 27/2022, their non-observance is also an administrative offence, subject to a fine ranging from RON 100,000 to RON 400,000.
By Paula Corban-Pelin, Counsel, and Teodor Sabau,Junior Associate, DLA Piper