The Romanian Energy Regulatory Authority (ANRE) has published on its web-site for public consultations a draft Order for the approval of the actions and rules that will be applied on the electricity market in order to eliminate and / or mitigate the impact of some measures or policies that can restrict the formation of prices on the wholesale electricity market (Draft Order). The explanatory memorandum to the Draft Order, provides that the purpose of the Draft Order is to align the current legislative framework with Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (Internal Market Regulation) directly applicable starting with 1 January 2020.
The main changes brought by the Draft Order are as follows:
New definition and rules for the wholesale electricity market
There is a new definition of the wholesale electricity market, which is more extensive than the current definition in Law 123/2012 of electricity and natural gas (Energy Law) which only refers to the centralized competitive market. As such the "wholesale electricity market" is defined as "any market on which energetic products are traded wholesale" while "electricity market" means "electricity markets, including unregulated markets and electric power exchanges, markets for sale of electricity, capacities, balancing services and system services for all timeframes, including futures markets, day-ahead markets and the intraday markets".
Prices on the wholesale market are floating freely and there can be no mandatory maximum and minimum prices for electricity (this being also applicable on the balancing market).
Directly negotiated power purchase agreements outside the centralized market are allowed, provided that the delivery period is longer than one year and delivery starts in 2021
The Draft Order provides that transactions with electricity with delivery in 2020 shall take place on the competitive market in a transparent, public, organized and non-discriminatory way. In contrast, market participants may conclude negotiated bilateral contracts for a delivery period of more than one year.
Moreover, producers of electricity are still obliged, until 31.12.2020, to offer on the competitive market all the available electricity.
It seems that, once the Draft Order will enter into force, directly negotiated power purchase agreements may be concluded outside the centralized market, provided that the delivery period is longer than one year and the delivery will effectively start in 2021.
Directly negotiated power purchase agreements for the development of new generation capacities
According to the same Draft Order, a natural or legal person holding a valid technical connection permit has the right to contract, as producer, in accordance with the regulations issued by ANRE, the electricity that will be produced by the new production facility without holding, at the time when the contract is entered into, a license to commercially exploit the production capacity. There is an obligation to obtain the license with 60 days in advance to the start of delivery.
Therefore, long term power purchase agreements may be concluded from the development stage, once a technical connection permit is obtained.
New activities to be licensed by ANRE. Regulation of the aggregation activity
The aggregation activity and the commercial exploitation of electricity storage facilities are subject to licensing by ANRE.
Certain provisions of Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU (recast) (Directive) with respect to the aggregation activity are also transposed by the Draft Order. As such "aggregation" is defined as a function performed by a natural or legal person who combines multiple customer loads or generated electricity for sale, purchase or auction in any electricity market while the "independent aggregator" is a market participant engaged in aggregation who is not affiliated to the supplier undertaking the balancing liability for the final customer.
In terms of access to the wholesale market, two or more participants may access the competitive market by aggregation and the aggregators may conclude power purchase contracts with the suppliers of the final clients participating into aggregation.
Participation of consumers to the wholesale electricity market
The Draft Order also provides that consumers can participate to the wholesale electricity market directly or through aggregation if they have a power consumption approved through the technical connection permit of more than 500 kW. If the power consumption approved through the technical connection permit is less than or equal to 500 kW, consumers can participate to the wholesale electricity market only through aggregation. The electricity supplier is not allowed to prevent the participation of its final customers to the wholesale electricity market or their participation to the aggregation of consumption by an independent aggregator.
The activities of the final client regarding the direct participation into the electricity market do not require a license from ANRE.
The above measures are to be enacted through an ANRE Order while there is no clear indication whether the Energy Law will also be amended until the beginning of 2020, when the Internal Market Regulation shall apply. In this context, assuming that the Energy Law remains as is, a further analysis will be necessary regarding whether the Internal Market Regulations and the Draft Order shall have prevalence over the provisions of the Energy Law which still requires producers to make available all the power they generate for trading on the centralised markets.
We will continue to monitor the subject and come back with any further developments.