Romanian government considers abandoning natural gas price hike calendar

By bne IntelliNews March 21, 2014

Romania’s government considers abandoning the calendar set with the IMF and the EU, under which the regulated price of the domestic natural gas will increase gradually towards the price of the imported Russian gas, Bursa daily reported, quoting unofficial sources.

The government invokes the decrease in the volume of imported natural gas. Instead, the price would be set by the market, sources said without further details. The gas market is not functional yet and it will not become functional in the short run due to physical and legal reasons.

The decrease in gas consumption and imports was predictable, as a result of the rise of end-user prices. The real reason behind the government’s planned decision seems to be the large consumers’ pressure for lower energy prices. While the price hike calendar can be legitimately criticised for not meaning market liberalisation, and the magnitude of the hikes should be in principle adjusted in case the price of imported Russian gas decreases, the drop in domestic consumption can hardly be a sound reason for abandoning the so-called liberalisation process.

Under a separate move, the government considers using an option in the law 220/2010 recently amended that allows it to cut by up to 85% the green energy surcharge paid by large industrial users.

PM Victor Ponta confirmed earlier this week that the government would endorse a series of measures aimed at helping large consumers that face high and rising electricity and natural gas prices. While explaining how this would be done in the case of electricity, it remained largely unclear how this can be done for natural gas.

Romania has agreed with the IMF a firm calendar for hiking the regulated price of the domestic natural gas – under a preliminary procedure aimed at bringing this price closer to the higher price of the Russian gas. Consumption decreased predictably and the share of imported gas decreased accordingly. This already should reflect in the basket of domestic/import natural gas set for industrial users.

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