Romania’s ministry of energy has notified the competition council of possible collusion among power producers, and will investigate the causes of subdued hydropower production, after the average electricity price for peak consumption period rose 3.1 times y/y to RON550 (€120) per MWh for the delivery date of August 4, on the day-ahead market.

The government is mulling capping electricity prices, but the market regulator argues that this would require complicated procedures particularly since Romania’s day-ahead market is coupled with those in Hungary, Slovakia and the Czech Republic.

The main cause of the high prices on the spot market seems to be the market regulator’s decision to suspend the quarterly auctions for the electricity purchased by suppliers of last resort (those that still deliver energy to most of the residential users), Energy Minister Toma Petcu has explained. 

The ministry has questioned other decisions of power market regulator ANRE, which suspended auctions for suppliers of power under the universal services framework in June.

The regulator had expected the high prices prevailing at that time in the market to decline, allowing the suppliers cover their needs from the spot market at decent prices. Unfortunately, this has not happened — rather the opposite. 

“We have discussed with both ANRE and the competition council, because we have been notified regarding possible competition, or rather lack of competition [in the market]. We have asked [ANRE head Nicolae] Havrilet to analyse the situation and make recommendations for the steps we have to take," Petcu said on August 4, quoted by Bursa daily.

The prices for the electricity to be delivered in July-August this year, traded on the market for longer-term contracts, increased by some 8% y/y while the prices on the day-ahead market (DAM) more than doubled in the first week of August. The average price for the electricity traded on DAM, to be delivered in the week ending August 7 rose to RON344 (€75) per MWh, according to data published by the power market operator OPCOM. This was 2.1 times more than one year earlier. For the peak consumption hours (9:00 to 20:00) the average electricity price for the same one-week period was RON425 (€92) per MWh, 2.3 times up y/y. 

For comparison, the power delivered under longer-term contracts traded on the centralised market with double continuous negotiations (CM-OTC mechanism), which is the largest segment of Romania’s electricity market (57% of final consumption in March 2017, the latest available data), is around RON170 per MWh for July-August and RON200 for the peak consumption periods of the day in the two months. The spot electricity price is thus twice as high as it was on the spot market one year earlier, but also twice as high as the price traded in advance with delivery date in this period of time.

Speaking of the market development, a trader quoted by Bursa daily explained that indeed the electricity suppliers of last resort under the universal services framework are ready to place high bids on the DAM in an attempt to avoid power shortages (and the even higher prices on the intra-day market). The producers take advantage of this by reducing the amounts sold on the market, Jack Cutisteanu, head of Petrprod energy trader explained to Bursa. Indeed, on August 3 with delivery date on August 4 (when the price soared by 3.1 times y/y for the peak consumption period), the amount of power sold on the peak consumption segment decreased by 32% y/y.

The electricity price has become the most unpredictable inflation driver, central bank governor Mugur Isarescu commented in the context of the August 4 monetary board. He mentioned the significant impact of the electricity price on the July consumer price inflation figure (to be released on August 11). The central bank is concerned about the administered electricity prices and expects the relevant bodies (i.e. ANRE) to make the necessary clarifications in the coming days, Isarescu stressed.