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Long Awaited Amendments to the Romanian Electricity (and Gas) Law

Long Awaited Amendments to the Romanian Electricity (and Gas) Law

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On 31 December 2021, Government Emergency Ordinance no. 143/2021 for the amendment of Law no. 123/2012 on electricity and natural gas, as well as for the amendment of other regulatory acts (“GEO 143/2021”) was published in Official Gazette of Romania no. 1259 and entered into force on the same date.

1. Preliminary remarks

On 31 December 2021, Government Emergency Ordinance no. 143/2021 for the amendment of Law no. 123/2012 on electricity and natural gas, as well as for the amendment of other regulatory acts (“GEO 143/2021”) was published in Official Gazette of Romania no. 1259 and entered into force on the same date.

GEO 143/2021 was mainly intended to transpose into national law Directive 2019/944 on common rules for the internal market for electricity and amending Directive 2012/27/EU (“Directive 944/2019”), and, thereby, to close the infringement procedure initiated by the European Commission against Romania in relation to the transposition of Directive 944/2019. However, the most anticipated amendment and the main novelty brought by GEO 143/2021 consists in the exclusion of the obligation to trade electricity exclusively on centralized markets. Basically, this puts an end to the 10-year ban on the conclusion of directly negotiated bilateral power purchase agreements (“PPAs”) (except for state owned entities which are still obliged to sell part of their output on the centralized markets). This change was vividly requested by market players and is expected to encourage the development of new capacities by facilitating access to financing.

Furthermore, we underline that, according to GEO 143/2021, within 6 months from its enforcement, the Romanian Energy Regulatory Authority (“ANRE”) has the obligation to amend, where necessary, the secondary legislation in line with the provisions of GEO 143/2021. Until the amendment, where necessary, of the secondary legislation, all regulatory acts issued pursuant to Law no. 123/2012 on electricity and natural gas (“Law 123/2012”) shall remain applicable, except for provisions that are contrary to the amendments brought under GEO 143/2021.

In addition, although GEO 143/2021 is already in force starting with 31 December 2021, it should be underlined that, according to the Romanian legislative procedures, GEO 143/2021 (as any other government emergency ordinance) will still be subject to approval by the Romanian Parliament, and also the fact that there is no specific deadline within which such approval (that can be adopted by the parliament without amendments or with amendments) or rejection by the parliament, as the case may be, should occur.

The amendments brought to Law 123/2012 under GEO 143/2021 are numerous and substantial. A selection of the aspects which seem more important is presented below.

2. Electricity sector

2.1 Electricity markets

The main amendments are the exclusion of the provisions regarding the regulated electricity market and of those regarding the obligation to trade electricity on the centralized market.

The concept of a “centralized market” was excluded and replaced by the concept of “organized market”, defined as (i) a multilateral system which brings together or facilitates the bringing together of multiple third-party buying and selling interests in wholesale energy products in a way that results in a contract or (ii) any other system or facility in which multiple third-party buying and selling interests in wholesale energy products are able to interact in a way that results in a contract. Participation in any electricity market is voluntary for market participants.

Electricity markets are now defined as markets for electricity, including over-the-counter markets and electricity exchanges, markets for the trading of energy, capacity, balancing and ancillary services in all timeframes, including forward, day-ahead (“DAM”) and intraday markets (“IDM”).

Therefore, at least the following types of transactions can be concluded on the wholesale electricity market, in all timeframes: (i) directly negotiated bilateral transactions; (ii) transactions concluded following auctions on organized markets, including the electricity balancing market (“BM”); (iii) electricity import and export transactions. In addition, long-term hedging products are tradable on exchanges in a transparent manner, and long-term supply contracts may be negotiated on over-the-counter markets, subject to compliance with European competition law.

Market participants shall have the right to trade energy as close as possible to real time and at least until the IDM cross-zonal gate closure time, with the possibility to trade energy in time-frames at least as short as the imbalance settlement period on both the DAM and IDM.

The nominated electricity market operator (“NEMO”) provides products for trading on the DAM and IDM that are sufficiently small in size, the minimum bid size being of 500 kW or less, to allow effective participation of demand response, energy storage and small - scale renewables, including direct customer participation.

It is noteworthy that at the same time, the provisions regulating the producers’ (general) obligation to offer on the competitive market in a public and non-discriminatory manner all available electricity have been repealed. However, in order to maintain an adequate liquidity of the electricity market, state-owned producers that are subject to the provisions of GEO no. 109/2011 on corporate governance of public enterprises, are required to trade at least 40% of their annual electricity production through contracts on electricity exchanges, on markets other than DAM, IDM and BM. Generating capacities put into operation after 1 June 2020 are exempted from this obligation.

2.2 Electricity supply price

As a matter of principle, suppliers are free to set the price at which they supply electricity to customers, except for the situations expressly regulated under Law 123/2012. Thus, the Government, with the approval of the Competition Council, may intervene in the setting of prices for the supply of electricity to energy poor and vulnerable household customers, after notifying the EC of these measures within one month of their adoption. New provisions are added in order to regulate the new amendments set out the principles of public intervention in the setting of prices for electricity supply and detail how the EC must be notified.

2.3 New electricity market participants

Two new categories of participants are being regulated, namely “active customer” and “citizen energy community”, as well as their legal regime, rights and obligations. 

An active customer is a final customer, or a group of jointly acting final customers, who consumes, or stores electricity generated within its premises located within confined boundaries, or who sells self-generated electricity or participates in flexibility or energy efficiency schemes, identified as such by the applicable legislation, provided that those activities do not constitute its primary commercial or professional activity.

A citizen energy community is a legal entity that cumulatively meets the following conditions: (i) is based on voluntary and open participation and is effectively controlled by members or shareholders that are individuals, local authorities, including municipalities, or small enterprises; (ii) its primary purpose is to provide environmental, economic or social community benefits to its members or shareholders or to the local areas where it operates rather than to generate financial profits; (iii) may engage in generation, including from renewable sources, distribution, supply, consumption, aggregation, energy storage, energy efficiency services or charging services for electric vehicles or provide other energy services to its members or shareholders.

2.4 Prosumers

The new amendments introduce in Law 123/2012 the concept of prosumer and also a number of provisions on the legal status of prosumers, repealing at the same time the legal provisions regarding the existing legal status of the prosumer, on the date of enforcement of GEO 143/2021, in Law no. 220/2008 for the establishment of the system for promoting the production of energy from renewable energy sources (“Law 220/2008”).

Possibility to sell electricity. Prosumers who own renewable electricity generation units with an installed capacity of 400 kW or less per consumption point may sell the electricity they produce and deliver to the grid to electricity suppliers with whom they have concluded supply contracts. Prosumers, natural persons (but not authorized natural persons, individual enterprises, and family enterprises) may trade the electricity produced in their electricity generation units, without registering and authorizing their operation.

Exemption from the obligation to purchase green certificates and tax exemptions. Prosumers owning units with an installed capacity of 400 kW or less per consumption point are exempted from the obligation to purchase green certificates annually and quarterly. Moreover, individual prosumers will also benefit from tax exemptions for electricity produced for their own consumption and for the surplus sold to their supplier.

Suppliers’ obligations to prosumers. At the request of prosumers producing electricity in units of up to 200 kW, their suppliers will have to make a quantitative settlement in invoices, between the amount of electricity consumed and the amount produced and delivered to the grid. Where the quantity of electricity produced and delivered to the grid is greater than the quantity consumed, suppliers will, at the request of prosumers, have to carry forward this difference in invoices, which may be used for a maximum period of 24 months from the date of invoicing.

Quantitative settlement will be granted until 31 December 2030, in the context of measures and actions related to achieving the commitments on the share of renewable energy in 2030 specified in the National Energy and Climate Change Plan, according to an ANRE methodology, and after that period those prosumers can sell electricity produced under the conditions established for prosumers with an installed power ranging between 200 kW and 400 kW.

At the request of prosumers producing electricity in units with an installed capacity ranging between 200 kW and 400 kW, their suppliers will be required to purchase the electricity produced and delivered at a price equal to the medium weighted price recorded in the DAM for the month when the electricity was produced, and to settle the resulting amounts and the amounts owed by the prosumer for the consumed electricity.

In addition, the supplier of a prosumer with an installed capacity of less than 400 kW will take over the balancing responsibility from the prosumer.

2.5 Regulation of certain fees imposed on final customers in certain situations

Contract termination fee is defined as the charge or penalty imposed on final customers by suppliers or market participants engaged in aggregation, for terminating an electricity supply or service contract (“Contract termination fee”).

Switching-related fee is defined as the charge or penalty for changing suppliers or market participants engaged in aggregation, including contract termination fees, that is directly or indirectly imposed on customers by suppliers, market participants engaged in aggregation or system operators (“Switching-related fee”).

Although the rule is that household customers, small enterprises and micro-enterprises have the right to switch their electricity supplier or market participant involved in the aggregation without any Switching-related fee, electricity suppliers or market participants involved in the aggregation may charge end costumers Contract termination fees for fixed-term, fixed-price electricity supply contracts, where the final customer terminates the contracts before their maturity.

Contract termination fees must cumulatively meet certain conditions laid down in Law 123/2012 (e.g., clear communication to the customer, fees regulation in the contract, proportionality).

2.6 Dynamic electricity price contracts

The new amendments regulate the dynamic electricity price contract, defined as a contract between a supplier and a final customer that reflects the price variation in the spot markets, including in the DAM and IDM, at intervals at least equal to the market settlement period.

This entitles final customers to enter into dynamic electricity price contracts with at least one supplier and with every supplier that has more than 200,000 final customers, provided they have a smart metering system.

Concerning the dynamic electricity price contracts, the following obligations are incumbent on suppliers: (i) to inform final customers about the benefits, costs and risks of such contracts, including the need for a smart metering system; (ii) to obtain the final customer's consent prior to switching to such a contract; (iii) to submit both standard offers for household costumers and micro-enterprises and dynamic price offers to ANRE.

Moreover, the amendments provide for ANRE’s competences with regard to dynamic electricity price contracts (e.g., to assess the risks associated with these contracts, to take action against abusive practices, to publish annual reports, etc.).

2.7 Recharging points for electric vehicles

The new amendments aim to regulate the legal status of electric vehicle recharging points, defined as an interface that is capable of charging one electric vehicle at a time or exchanging the battery of one electric vehicle at a time.

The amendments clarify that the sale of electricity purchased from a supplier of electricity and used by an operator of a battery recharging point/station equipping electric and plug-in hybrid electric vehicles does not represent supply of electricity.

The connection of publicly accessible and private recharging points to the electricity distribution networks is to be approved by the distribution system operator.

It is also specified that the distribution system operator may not own, develop, manage or operate recharging points for electric vehicles, unless (i) it owns recharging points solely for its own use; or (ii) ANRE's permission is obtained in the event that certain conditions set out in Law 123/2012 are cumulatively met. However, the prohibition does not apply to operators of closed distribution systems.

2.8 Universal service

The universal service (“US”) has been redefined as the supply with electricity of a specified quality guaranteed to household customers at competitive, easily and clearly comparable, transparent and non-discriminatory prices. Thus, the US no longer involves the supply of electricity to non-household customers who could benefit of this service under the old regulation if certain conditions were met.

It is also specified that the US is provided by electricity suppliers under a framework contract prepared and approved by ANRE, and that electricity suppliers who have concluded contracts in the competitive market with household customers are required to publish US offers and conclude electricity supply contracts if they receive a request from a customer entitled to US.

2.9 Vulnerable consumers

New provisions have been included according to which: (i) income levels, the share of energy expenditure of disposable income, the energy efficiency of homes, critical dependence on electrical equipment for health reasons, age or other criteria shall be taken into account in determining the categories of vulnerable customers; (ii) disconnection from the electricity grid of consumption points where vulnerable customers live, in situations of energy crisis, is prohibited; (iii) any measures taken in relation to vulnerable customers shall not impede the effective opening and functioning of the market and shall be notified to the EC. Such notifications may also include measures taken within the general social security system.

2.10 Flexibility service

The new amendments regulate the concept of flexibility service (in addition to the system service, including the system service for the maintenance of frequency, which have been redefined and respectively defined), representing a service provided by a market participant and purchased by distribution system operators to support the efficient and secure operation of the distribution system and to maximize the quality of the services provided. Moreover, several provisions on incentives for the use of flexibility in distribution networks, how flexibility services are procured, specifications of these services, etc. have been included among the amendments.

2.11 Sanctioning regime

Introduction/amendment of certain provisions regarding the sanctioning regime for breach of the rules on conducting business in the electricity sector: (i) regulation of new contraventions; (ii) amendment of the definition of repeated contravention by adding a requirement according to which the commission at least two times of the same contravention must take place during 12 consecutive months; (iii) in the case of contraventions for which penalties are established by reference to turnover, the determination and individualization of penalties will be made by the ANRE Regulatory Committee pursuant to a procedure approved by ANRE President within 60 days after the enforcement of GEO 143/2021. The individualization of penalties for these contraventions will also be based on the seriousness and duration of the contravention, the impact on the electricity market and the final customer, depending on the case, in compliance with the principles of effectiveness, proportionality and the dissuasive effect of the penalty applied.

2.12 Other amendments

Amendment of the scope of Law 123/2012 in line with the principles of Directive 944/2019 and the European electricity regulations.

Amendment of certain concepts within the meaning of Directive 944/2019 and definition of new concepts.

Amendment of ANRE's competences, including with regard to: (i) the application of Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity and Directive 944/2019; (ii) the identification and sanctioning of suppliers’ unfair or misleading commercial practices in relation to final customers, through the application of certain provisions of Law no. 363/2007 on fighting against unfair practices of traders in relation to consumers and on the harmonization of regulations with the European legislation on consumer protection (“Law 363/2007”) (including Schedule 1 of the law in question covering examples of conduct considered unfair practices).

Introduction of the NEMO concept in accordance with the provisions of Commission Regulation (EU) 1222/2015 of 24 July 2015 establishing a guideline on capacity allocation and congestion management, which will be nominated by ANRE and will perform tasks related to the single DAM and IDM coupling. Distinctly, the electricity market operator is defined as the entity that provides a service whereby electricity bids are matched with offers.

Amendments on how a legal person with a registered office in an EU Member State can operate in Romania. As such, carrying out the activity under a license issued by a Member State is subject to the entity’s affidavit according to which it will comply with the Romanian technical and commercial norms/rules applicable to the activity carried out, and to ANRE’s confirmation of the right to participate in the Romanian electricity markets through a decision issued under its own procedure.

Amendment of the provisions on smart metering systems and conventional meters.

Establishment of data management, including protection and security.

Repeal of provisions on guaranteed access to energy networks and introduction of priority dispatching provisions for renewable and cogeneration capacity. However, for the electricity produced from renewable sources in power plants accredited for the application of the promotion system through green certificates established under Law no. 220/2008, the takeover in the power grid is guaranteed.

Amendment of provisions on the implementation of electricity network extensions, connections and fittings, and how they are financed.

Producers and suppliers of electricity can supply their own premises, subsidiaries and all customers through direct lines, without being subject to disproportionate administrative procedures or costs. Prior to the new amendments, supply through a direct line was conditional on the absence of an economically and technically reasonable bid for access to the public utility grid.

Introduction of new provisions relating to aggregation activity (e.g., aggregation contract, demand response through aggregation, possibility for citizen energy communities to engage in aggregation, possibility for final customers to conclude aggregation contracts with market participants involved in aggregation, possibility for active customers to operate through aggregation, etc.).

Amendment of certain provisions on authorizations and licenses for electricity operators and of certain provisions on regulated tariffs.

Granting the transmission system operator, and distribution system operators the right to own storage facilities only under certain conditions set out in Law 123/2012. However, the prohibition on owning storage facilities does not apply to operators of closed distribution systems.

Amendment/ supplementation of the provisions regarding customers’ rights and obligations and, implicitly, of those regarding suppliers’ rights and obligations (e.g., on tools for comparing offers, on the complaint-handling system, invoicing and payment, contracting procedure and modification of contract terms, change of supplier, information on alternatives for interruption of power supplies, etc.).

Regulation of the obligation of economic operators active in the electricity sector to participate in alternative dispute resolution mechanisms for household customers.

Natural gas sector

Although GEO 143/2021 is mainly aimed at transposing Directive 2019/944, which covers the electricity sector, some amendments have nevertheless been made to Law 123/2012 with regard to the natural gas sector, including for the purpose of aligning some provisions. The amendments which seem to be the most important are presented below:

Regulation of new ANRE obligations and competences concerning: (i) campaigns to inform consumers about their rights, including the right to change their natural gas supplier; (ii) the creation and operation of an integrated platform, unique at national level, through which the final customer can change the natural gas supplier; (iii) the detection and sanctioning of suppliers’ unfair or misleading commercial practices in relation to non-household customers, by applying certain provisions of Law 363/2007 (including Schedule 1 of the law in question covering examples of conduct considered unfair practices).

Amendment of certain provisions regarding the concession of the natural gas distribution utility service (e.g., concerning the extension of the concession area, extension financing, investment regime for distribution system operators, participation of local authorities with third-party financing, rights and obligations of the concessionaire, etc.).

Amendment of certain provisions concerning authorizations and licenses of natural gas operators, including the legal basis for refusal to grant authorizations/licenses.

Amendment of certain provisions regarding the requirements imposed on distribution system operators/storage operators that are part of a vertically integrated economic operator.

Amendment of certain provisions relating to the financing of works for objectives/pipelines necessary for connection (e.g., applicants’ possibility to ensure the financing of works for the extension of the natural gas transmission/distribution network, with the transmission/distribution operator returning the amount financed by the applicants under the efficiency requirements defined by ANRE).

Regulation of additional cases where ANRE may allow the execution of direct pipelines.

Regulation of hydrogen production facilities/ hydrogen terminal (e.g., purposes for which hydrogen is produced, hydrogen terminal operator’s obligations and rights, hydrogen licensing regime).

Introduction and amendment of certain provisions regarding the connection to the distribution system, including the distributor’s and the applicant’s rights and obligations (e.g. (i) the distributor’s obligation to issue a technical connection permit to the applicant, that will also include the technical solution; (ii) the applicant's right to freely choose any economic operator authorized by ANRE to design and execute the works necessary for the connection; (iii) the applicant's obligation to conclude a connection contract with the distribution system operator; (iv) the payment of the cost of the connection works in the case of household and non-household customers).

Amendment of certain provisions regarding the sanctioning regime for breach of the rules on conducting business in the natural gas sector: (i) regulation of new contraventions; (ii) amendment of the definition of repeated contravention by adding a requirement according to which the commission at least two times of the same contraventions must take place during 12 consecutive months; (iii) in the case of contraventions for which penalties are established by reference to turnover, the determination and individualization of penalties will be made by the ANRE Regulatory Committee according to a procedure approved by the President of ANRE within 60 days after the enforcement of GEO 143/2021. The individualization of penalties for these contraventions will also be based on the seriousness and duration of the contravention, the impact on the electricity market and the final customer, depending on the case, in compliance with the principles of effectiveness, proportionality and the dissuasive effect of the penalty applied.

By Monica Iancu, Partner, Ionel Macovei, Associate, Vasile Soltan, Associate, and Alexandra Bunea, Junior Associate, Bondoc si Asociatii

Romanian Knowledge Partner

Țuca Zbârcea & Asociații is a full-service independent law firm, employing cross-disciplinary teams of lawyers, insolvency practitioners, tax consultants, IP counsellors, economists and staff members. It also operates a secondary law office in Cluj-Napoca (Romania), and has a ‘best-friend’ agreement with a leading law firm in the Republic of Moldova. In addition, thanks to the firm’s dedicated Foreign Desks, the team provides the full range of services to international investors seeking to gain a foothold or expand their existing operations in Romania. Since 2019, the firm and its tax arm are collaborating with Andersen Global in Romania.

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