Energy prices capping: Temporary benefits for consumers

On 13 December 2022, Law No. 357/2022 on the approval of Emergency Ordinance No. 119/2022 amending Emergency Ordinance No. 27/2022. The law brings several amendments in the calculation of final price cap for household and non-household consumers for both electricity and gas, as it follows:

1. With respect to household costumers, the final price cap invoiced by electricity suppliers is:

(a) of maximum RON 0.68 per kWh (approx. €0.14), VAT included, for the consumption from 1 September 2022 to 31 December 2022 of the household customers whose average monthly consumption at the place of consumption in 2021 is between 0-100 kWh inclusive.

(b) of maximum RON 0.68 per kWh (approx. €0.14), VAT included, for the consumption from 1 January 2023 to 31 March 2025 of the following categories of customers:

• household customers whose monthly consumption is between 0-100 kWh inclusive.
• household customers using medical devices or equipment required for treatment, on the basis of an application and an affidavit.
• household customers who have at least 3 dependent children up to the age of 18, or 26 if they are in education, on the basis of an application and an affidavit.
• single-parent households with at least one dependent child up to the age of 18, or 26 if in education, on the basis of an application and an affidavit.

(c) of maximum RON 0.80 per kWh (approx. €0.16), VAT included, for the consumption from 1 September 2022 to 31 December 2022 of the household customers whose average monthly consumption at the place of consumption in 2021 was between 100,01-300 kWh for a monthly consumption of maximum 255 kWh.

(d) of maximum RON 0.80 per kWh (approx. €0.16), VAT included, for the consumption from 1 January 2023 to 31 March 2025 of the household customers whose monthly consumption at the place of consumption is between 100.01 and 255 kWh; electricity consumption between 255 and 300 kWh/month is invoiced at a maximum price of RON 1.3 per kWh (approx. €0.26), VAT included, and if consumption exceeds 300 kWh/month the entire consumption shall be invoiced at a maximum price of RON1.3 per kWh (approx. €0.26).

(e) of maximum RON 1.3 per kWh (approx. €0.26), VAT included, for household consumers other than those referred to in (a) to (d) above.

In the case of household customers, the final invoiced price applies only to their domicile/residence consumption places. A household customer who has both a residence address and a domicile address may benefit from the capped price either at the domicile address or at the residence address, on the basis of an affidavit submitted to the supplier that it does not benefit from the capped price for another consumption place.

1. With respect to non-household costumers, the final price cap invoiced by electricity suppliers is:

(a) of maximum RON 1 per kWh (approx. €0.20), VAT included, for 85% of the monthly consumption at the place of consumption, while the difference in the monthly electricity consumption shall be invoiced at a maximum price of RON 1.3 per kWh (approx. €0.26), VAT included, on the basis of the affidavit of the legal representative for the following categories of consumers:

• small and medium-sized enterprises.
• providers/ regional providers of certain public utility services (e.g., water supply), as well as Metrorex S.A.
• undertakings operating in the food industry identified by NACE Code 10 as well as those operating in agriculture and fisheries industry identified by NACE Codes 01 and 03.
• local public authorities and institutions, deconcentrated public services of ministries and other central bodies, companies and corporations of county, municipal or local interest, autonomous companies and all public and private entities providing a public service under the law, if they are established or organized at the level of communes, towns, municipalities, counties, Bucharest municipality and, where appropriate, at the level of administrative-territorial subdivisions of municipalities or at the level of inter-community development associations, under the direction, coordination, control and responsibility of local public administration authorities.
• national research and development institutes.

(b) of maximum RON 1 per kWh (approx. €0.20), VAT included, for the entire consumption of public and private hospitals, public and private educational establishments, as well as nurseries, public and private providers of social services as listed in the Nomenclature of social services. The cap referred to in this paragraph shall also apply to situations where one of the above entities is the final beneficiary of the electricity consumption and/or to all buildings that have been constructed and authorized for use as hospitals.

(c) of maximum RON 1 per kWh (approx. €0.20), VAT included, for 85% of the monthly consumption at the place of consumption, for public institutions, other than those referred to in point b) above, as well as for those belonging to officially recognized cults in Romania; the difference in the monthly electricity consumption shall be invoiced at a maximum price of RON 1.3 kWh (approx. €0.26), VAT included.

(d) of maximum RON 1.3 kWh (approx. €0.26), VAT included, for non-household consumers other than those referred to in (a) to (c) above.

For electricity customers (household or non-household), the final price invoiced by each electricity supplier shall be the minimum value of: (i) the maximum final price set out in Sections 1 and 2 above (applicable on a case-by-case basis), and (ii) the contract price.

1. Amendments concerning gas customers

For consumption between 1 April 2022 and 31 March 2025, the final price invoiced by gas suppliers shall be:

(a) of maximum RON 0.31 per kWh (approx. €0.06), VAT included, for household customers.

(b) of maximum RON 0.37 per kWh (approx.€0.08), VAT included, for non-household customers whose annual consumption of natural gas at the place of consumption in the preceding year is of 50,000 MWh or less, and for heat producers; from 1 January 2023, the price of maximum RON 0.37 per kWh (approx. €0.08), VAT included, shall also apply to non-household customers in industrial parks and in closed distribution systems.

(c) of maximum RON 0.37 per kWh (approx. €0.08), VAT included, for the non-household customers’ consumption places connected to the grid in that year, up to an annual consumption of 50,000 MWh.

For natural gas customers (household or non-household), the final price invoiced by each natural gas supplier shall be the minimum value of: (i) the maximum final price set out in Section 4 above (applicable on a case-by-case basis); (ii) the contract price; and (iii) the final price calculated in accordance with the provisions of articles 5 and 6 of GEO 27/2022 (point (iii) refers specifically to the non-household customers excluded from the application of the price caps set out in Section 4 above).

The law also brings amendments concerning the obligations of natural gas producers carrying out onshore and/or offshore extraction activities, which are required:

(a) during the period 1 April 2022 – 31 March 2025, to sell at a price of RON 150 per MWh (approx. €30) the necessary quantities of natural gas resulting from the current domestic production activity to the suppliers of household customers, in order to ensure for the period 1 April 2022 to 31 March 2025 the consumption needs of household customers from the current production and from the underground gas storage facilities as well as the natural gas requirements for constituting the minimum necessary stock for the period 1 November 2024 to 31 March 2025.

(b) during the period 1 September 2022 to 31 March 2025, to sell at a price of RON 150 per MWh (approx. €30) the necessary quantities of natural gas resulting from the current domestic production activity to suppliers of heat producers or directly to heat producers, as the case may be, only for the quantity of natural gas used in the production of heat in cogeneration plants and in thermal power stations for consumption by the population, in order to ensure the consumption needs of these customers from current production and underground gas storage facility for the periods 1 November 2022 to 31 March 2023, 1 November 2023 to 31 March 2024 and 1 November 2024 to 31 March 2025.

(c) during the period 1 April 2023 to 31 March 2025, to sell at a price of RON 150 per MWh (approx. €30) the necessary quantities of natural gas resulting from the current domestic production activity to the transmission system operator and to distribution concession operators holding an operating license – network operators in order to ensure 75% of the natural gas intended for technological consumption.

In addition, during the period from 1 September 2022 to 31 March 2025, in the case of natural gas producers carrying out both onshore and/or offshore extraction activities, irrespective of the date of commencement of such activity, and electricity generation activities using natural gas, the transfer price of natural gas used for electricity generation shall not exceed RON 100 per MWh (approx. €20).

On 1 September 2022, the Government issued the Emergency Ordinance No. 119/2022 (“GEO 119/2022”), amending Emergency Ordinance No. 27/2022 on measures applicable to final customers in the electricity and natural gas market in the period between 1 April 2022 and 31 March 2023. The measure extends the final price cap scheme until 31 August 2023 for both gas and electricity consumption. For the electricity consumption during the period from 1 September 2022 to 31 August 2023, the final price cap invoiced by electricity suppliers is of maximum RON 0.68 per kWh (€0.13 per kWh), for household customers whose average monthly consumption at the place of consumption in 2021 is between 0-100 kWh inclusive; and of maximum RON 0.80 per kWh (€0.16 per kWh) for household customers whose average monthly consumption at the place of consumption in 2021 was between 100.01 and 300 kWh, for a monthly consumption of up to 255 kWh (compared to 300 KWh/month under the previous form of GEO 27/2022).

Also, under the new measure, only the following categories of non-household customers can benefit from the price cap: small and medium-sized enterprises and economic operators in the food industry - maximum RON 1 per kWh (€0.2 per kWh), for 85% of the average monthly consumption at the place of consumption in 2021; public and private hospitals, public and private educational establishments, crèches, public and private providers of social services - maximum RON 1 per kWh (€0.2 per kWh) for full consumption; public authorities (others than those previously listed - public hospitals, education establishments, etc.) - maximum RON 1 per kWh (€0.2 per kWg) for 85% of the average monthly consumption at the place of consumption in 2021.

In addition, GEO 119/2022 brings new changes to the way the average purchase price is calculated. The average purchase price shall be calculated by each supplier, for each month of the period of application of the emergency ordinance and shall include 1) the countervalue of electricity/ natural gas purchased under all forward and day-ahead/ intra-day market contracts, including the countervalue of the natural gas extracted from the underground gas storage facilities and the transfer value between the production activity and the supply activity in the case of producers supplying electricity/ natural gas to final customers and 2) the countervalue of the imbalance achieved, but not more than 5% of the countervalue of the electricity/ natural gas referred to in the point above.

The ordinance regulates a new regime for electricity price caps and the "solidarity tax", applicable throughout the electricity and gas production chain. Electricity and natural gas traders pay a contribution to the Energy Transition Fund, established in accordance with the methodology set out in GEO 27/2022, which shall be calculated, declared and paid by the seller on a monthly basis. Traders will no longer be able to register profits of over 2%, as any surplus will be paid as contribution.