Legal & Tax Alerts

Power purchase agreements outside the centralized market

Government Emergency Ordinance no. 74/2020 regarding the amendment and supplement of Law no. 123/2012 on electricity and gas (“GEO no. 74”) entered into force on 19.05.2020, following its publication in the Official Gazette[1] from the same date. According to the substantiation note issued by the Romanian Government for GEO no. 74 and the recitals of this normative act, the enactment of these provisions in the field of electricity has been grounded on the following considerations:

» the preservation of the commitments undertaken towards the European Commission for the liberalization of the electricity market starting with 01.01.2021;

» the need to incentivise investments in new electricity production units, with positive direct impact on the economic and functioning of the National Power System on a medium and long term.

Based on the arguments offered by the Romanian Government, it concluded in the recitals of GEO no. 74/2020 that the enactment of the emergency ordinance is based on the necessity to identify, as a matter of urgency, for a determined period of time, namely until 31.12.2020, certain mechanisms to ensure the preservation of the current value of electricity prices. It is not clear whether the Government intends for the enacted amendments to apply for a limited duration in time.

In this context, GEO no. 74 brings a significant amendment in the field of trading on the electricity market, namely, this ordinance sets forth that, by way of derogation from the rule of electricity trading on a centralised market, the electricity producers will be allowed to conclude power purchase agreements outside the centralised market, at negotiated prices, with the observance of competition rules, but only with respect to electricity originating from new electricity production units commissioned after 01.06.2020.

Furthermore, with the objective of avoiding the increase in the prices of electricity compared to the current level thereof, GEO no. 74 provides that the obligation of the electricity producers to supply to last resort suppliers, until 31.12.2020, the electricity necessary to ensure the consumption of domestic customers for whom regulated fees are implemented will be applicable to the producers exploiting dispatchable production units, only for the units not benefiting from support schemes, in the ascending order of the prices established by the competent authority, for the entire quantity of electricity necessary to domestic consumers for whom regulated fees are implemented, so that these fees will not be increased over the level practised at the date of entry into force of GEO no. 74, they may be adjusted according to the evolution of the market, without exceeding the aforementioned level.

Also, GEO no. 74 stipulates that the Romanian Energy Regulatory Authority will establish the methodology based on which it shall regulate the prices for the sale of electricity delivered by producers to last resort suppliers, with the observance of the above-mentioned conditions.

 

[1] Official Gazette of Romania, Part I, no. 416 dated 19.05.2020.

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