Mihai G. Popa
Corporate Legal Department Director
E.ON Romania

12 August 2019

What are some of the major legislative changes that affected the distribution and supply sector in the past 12 months?

There are three major changes that are worth mentioning in my view. Firstly, the amendment of Law 123/2012 that has brought about changes in the area of fines. More specifically, the changes stipulate that if two contraventions are committed within the span of 12 months, the associated fine is as high as 5% of the company’s turnover. Taking into account the constitutive elements of the contravention we believe the sanctions are disproportionate, especially if we consider the fact that we already have public authorities that are responsible for fines applied to turnover. This adds unnecessary pressure to the activities of companies from the energy domain.

Another important change is related to secondary legislation adopted by ANRE and it concerns the rentability rate. The new legislation passed in autumn 2018 has set the RRR at 5,66%, whereas in the past it used to be 7,7%. This represents a challenge for distribution network operators, because it puts pressure on their profitability. Operators need to ensure a proper level of investments to guarantee that the distribution network is maintained at appropriate standards, and the recent legislative modifications put this at certain risks. The same is valid if we consider the need to maintain customer service at high quality levels. The third change is related to the same topic and it was introduced by GEO 114/2018. This time it is relatively good news, more specifically the GEO includes an article which raises the rentability rate to 6,9%. 

 

Can you elaborate on how GEO 114/2019 and the subsequent GEO 19/2019 have affected the distribution and supply sector? 

The legislation affects all the players from the energy sector by imposing a 2% tax on turnover and the stability on this market by capping the gas prices. While the capping of gas acquisition prices did not have a direct impact on us as distributors, we believe it is a measure that is not sustainable long term for the industry at large. It poses the risk of increased imports and it limits the predictability of our supply. 

The subsequent changes in GEO 19/2019 included a few turns for the positive way. The capping of the gas price for industrial consumers was abolished, this ceiling being maintained only for household customers and heat producers who supply centralized heating systems to the population. As mentioned already, there were some benefits for distributors as well (more precisely, the rate of profitability was raised to 6.9%). It is still far from ideal, but these modifications did send out a more positive message for the industry, by showing that the concerns expressed have been heard and that the dialogue has been effective to a certain extent. We are hoping that the situation will continue to improve going forward.

 

Often times changes in legislation have caused great dissatisfaction among industry members. Why do you think that is and what do you see as a possible solution?

An explanation could be the fact that public authorities are overloaded with different projects and sometimes they are required to make very fast decisions based mainly on political considerations. Unfortunately, these quick fixes tend to give birth to other problems down the road.

Another element has to do with our culture for dialogue. In order to have a balanced regulatory environment, and generally if we want to establish adequate parameters for the energy industry, we need to pay more attention to the dialogue between industry members and public authorities. The principle of transparency should be more valued, because it would decrease the level of contests and litigations that we are seeing at present time. As a member of the EU, we can easily learn from other countries and in this way avoid circumstances that are detrimental to both business sector and the state authorities itself. 

 

E.ON is involved in the NEXT-E program, which aims to develop a national network of charging stations for electric cars. Are there any legal clarifications still needed in this area, given that it is still rather new for Romania? 

The framework is generally clear, harmonized with legislation at EU level. We are ready to proceed with investment but there is one element that is still holding us back. There is a assessment going on between several public authorities, namely CNAIR (The National Road Infrastructure Administration), the Ministry of Regional Development and Public Administration and City Halls. The issue to be resolved is under whose responsibility should fall the installation of the electric charging stations. This is dependent on the location of the charging stations, as they can be placed on highways and national roads, or inside the cities. Our view is that placing them on main roads and essential points in the cities would bring most value to customers and would ease the charging process, but we need to wait for the official decision before we can move ahead at a faster pace with the program.

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