This week ANRE, the Romanian energy regulator, announced (click here) a new Order aimed at curbing speculation in the Romanian power market.
- The Romanian national regulatory authority has taken issue with the practice engaged in by some market participants in contracting for large volumes of electricity without the intention of taking delivery and then reselling the power before delivery to profit from the price difference. According to ANRE, this is usually done without providing any sort of payment guarantees such as margin or collateral. ANRE believes that this causes market imbalances, unstable prices, and a lack of trust between market counterparties.
- To discourage firms from doing this, ANRE has adopted an Order requiring electricity buyers to pay minimum sums upfront to its counterparty, or to provide a minimum guarantee when signing the contract. For forward deliveries with a duration of more than six months, five percent of the contract value must be paid, and 10% for forward deliveries of less than six months. Under this arrangement, payment of the above must be made within 15 days from signing the contract. The measure expressly excludes bilateral deals executed using EFET contracts. Under the Order, the contract price can no longer be changed after signing based on changes in transmission tariffs – a practice that ANRE believes has also created uncertainty and unfairness.
- The announcement does not explicitly state when the Order enters into effect although some sources have claimed that it applies immediately. The mandating of collateral or margining is usually the preserve of financial markets under regulations such as EMIR. This move is interventionist in nature and is not likely to be universally welcomed as it may encourage further such interventionist measures.
Firms active in Romania’s power markets will undoubtedly reflect on ANRE’s somewhat heavy-handed REMIT enforcement cases in 2024. As such, firms active in this part of the Romanian electricity market are advised to ensure that their Front Office personnel are aware of this Order, and appropriate controls are established to ensure the rules are not circumvented. Executing bilateral contracts through EFET-standard agreements would seem like a reasonable safe harbour in this regard.
