A. Wholesale electricity trading
1. Background information
The main piece of legislation regulating electricity trading in Romania is the Energy Act 2012 (Legea energiei). The Electricity Act 2012 largely transposes the Second Energy Package. The Act entered into force in July 2012, and is aimed at transposing the Third Energy Package covering both the electricity and gas markets. The Energy Act 2012 brings some uncertainties as concerns wholesale electricity trading, as it is not clear whether a mandatory power exchange has been created and hence bilateral trading is banned outright. The market has already reacted vividly and stakeholders are actively searching for clarifications both with their advisors and with the Ministry of Economy, the Romanian NRA and the Power Market Operator.
Detailed provisions on trading are comprised in the Electricity Wholesale Market Code (Codul Comercial al Pietei Angro de Energie Electrica – EWMC).
2. Licence requirements
2.1. General aspects
Under the Electricity Act 2007 all Electricity Traders trading in electricity in Romania or cross-border must hold a valid licence.
2.2. Conditions for licensing
Generally, the issuance of a licence is dependent upon numerous technical, organisational and financial criteria.
In order to obtain a trading licence, the applicant must be either a Romanian legal entity or a foreign legal entity having a permanent or a secondary (subsidiary or branch) seat in Romania during the entire period for which the trading licence is granted.
The licence is issued by the Romanian NRA (Autoritatea Nationala de Reglementare in Domeniul Energiei) for up to 10 years.
2.3. Fees and additional expenditure
- One-time payment of a licensing fee of RON 1890.
- Annual fee of 0.076% of revenues generated from the licensed activities.
2.4. Timetable for obtaining the licence
The statutory term for granting a licence is 60 days as of submission of the complete documentation.
3. Trading requirements
Prior to the entering into force of the Energy Act 2012 on the wholesale competitive market electricity could be traded either on the bilateral contracts market or on the power exchange. A balancing market is also available and mandatory. As mentioned in section I.1 above, the Energy Act 2012 brings some uncertainties as concerns wholesale electricity trading, as it is not clear whether the intention of the legislator was to create a mandatory power exchange and ban OTC trading outright.
The Romanian electricity market has not yet been fully liberalised, the retail market is still driven by regulated prices set by the Romanian NRA. However a wholesale competitive market has been set in place, which is now liberalised, pricing and other relevant provisions are based on the principle of contractual freedom and negotiation (for OTC trading, with the caveat mentioned under the Energy Act 2012 above), without any regulated tariffs.
3.1. OTC trading
Apart from the balancing obligations, there are no specific requirements for OTC trading in electricity in Romania. An Electricity Trader enjoys full contractual freedom, freely negotiating the terms and conditions of the agreement.
Framework agreements, such as those provided by the EFET, can be used in Romania as model agreements. The use of these framework agreements has not yet become a standard practice in Romania.
3.2. Power exchange trading
The power exchange offers day-ahead, intra-day and balancing trading. The power exchange is operated by the Romanian electricity market operator (OPCOM).
To become a member of the power exchange and trade on one of its platforms, an Electricity Trader needs to:
- register as a balancing responsible party or join an existing balancing responsible party;
- enter into a standardised membership agreement with OPCOM;
- provide financial security under the form of a first demand, irrevocable and unconditional bank guarantee valid for at least three months.
Depending on the trading platforms, the standardised contracts offered by OPCOM are optional or mandatory.
3.3. Balancing market
The balancing market is run by the Romanian TSO. An Electricity Trader must either register as a balancing responsible party or join an existing balancing responsible party which undertakes the balancing obligation.
To become a balancing responsible party an Electricity Trader needs to:
- enter into a metering agreement with the TSO (acting as metering operator);
- submit a request (accompanied by relevant specific documentation) for registration;
- submit a financial guarantee of at least RON 100,000, in the form of a first demand, unconditional and irrevocable bank guarantee valid for at least 12 months;
- enter into a balancing agreement with the Romanian TSO.
The Romanian TSO, as the balancing market operator, registers participants to the balancing market, collects and validates offers and determines the volumes needed for settling the transactions.
Settlement itself is currently ensured by the market operator, OPCOM acting as settlement administrator. OPCOM provides settlement calculations for transactions concluded on the day-ahead market and the balancing market. Settlement services are available for a regulated tariff.
To join an existing balancing responsible party the Electricity Trader needs to:
- provide adequate financial guarantees;
- get the approval of the Romanian TS for transferring the balancing responsibility to an existing balancing party.
4. Cross-border trading
4.1. General information on cross-border trading in Romania
Romania has established several interconnectors with neighbouring countries Bulgaria, Serbia, Hungary, Ukraine and Moldova, for capacities of 110 kV, 400 kV and 750 kV.
Cross-border transactions have to be notified to the Romanian TSO.
4.2. Capacity auctions
Interconnection capacities for outbound and inbound cross border trading are allocated through auctions.
Transmission capacities may be allocated during annual, seasonal, quarterly or monthly auctions, as defined and organised by the Romanian TSO. The Romanian TSO can only auction half of the net transfer capacity; the remaining half will be allocated by the TSO of the neighbouring country.
To participate in cross-border trading using the Romanian transmission network, an Electricity Trader needs to:
- fill in a registration form;
- get the approval of the Romanian TSO;
- enter into a framework agreement for allocation of interconnection
capacity with the TSO; and
- register as a balancing responsible party or join another balancing responsible party;
- hold an energy identification code (EIC code).
5. Grid access
Access to the grid is based on the principle of third-party access and is a regulated and mandatory public service offered by the Romanian TSO and the Romanian DSOs. Access may only be restricted if the safety of the power network is jeopardised through the breach of technical norms and performance standards.
Access to the entry and exit points, whether for domestic trading or at the interconnectors, is offered for a regulated tariff.
B. Wholesale gas trading
1. Background information
Wholesale gas trading in Romania is governed by the provisions of the Romanian Energy Act 2012. The Energy Act 2012 (see section I.1 above) has not brought any substantial amendments concerning wholesale trading of gas.
The provisions of the Energy Act 2012 are further detailed by way of secondary legislation issued by the Romanian NRA.
2. Licence requirements
Under the Gas Act 2004 all Gas Traders trading gas in Romania or cross-border must hold a valid licence.
2.1. Conditions for licensing
Generally, the issuance of a licence is dependent upon numerous technical, organisational and financial criteria, including:
- bank guarantee;
- ISO 9000 quality certification of the management system;
- ISO 14000 quality certification of environmental management system;
- certification of the communication system with customers;
- a list of secondary offices.
In order to obtain a trading licence, the applicant must be either a Romanian legal entity or a foreign legal entity having a permanent or a secondary (subsidiary or branch) seat in Romania during the entire period for which the trading licence is granted.
The licence is issued by the Romanian NRA for up to 30 years.
2.2. Fees and additional expenditure
- Annual fee of RON 0.41%/m3, calculated based on the quantities of gas forecasted to be supplied during the reference year and then further adjusted based on the quantities effectively supplied.
2.3. Timetable for obtaining the licence
The statutory term for granting a licence is 60 days as of submission of the complete documentation.
3. Trading requirements
On the wholesale competitive market, gas can be traded based on bilateral agreements, Gas Traders enjoying full contractual freedom, freely negotiating the terms and conditions of the agreement. The Romanian commodities exchange market is virtually not used, and there are no gas hubs.
Under the Energy Act 2012, market participants are bound to cover financially their balancing obligation. Further details are set in the secondary legislation issued by the Romanian NRA.
The balancing market is operated by the TSO, and the unbalancing charges are based on regulated tariffs proposed by the TSO and approved by the Romanian NRA.
4. Cross-border trading
According to the Romanian NRA's statistics as of January 2011, 74.83% of domestic demand was covered by domestic production, the rest being imported mainly from Russia.
The national transmission network has been recently interconnected with the Hungarian network, and now Romania can engage in inbound and outbound cross-border trade from Western Europe as well. Nevertheless, currently due to technical limitations, the pipeline allows only inbound trading.
There are plans to construct a second interconnection pipeline linking the Romanian national transmission network with the Bulgarian network. There is a statutory ban on outbound trading of natural gas as long as domestic production does not cover the entire domestic gas demand.
Moreover, the weak infrastructure of the transmission system does not allow outbound cross-border trading. With the view to the implementation of the Third Energy Package (which provides for both inbound and outbound cross-border trading in and out of all Member States), Romania has recently concluded a Memorandum with the EU Commission, and it is expected that outbound cross-border trading of natural gas will be feasible from both the regulatory and technical perspectives by the end of 2013.
5. Grid access
Like for electricity, access to the grid and to the underground storage facilities is based on the principle of third-party access, and is a regulated and mandatory public service offered by the Romanian TSO and the DSOs. Access may only be restricted in limited cases. The unjustified refusal to grant access to the network and the storage facilities can be considered as an abuse of dominant position, which is sanctioned by the law. The Romanian NRA shall inform the Competition Council of any such abuse.
Access to the grid is offered for a regulated tariff.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
