The liberalization of the electricity market
The liberalization of the Romanian electricity market has already begun back in the first semester of the year 2000, taking place gradually so that starting with the 1st of July 2007 all electricity consumers, regardless of utilization, consumption patterns or used quantities have had the possibility to choose their supplier of preference. The Romanian, as well as the entire EU electricity market have already been liberalized, consumers being able to select any supplier they prefer. At present Romanian consumers can select between more than 50 electricity suppliers. Based on the memorandum of understanding approved by the Romanian Government in March 2012 - in accordance with the obligations undertaken in relation to the IMF, the World Bank and the European Commission - the new calendar has been approved for gradually eliminating regulated electricity prices for final consumers, who have not yet made use of their eligibility right (final consumers who have not changed their electricity supplier, or have not re-negotiated their supplier contracts). According to the new regulation, the electricity suppliers will apply a new tariff on the invoices of final consumers called the “Competitive Market Component” (Componenta de Piaţă Concurenţială - CPC). In September 2012, the electricity supplied with this new tariff has represented 15% of the total electricity consumption, steadily increasing over the coming months in order to reach 100% until the end of 2013 for non-household consumers, resulting in the complete elimination of regulated electricity prices. For household consumers the elimination of regulated tariffs will begin in July 2013, the process being due to be finalized until the end of 2017.
What does the liberalization of the electricity market mean for Your company?
On a liberalized market competition is supposed to result in a decrease of the final consumer price, the higher efficiency of suppliers and more consumer-oriented services. In consequence - at least theoretically - the liberalization of the electricity market should bring about several benefits for the Romanian companies. Despite all the facts, in the early phases of liberalization, eliminating regulated tariffs will inevitably lead to increased energy prices. This process will have a negative effect especially on small and medium sized consumers, which - resulting from their limited possibilities for influencing the market and lack of information - will not be able to negotiate favorable electricity supply contracts.
What are the risks?
Electricity supply, as an activity hides in fact the process of electricity trading and has to include a series of other services like: meter reading, billing, collecting, mediating client and network-operator relations, resolving complaints, informing clients regarding changes in the legislation, consultancy, etc. Changing the electricity supplier does not pose any risks. In the process the flow of electricity will not be interrupted, the supply infrastructure will remain the same and the new supplier will not proceed to install new lines or cables. The only thing changing will be the price of the electricity and of course the name of the supplier on the invoice. In the unpleasant but very rare case in which your new electricity supplier will no longer be able to fulfill its obligations specified in the contract, the electricity supply will not have to suffer. The National Energy Regulatory Authority has already adopted several regulations ensuring that the electricity will be delivered continuously by another supplier.
The Romanian experience
Large companies regularly plan their electricity sourcing procedures in due time, gathering offers and organizing electronic auctions, although in the absence of necessary tools and techniques, lacking access to market benchmarks they do not always manage to obtain the lowest prices on the market, no matter how hard they try. The situation is all the more difficult in the case of small and medium sized consumers because they usually do not receive enough offers, or even if they do these are very difficult to compare in their very short validity periods. While large companies usually have specialized personnel in charge of running sourcing procedures and negotiating electricity supply contracts, smaller consumers - in the absence of external expertise specialized on negotiating contracts and selecting electricity suppliers - will be destined to settle for higher prices imposed by the main players present on the market.
Want to change your supplier? - Nothing could be simpler!
- Step 1 – you have to gather a few offers from different electricity suppliers, you can organize an auction or you can make use of the services provided by Ensorce Ltd. as an independent 3rd party consultant for selecting the right electricity supplier. Although the deadline for sending supply offers is max. 30 days, you can significantly reduce this time-frame by asking for the services of a specialized external consultant, thus being able to obtain the offers in 3 to 5 days. The offers can then be compared according to price, duration, conditions, penalties and payment deadlines.
- Step 2 – after selecting your new supplier and signing the contract, the other supplier will also need to be notified with at least 30 days before terminating the old contract. Also, you will need to check if the existing electricity meter is suited for supplying electricity according to competitive market conditions. If not, then it will have to be changed, costs usually being supported by the consumers.
It is worth mentioning that in the process of changing the supplier the flow of electricity will not be interrupted, the supply infrastructure will remain the same and the new supplier will not proceed to install new lines or cables. The only thing which will change will be the price of the electricity and of course the name of the supplier on the invoice.
- Step 3 – once the process has started, the new supplier will contact all external parties involved in order to correctly read the meter at the time of making the transition effectively.
The purpose of this reading is to determine the index for the final invoice (the so called contract cancellation index) of the old supplier, marking at the same time the exact moment when the obligations resulting from the new supply contract enter into force.
- Step 4 – you will receive an invoice for the final settling which will have to be paid in the specified interval.
It is of utmost importance that you check the correctness of the last invoice and check that the index on the invoice is the same as the cancellation index because there will be no other chance to correct these issues after making the transition to the new supplier.