The liberalization of the natural gas market
The Romanian natural gas market has been gradually opened starting with the year 2001, as follows: 10% in 2001, 25% in 2002, 30% in 2003, 40% in 2004, 50% in 2005, 65% on the 1st of January 2006, 75% at the beginning of 2007 (100% for non-household consumers), becoming 100% liberalized from July 2007 for all consumer categories. From this date onwards all consumers are free to chose their natural gas supplier of preference and to negotiate their supply contracts directly. The consumers can exercise their eligibility rights (changing their supplier or renegotiating their supply contracts) automatically, without any constraints.
The Romanian natural gas market is made up of 2 main components: the competitive segment, covering the trade of natural gas between suppliers as well as suppliers and consumers and the regulated market for supplying natural gas at regulated prices.
In the competitive segment, the prices are formed based on supply and demand, as a result of the market mechanisms. On the regulated market on the other hand, the prices and tariffs are set by the regulating authority based on the price of natural gas, as well as the expenses and profits of the suppliers operating on the regulated market. At the moment, the relatively low prices on the regulated market are made possible by the low cost of natural gas produced in Romania.
The end of regulated prices
According to the Electricity and Natural Gas Law approved on the 10th of July 2012, the calendar for gradually eliminating the regulated natural gas prices has started in December 2012 for non-household consumers and will begin in July 2013 for households. The supply of natural gas at regulated prices will continue until December 2014 for non-household clients, except the case when significant differences will be observed between the prices for natural gas produced in the country and the import prices, threatening the stability of the market. In this case the deadline can be extended until December 2015. For household consumers the supply of natural gas at regulated prices based on framework contracts will continue until December 2018.
In mid 2012 the National Energy Regulatory Authority has published the calendar for the gradual elimination of regulated prices for natural gas. According to the memorandum the transition will be made in several steps, starting with December 2012 for non-household consumers, so that the cumulated increase would be 18% by December 2013 and 10% for household consumers by the end of the same year.
The calendar for eliminating regulated natural gas prices for non-household consumers:
- December 2012: domestic price 49 lei/MWh, 5% increase in the final price
- April 2013: domestic price 55,3 lei/MWh, 5% increase of the final price
- July 2013: domestic price 63,4 lei/MWh, 5% increase of the final price
- October 2013: domestic price 68,3 lei/MWh, 3% increase of the final price
- January 2014: domestic price 72 lei/MWh, 4% increase of the final price
- April 2014: domestic price 89,4 lei/MWh, 5% increase of the final price
- July 2014: domestic price 109 lei/MWh, 5% increase of the final price
- October 2014: domestic price 119 lei/MWh, 4% increase of the final price
What does the liberalization of the natural gas market mean for Your company?
According to the above calendar, we can clearly see an increase of more than 200% in the case of the domestic natural gas prices. This can be translated into a 36% increase of the final price until the end of 2014 for non-household consumers (compared to prices from 2012). For household consumers the transition will be at a slower pace, until the end of 2018.
The liberalization of the natural gas market poses not only problems, but offers solutions as well. In the beginning, the rising domestic natural gas prices will definitely affect the competitiveness of Romanian companies in a negative way. Using the knowledge and expertise gathered on the Eastern- and Central European energy markets, Ensorce Ltd. can help Your company select the adequate natural gas supplier, negotiating the lowest prices under the best conditions, eliminating thus part of the negative effects.
Want to change your supplier? - Nothing could be simpler!
The steps for changing the natural gas supplier in the case of non-household consumers are the following:
- 1. Selecting the new supplier
The consumer has the right to select the type of supply contract as well as one or more supplier for each point of consumption. In the case when the non-household consumer opts for buying the natural gas at regulated prices, it needs to contact the specific operator in charge of supplying the natural gas at regulated prices in the area of the client.
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, like our company, 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.
- 2. Signing the contract with the new supplier and terminating the previous supply contract.
The new supplier sends the consumer the general conditions for contracting and initiates the negotiation process for the provisions of the new contract. The non-household consumer and the new supplier sign the contract, considering also the time necessary to terminate the contract with the present supplier.
The non-household consumer signing a contract with the new supplier has the following options:
a) with included services, where, besides the price negotiated for the supply of natural gas, the supplier includes the regulated tariffs related to system services, like transport, distribution and storageIt is worth mentioning that in the process of changing the supplier, the flow of natural gas will not be interrupted, the supply infrastructure will remain the same and the new supplier will not proceed to install new pipes. The only thing which will change will be the price of the natural gas and of course the name of the supplier on the invoice.
b) without included services, covering exclusively the negotiated prices of the natural gas. In this case the consumer will have to sign a separate contract with the natural gas distribution company in the area for the system services
- 3. Notifying the distribution / transport operator and transferring the reserved capacity
The new supplier will notify the distribution / transport operator in the area about the fact that the consumer will become its client starting with the date agreed upon by both parties. In the case of non-household consumers the “capacity follows the consumer” principle is applied. The present supplier and the new supplier announce the distribution / transport operator about the transferred capacity related to the specific client. The consumer category of the client is not modified as a result of changing the natural gas supplier.
- 4. Determining the index of the consumer’s natural gas meter
The distribution / transport operator convenes and accepts together with the present supplier as well as the new supplier the index of the natural gas meter, observed on the day when the new supplier starts selling natural gas to the consumer.
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 of the meter, because there will be no chance to correct these issues after making the transition to the new supplier.