EU pushes Romania to modify energy price caps

The EU has called on Romania to amend its energy price-capping scheme, urging the government to allow gas and electricity producers to set their own prices. The request came in the form of a letter, with Romania expected to respond within two months. The letter marks the first step of an infringement procedure that could ultimately go to the EU’s Court of Justice.

The main concern of the European Commission (EC) is Romania’s requirement for gas producers to sell 1 MWh to suppliers and thermal energy producers for RON 120 (EUR 24.10), a price control set to expire at the end of December but likely to be extended until March 2024.

Similarly, electricity producers are incentivised to sell at a capped price of RON 400 (EUR 80.33) per MWh, as anything they earn above this amount is handed over to the state. These caps were introduced alongside ceilings for end consumers, including households and businesses, as part of the government’s response to rising energy prices.

Romania defends energy measures

Romanian Energy Minister Sebastian Burduja defended the price caps, stating they were necessary to shield citizens and businesses from the volatility of energy prices. “From the peak of the energy crisis, we took measures to protect Romanian citizens and the Romanian economy in the face of the dynamic increase in electricity and natural gas prices,” he told local news website Digi24.

Burduja explained that the interventions included capping prices at the production level, over-taxing unusually high profits, and imposing limits on the final price paid by consumers. He noted that the EC has already opened two cases related to these market interventions, one of which dates back to January 2023, prior to his tenure as energy minister.

He also framed the EU’s recent letter as part of a “moderate approach” toward Romania, acknowledging the challenges the country still faces in the energy market, emphasising that Romania has time to respond and, if necessary, adjust its strategy to align with EU regulations.

Minister strikes balanced tone

If Romania fails to adequately address the EC’s concerns within the two-month deadline, the EU may issue a reasoned opinion, providing the country another opportunity to comply before escalating the case to the Court of Justice. Burduja confirmed that Romania is already preparing for the post-April 2024 period, when the current price cap scheme is set to expire.

Burduja said the government is focused on developing a plan to protect vulnerable consumers, particularly those in energy poverty, while working to resolve the dispute with the EU. “We will also discuss this set of measures in detail with the EC to kill two birds with one stone,” he added, suggesting that the goal is to continue shielding Romanian citizens while also satisfying the EU’s regulatory requirements.

Broader implications for Romanian energy market

The EU’s pressure comes at a critical time for Romania, which has been grappling with the dual challenges of high energy prices and the need to comply with EU regulations. The government’s interventions have provided short-term relief, but the looming infringement procedure underscores the difficulty of balancing domestic economic concerns with European market rules.

The outcome of these negotiations will likely shape Romania’s energy policy moving forward, as the country seeks to protect consumers without running afoul of EU competition laws.