GEO 114/2018 BEGINS TO SHAKE UNDER THE REALITY CHECK / ENERGYNOMICS.RO


20.01.2019
Almost one month after the adoption of OUG 114/2018, the main opposition party calls for the urgent abrogation of the legislative act, according to the PNL leader Ludovic Orban. PNL will ask Parliament to vote on the rejection of the ordinance, Liberal MP Marilen Pirtea, deputy chairman of the Chamber of Deputies, announced. Few days earlier, the President of the Hungarian Democratic Union of Romania, Kelemen Hunor, announced that UDMR would not support GEO 114 as the measures were taken abruptly, without debate and without an impact study. UDMR supports the PSD-ALDE ruling coalition, based on rather loose parliamentary cooperation.

“Energy companies have lost almost 10 percent of their value on the stock market. For the vast majority of these companies, the shareholder is the state. It is better to say that the state has lost because of the decisions of the Government”, said Ludovic Orban, in a press conference. “A lot of energy companies will see their profitability haired and many of them will enter the red. […] We call for the urgent abrogation of GEO 114/2018 and we believe that in the case of the extraordinary session, besides the debate on the law on the compensatory appeal, it is urgent to adopt a law to reject the GEO 114”, the PNL leader has also stated.

Criticisms from PNL

A similar position had previously been expressed by the PNL MP Virgil Popescu, who accused the government of having, through GEO 114, hit in small and medium-sized enterprises. “More and more SME representatives have warned me over the past week that they have received notifications from their energy suppliers announcing the increase in the electricity tariff by up to 30% since the beginning of the year” Popescu wrote in a press release. “The 2% surcharge on the energy companies’ turnover has begun to take effect on 01.01.2019. Energy producers are required to pay the 2% of turnover tax, suppliers in turn pay 2% on both energy purchased from producers and on the supply tariff, while distributors pay 2% on the distribution tariff “, says Virgil Popescu.

Criticisms from USR

USR, the second opposition party in Parliament, is also opposed to GEO 114. One of the reasons is that the capping of price for the domestic gas to 68 lei/MWh “violates the European principles of functioning of a free market”. Another reason is the 2% tax on revenues, which “jeopardizes the CE Oltenia’s chances of refurbishing and investing in new business lines such as new gas or renewable capacities.” “The jobs at CE Oltenia will be even more uncertain, and Romania’s energy security will be more vulnerable,” said USR MP Cristina Prună.

Exception for coal-based electricity

Energy Minister Anton Anton said after the meeting on Thursday with the representatives of the CE Oltenia and the trade unions that he was considering the elimination of the 2% turnover tax for companies producing coal-based energy, introduced by GEO 114/2018. “We will strive to abolish the 2% turnover tax for coal-based generators,” Anton Anton said. In the minister’s view, removing the tax would be justified by the fact that CE Oltenia is obliged to pay for carbon dioxide certificates, which means an estimated burden of more than 30% of the cost of coal-based energy production.

Most likely, an exception introduced for CE Oltenia would raise competition concerns in the electricity generation market and could be considered state aid.

Potential lawsuits

Sources in the energy market, quoted by InvestEnergy, say there are many investors who are preparing to open lawsuits against the National Regulatory Authority for Energy – ANRE. They accuse ANRE of maintaining in its regulations the provision that the contribution is calculated as a percentage of the turnover of the previous year, which means retroactive application of the provisions of GEO 114/2018. “There will be an ocean of lawsuits; if at least one of us wins against ANRE, there will be blood!”, said an investor, quoted by InvestEnergy.

GEO 114 is under EC assessment

MEP Cristian Buşoi, a member of the European Parliament’s Committee on Industry, Research and Energy, said he would intercede with the European Commission about the legality of GEO 114/2018 from the Community legislation standpoint. The Commission has already announced in December that it will thoroughly assess, in particular, the compatibility of GEO 114 with the EU Treaty, with the Gas Directive and with the Electricity Directive.

Former Energy Minister Răzvan Nicolescu was quoted by NewsEnergy saying that “Government Emergency Ordinance 114/2018 has provisions contrary to articles of the EU Treaty on the free movement of goods and goods, EU State Aid and EU Directives (73/2009 and 74/2009) on the electricity and natural gas market, which will greatly complicate Romania’s dialogue with the European Commission on energy issues”.

20.01.2019 · ROMANIA