Energy updates: Romanian Government approved the amendment of the Energy Law on the last day of 2021

Perhaps the most highly anticipated regulatory change in the Romanian Energy sector, respectively the implementation of the Directive (EU) 2019/944 on common rules for the internal market for electricity (Directive 944) into the national legislation, was brought into effect on the final day of the calendar year 2021, through the publication in the Official Gazette of Romania of the Government Emergency Ordinance no. 143/2021 for the amendment of Law no. 123/2012 of electricity and natural gas, as well as for the amendment of other regulatory acts (GEO 143). The final approval and entry into force of GEO 143 marks the end of a very lengthy and highly debated drafting and public consultation process concerning the form and scope of the changes that this act would bring to Law no. 123/2012 of electricity and natural gas (Energy Law).

Although the amendments brought by GEO 143 to the Energy Law are substantial, and their scope and eventual effects yet to be fully determined (considering that these changes further require a major overhaul of the secondary legislation, a process which should be completed within 6 months as per the provisions of GEO 143), we aimed to provide a general overview of the major legislative changes that should be considered by all participants and stakeholders in the Romanian energy system. We also deem necessary to mention that GEO 143, although already in force as of 31 December 2021, will still be subject to a Parliamentary approval procedure, which may result in either its approval without amendments, with amendments or to its rejection (resulting in a repeal of all the provisions thereof).

1. Energy markets

1.1 The energy markets are now defined as in Directive 944 being “markets for electricity, including over-the-counter markets and electricity exchanges, markets for the trading of energy, capacity, balancing and ancillary services in all timeframes, including forward, day-ahead and intraday markets”; electricity derivatives are also included and defined similar to the definitions provided for in Directive 944 and MIFID II Directive;

1.2 On the wholesale electricity market, transactions are taking place, in all timeframes, through directly negotiated bilateral transactions (ie directly negotiated power purchase agreements (PPA)), bids on the organized markets, including for balancing services or through import/export transactions; the newly added provisions now make clear that PPAs can be concluded outside of OPCOM centralized market; we note that a previous amendment to the now definitive lift on the ban for directly negotiated PPAs was implemented since the end of 2020, but only applied to production capacities commissioned after 1 June 2020.

1.3 The operator of the organized energy market shall ensure the offering of low-capacity trading products (ie minimal offer equal to or below 500 kW), both on the day-ahead market and on the intra-day market, in order to ensure the effective participation of dispatchable consumers, low-scale energy storage and renewable capacities, as well as the direct participation of clients.

1.4 For reasons of ensuring the liquidity of electricity markets, state-owned energy producers (ie those which fall under the conditions of Government Emergency Ordinance no. 109/2011 regarding the corporate governance of public enterprises) must trade at least 40% of their annual production on the energy exchange, on markets other than the day-ahead market, the intra-day market or the balancing market. This obligation is not applicable to production capacities commissioned after 1 June 2020 (even if they are state-owned).

1.5 The transport and system operator (TSO) shall purchase electricity, capacity and system services from all market participants that fulfil the necessary technical requirements, including from energy producers from renewable capacities, dispatchable customers, operators of energy storage installations and aggregators, based on a transparent, not discriminatory and market-based procedure, which shall be subject to approval by the National Authority for Energy Regulation (ANRE).

1.6 With regards to purchasing system services other than those required for electricity frequency balancing, the same rules shall apply, not only for the TSO but also for distribution system operators, with the exception that in this case ANRE may grant a derogation in the event that the provision, under market conditions, of system services other than those required for electricity frequency balancing would not be economically viable.

1.7 ANRE is also tasked with drafting norms under which distribution system operators would be incentivized to purchase flexibility services (ie services provided by a market participant and acquired by the distribution operator for sustaining the efficient and safe functioning of the distribution system and for maximizing the quality of service). These flexibility services shall be purchased by distribution operators from entities offering distributed production services, dispatchable consumption of energy storage, and that promote energy efficiency measures, based on a transparent, indiscriminatory and market-based procedure.

2. Transparency concerning grid development and connection procedures

2.1 The TSO must prepare and present to ANRE, at least every two years, a ten-year development and investment plan of the electricity transport system. ANRE shall analyze this plan considering, among others, its compatibility with the the National Energy and Climate Plan which has been notified by Romania to the European Commission. ANRE may request the TSO to amend a proposed investment and development plan.

2.2 In the event that the TSO, for reasons other than those outside its control, does not complete an investment which was scheduled in the following three years according to the plan and provided that the respective investment remains relevant under the most recent ten-year plan of the TSO, ANRE must resort to either of the following:

1. Request the TSO to execute the investment;
2. Organize a tender procedure for that investment, open to all investors; or
3. To mandate the TSO to accept a share capital increase for financing the required investment(s), and allow independent investors to participate to such offering.

2.3 Distribution system operators must also prepare and publish a development plan of the respective distribution system, consulting both the users of such distribution system and the TSO, and present such development plan to ANRE, at least every two years, together with the findings of the public consultation process.

2.4 Further limitations are imposed on the ability of the TSO to reject a request for grid connection, restraining its ability to ground such a rejection on arguments such as that the connection of the proposed capacity would result in additional costs generated by the necessary increase of system elements within the perimeter of the connection point, or future limitations of available grid capacities, such as congestions at distant points within the system. Limitations of the guaranteed grid connection capacity or the offering of grid connection conditions subject to limitations, for ensuring the economic efficiency of new energy production or storage capacities, must be approved by ANRE. In any case, no limitations shall apply in case the production/storage installation (developer) undertakes the costs which would ensure unlimited/unconditioned grid connection.

2.5 Applicants for connection to the distribution grid have the option to finance the distribution grid expansion works, being entitled to reimbursement of costs from the distribution system operator, within a timeline to be established under ANRE regulations.

2.6 The costs incurred by household consumers with the design and execution of the connection to the low-voltage electricity grid shall be reimbursed to them by the distribution grid operator, up to the medium cost for such connections, to be established through ANRE methodologies. This shall not be applicable to non-household consumers, who shall undertake the design and execution costs themselves.

3. Prosumers

3.1 Prosumers operating energy production capacities from renewable sources of up to 400 kW per consumption location can sell the excess the energy produced and delivered into the grid to the electricity suppliers with which they have an electricity supply contract according to ANRE regulations. Prior to GEO 143, this was possible only for prosumers with production capacities of up to 100 kW.

3.2 Prosumers operating energy production capacities from renewable sources of up to 200 kW may request their energy supplier to operate a quantitative settlement in their invoices, between the amount consumed and the amount delivered into the grid. In case the quantity of electricity delivered into the grid exceeds the consumption of a respective prosumer in a given period, the excess amount delivered into the grid will carry over and be settled with future amounts consumed by the respective prosumer, within a period of 24 months from the invoicing date.

3.3 For prosumers with capacities between 200 kW and 400 kW, the electricity supplier must, upon the request of the respective prosumer, purchase the electricity delivered into the grid by the prosumer at a price equal to the medium weighted price on the day-ahead market for the month when the electricity was produced, and further settle the resulting amounts with the amounts owed by the prosumer for their consumed electricity.

3.4 Prosumers operating renewable capacities below 400 kW shall also be exempt from the obligations to purchase green certificates in accordance with the provisions of Law 220/2008, from the balancing obligations (which will be passed onto the supplier) and individual prosumers shall also benefit from tax-exemptions on the electricity produced for personal use and the excess sold to their electricity supplier.

4. Storage capacities and EV charging stations

4.1 The activity of selling electricity purchased from an electricity supplier and used by an operator of a charging station for electric/plug-in hybrid vehicles shall not be construed as representing the activity of supply of electricity.

4.2 Distribution grid operators are, in principle, not allowed to own or operate charging stations for electric vehicles, unless solely for their own use. However, a general exemption may apply, if a number of cumulative conditions are met. Also, it should be noted that the limitations are not applicable in the case of closed circuit distribution systems.

4.3 The TSO, as well as distribution system operators are generally barred from owning or operating electricity storage facilities, although, subject to the fulfilment of certain cumulative conditions, an exemption may apply.

5. Other notable changes

5.1 Two new concepts are introduced under the Energy Law through GEO 143, namely the categories of “active clients” and “citizens’ energy communities”, aiming to empower consumers, both in an independent and aggregate manner, to take a more active role in the energy markets and leverage the market mechanisms at their disposal in order to achieve superior energy efficiency and lower costs.

5.2 As per the amended Energy Law, an active client would be the end customer or a group of end customers acting together, consuming or storing the electricity produced in the spaces they own located in limited areas or selling their own electricity produced or participating in energy flexibility or efficiency programs, identified as under the applicable law, provided that the activities in question do not constitute their principal commercial or professional activity.

5.3 On the other hand, the citizens’ energy community is defined as the legal entity that cumulatively fulfils the following conditions:

• is based on voluntary and open participation and is effectively controlled by members or individual shareholders, local authorities, including municipalities, or small businesses;
• its main objective is to provide environmental, economic or social benefits to its members or shareholders or to the local areas in which it operates, rather than to generate financial profits;
• may be involved in production, including production from renewable sources, distribution, supply, consumption, aggregation, energy storage, energy efficiency services, or charging services for electric vehicles, or may provide other energy services to its members or shareholders.

5.4 Electricity producers and suppliers can supply their own premises, subsidiaries or all customers, through direct lines, without being subject to administrative procedures or disproportionate costs. Prior to the amendments brought on by GEO 143, the right to supply via direct lines was conditioned by the absence of a technically and economically reasonable offer for connecting to the public interest electricity grid.