Market regulator considers setting cost-plus electricity prices in Romania

  • Jan 11, 2019
  • Romania Insider

The residential end-users in Romania would be supplied with electricity from nuclear power plant Nuclearelectrica and hydropower company Hidroelectrica at the production cost plus “a reasonable profit margin”, under a scenario considered by the market regulator ANRE.

“We have already asked producers to send us the costs, based on which we will set regulated prices, which will be the cost of production plus a reasonable fixed margin,” unofficial sources within ANRE told Economica.net.

The market regulator is compelled, under the emergency ordinance 114/2018 to regulate the electricity price for residential users (which include small businesses as well) for the period 2019-2022.

The cost-plus methodology is not something new on the market and is typically used in the situation of monopoly (geographic monopoly in general) for instance when the fees charged by transport and distribution operators are set. Romania’s electricity market had previously been fully liberalised for the industrial and residential users as well. Out of the 9 million residential users, some 2 million have already decided to leave the supplier of last resort and select another supplier (while the distribution is done by the same regional distribution network). It remains unclear whether ordinance 114 refers to all residential users or only those who have not changed their supplier, Economica.net commented.

Electricity price peaks in Romania amid cold weather, inelastic production capacity

The residential end-users in Romania would be supplied with electricity from nuclear power plant Nuclearelectrica and hydropower company Hidroelectrica at the production cost plus “a reasonable profit margin”, under a scenario considered by the market regulator ANRE.

“We have already asked producers to send us the costs, based on which we will set regulated prices, which will be the cost of production plus a reasonable fixed margin,” unofficial sources within ANRE told Economica.net.

The market regulator is compelled, under the emergency ordinance 114/2018 to regulate the electricity price for residential users (which include small businesses as well) for the period 2019-2022.

The cost-plus methodology is not something new on the market and is typically used in the situation of monopoly (geographic monopoly in general) for instance when the fees charged by transport and distribution operators are set. Romania’s electricity market had previously been fully liberalised for the industrial and residential users as well. Out of the 9 million residential users, some 2 million have already decided to leave the supplier of last resort and select another supplier (while the distribution is done by the same regional distribution network). It remains unclear whether ordinance 114 refers to all residential users or only those who have not changed their supplier, Economica.net commented.

Electricity price peaks in Romania amid cold weather, inelastic production capacity

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