Currently, according to the Electricity and Natural Gas Law no. 123/2012 (the Law), the rule is that transactions in the competitive market are conducted in a transparent, public, centralized and non-discriminatory manner. The centralized mode means, in the sense of the law, the conduct of transactions between economic operators intermediated by the electricity market operator or the transport operator based on rules approved by the competent authority.

In Romania’s case, the electricity market operator is OPCOM SA, and the competent authority to issue rules affecting the market is ANRE.

Community Regulation

Starting from January 1, 2020, Regulation of the European Parliament and of the Council no. 943/2019 (the Regulation) on the internal electricity market became applicable at the community level, and implicitly in Romania, with the main objectives and principles:

– to offer all consumers in the Union real possibilities of choice, as well as new business opportunities and more intense cross-border trade,

– ensuring progress in terms of efficiency, competitive prices and improving the quality of services, as well as contributing to security of supply and sustainable development.

– ensuring negotiation on over-the-counter markets of long-term supply contracts.

European Regulations are implemented directly in the legislation of European states, in accordance with art. 288 of the Treaty on the Functioning of the European Union and create rights whose observance can be claimed directly before national courts.

Changes Brought by the Government Emergency Ordinance (GEO) no.74/2020

On May 19, 2020, Government Emergency Ordinance (GEO) no. 74/2020 for the modification and completion of the Electricity and Natural Gas Law no. 123/2012 was published in the Official Gazette, which entered into force on the date of publication.

According to the substantiation note, among other things, the changes introduced by the GEO aim to stimulate investments in new electricity production capacities, in the context of the aging of existing capacities.

Thus, to achieve the first stated purpose of the GEO, art. 23 of the Law was supplemented, with paragraph 2¹ being added, which provides that “by exception from the provisions of paragraph (1), on the competitive market, wholesale or retail, producers may conclude bilateral contracts outside the centralized market, at negotiated prices, respecting competition rules, for electricity from new energy production capacities, put into operation after June 1, 2020.

According to the changes brought by the GEO, electricity from capacities put into operation after June 1, 2020, is exempted from the obligation to be offered publicly and non-discriminatorily on the competitive market. Also, art. 29, regarding producers’ rights from the Law was supplemented to correlate with the additions to art. 23.

Therefore, all energy produced by capacities put into operation after June 1, 2020, can be traded without the intermediation of the electricity market operator (“Opcom” – S.A.), energy producers having the possibility to negotiate and conclude bilateral contracts with consumers.

However, it is important to bear in mind that:

1. Art. 3 of the GEO provides that within 30 days from its entry into force, respectively until 19.06.2020, ANRE will issue the necessary regulations for the implementation of the provisions and changes made. Therefore, even if the changes to the Law have taken place, at the current moment they cannot be applied in practice, as the application norms mentioned earlier do not exist, and no legislative project to implement the changes has been initiated on this institution’s website;
2. The GEO needs to be approved by law. At the time of publication of this article, the draft law approving the GEO was adopted by the Senate and was sent to the Chamber of Deputies for debate, but amendments were submitted by the Senate committees:
   • The Committee for Energy, Energy Infrastructure and Mineral Resources has completely eliminated all provisions that referred to the right of electricity producers to contract through direct negotiation, as described above. Instead, the committee proposed that producers who have obtained a connection approval should have the possibility to contract the electricity produced by the new capacity without holding a license in this regard. The Committee argues for the elimination of these provisions by the fact that the proposed changes grant the right to conclude directly negotiated bilateral contracts only to producers, without granting this right to their partners, i.e., other market participants. Also, the committee also emphasized that this right applies only to production capacities put into operation after June 1, 2020, which can be discriminatory.
3. The draft law is in the legislative procedure of the Chamber of Deputies, with other changes to the GEO text being possible, its final form may be very different from the form published in the Official Gazette on 19.05.2020. However, even if this endeavor to reintroduce the right to directly negotiate contracts on the energy market fails, it is noteworthy the tendency of the national legislator to transpose European provisions in the field and to stimulate investments in the energy sector, especially that of renewable energy.

Regarding the committee’s motivation concerning the so-called non-granting of the right to conclude bilateral contracts explicitly to the partners of the producers, we consider that it is necessary to apply the principle of interpretation of the law in the sense in which it would produce effects. Thus, it is natural that if one participant is granted the right to participate in a legal relationship, his co-contractor is also granted this right, otherwise it would be impossible to conclude the contract. This reasoning can be applied to the current hypothesis also due to the fact that there is a limited number of types of co-contractors who can participate in these legal relationships, meaning the producer cannot conclude bilateral contracts except with participants in the energy market.

The introduction of these changes considerably stimulates the realization of investments in the field of renewable energy. By concluding directly negotiated bilateral contracts over a long period, investors will obtain an instrument against price volatility on the centralized market, and uncertainty regarding the future return on investments will be reduced.

However, we must admit that the authors of the GEO have chosen a rather unfortunate formulation for art. 23 paragraph. 2(1). If an attempt was made to transpose the provisions and principles of Regulation 943, the chosen formulation seriously limits the meaning of its provisions. Article 3 letter o) of the Regulation does not distinguish between producers and other market participants, long-term supply contracts being negotiable on over-the-counter markets, subject to compliance with European Union competition law. We consider that it would have been useful for the authors of the GEO to use the formulation and terminology from the Regulation, in order to ensure to the greatest extent possible, the correlation of national provisions with community ones.

Antico & Asociatii S.P.R.L. has extensive experience in the energy sector, especially projects regarding renewable energy; We offer a complete range of legal services in investment projects in the energy and natural resources sector. The assistance provided can concern both the realization of new production capacities and other transactions specific to the energy and natural resources sector.