Romania would need investments of around EUR 20 billion in the electricity distribution network alone in the next 20 years, according to a report issued by the Romanian Academic Society (SAR).

“Given the regulated tariffs and the bulk contracts under the market price, distribution network operators accuse the fact they cannot do the needed investments in their networks,” writes the report.

The energy sector in Romania suffers from old structural problems, along with non-competition business practices and bad management decisions continue to appear. "Although the restructuring process by breaking-up vertical monopolies (damaging for competition and for competitiveness at the same time) started off relatively early - 1998 for electricity, 2000 for gas, uncompetitive commercial practices and damaging administrative decisions kept persisting," according to the report. "Absence of transparency in trading, overthe-counter contracts follow a political rather than a commercial logic. We are talking here about the so-called “contracts with the smart guys”, whereby rent-seeking suppliers or industrial consumers benefit from cheap energy from state-owned companies," SAR goes on.

Only a small amount of contracts are inked at market price, on the OPMCOM platform. The regulated tariffs trigger producers cover their losses on the back of industrial consumers. One of the infringement procedures opened against Romania in June 2009 focused on these regulated tarriffs, according to SAR.

"On top of all these aspects, one should not forget the artificial life support given to inefficient and polluting power plants, mostly for social protection reasons. The best known case is Termoelectrica, which has accumulated losses of 2.5 billion RON by the end of 2009," SAR points out.

Get the full SAR report (in English) here.

editor@romania-insider.com

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