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Archives for : Pretul gazelor

Natural Gas Price

The most up-to-date question on a liberalized market is linked to the forecasting of gas prices. Anticipating the gas price trend can be achieved by using mathematical and statistical tools if we have a sufficient amount of data established as a result of the interaction of demand and supply.

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Resemblance between contracts concluded in Swiss francs and contracts to be concluded in the free gas market

imagesND172A4M170,000 customers will conclude gas purchase contracts this year, signing clauses that will become, within several years, so burdensome that many customers will not be able to pay their bills. Then, as in the case of Swiss francs, institutions will blame customers. The PretCorectLaGaze (Fair Gas Prices) campaign aims at preventing this situation and will present some of these clauses. Gas market liberalization for non-household customers has highlighted practices through which suppliers have imposed damaging commercial clauses for customers, clauses which result in a gas cost different from the contractual price. Non-households that have initiated negotiations with gas suppliers considered price negotiation. Suppliers that defined customer profile have reacted quickly and offered gas at an “attractive” price, taking advantage of naivety of customers in interpreting clauses of the contract provided by the supplier. Thus, a number of “traps” were laid to customers, bringing the specific gas costs above the price quickly embraced by customers. Together with manipulation of capacity reserved in the transmission system (about which we have written), other clauses are introduced in gas sale-purchase contracts, which we highlight below:

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PretCorectLaGaz. Manipulation of non-household gas customers

aaaReservation of capacity is a notion that in Romania has no head and tail, determining difficulties in using it by many market participants, being a tool used to manipulate untrained customers. Failure to define the notion of capacity in the Romanian gas system is due to legislator (for both the primary and secondary legislation), which for certain reasons did not want to define this tool. Reasons are first related to the “garbage” that this tool would surface. Without planning to analyze this tool in the material present, we want to mention that in the production/import – transmission – storage – distribution – consumer gas flow, reservation of capacity is exclusively used in the transmission activity, creating confusion in the market. The lack of unitary approach of this tool throughout the gas chain determines the faulty functioning of the market, but also the speculative use or even with ill will of this tool. Capacity reserved in a gas supply contract to the end-customer, according to the applicable legislation, can be defined as being the hourly capacity reserved by supplier in the National Transmission System at any time during the contractual period. In the Romanian legislation, the notion of capacity in the delivery point to the end-consumer misses, but also the methodology for determining this capacity. Thus, the consumer does not know what is the capacity that should be reserved in the transmission system. Here, “benevolent” suppliers have helped consumers putting a clause in the contract under which the supplier unilaterally sets the capacity to be reserved on behalf of the consumer in the transmission system.

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PretCorectLaGaze: How is the gas price formed?

images8O2ZOSZQIn Romania, there are several price categories in the gas market, this aspect creating confusions. It is necessary to acknowledge the difference between the commodity price (gas at import points or at the entry into the transmission system from production fields) and tariffs related to services needed to carry gas from production fields and/or import points to end-customers. They include gas transmission tariffs, gas distribution tariffs and gas storage tariffs (in the worm period, demand is lower than production, gas being used in the cold season, when demand is higher than production). Tariffs of transmission, storage and distribution services are regulated by ANRE, being applicable similarly to all market participants.

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PretCorectLaGaze: How much gas prices could have dropped for end-customers if non-households had had the courage and knowledge to negotiate their contracts

images8CFEHaaKKENon-household customers did not have the opportunity, knowledge and courage to start a negotiation with gas suppliers on January 1st 2015. This situation costs them and brings money in the suppliers’ pockets. Analyzing the average costs faced by gas suppliers in the market and tariffs of related services, we believe that – compared to an average gas price in Romania offered in the market for the end-customer – the fair gas price in the market has important variations depending on the various months of 2015.

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Dull “negotiation” of gas contracts between suppliers and non-household customers on January 1st 2015

images8CFEHaaKKEAt customer level, the lack of knowledge specific to a competitive gas market, but also lack of interest of institutions for customers makes them be afraid to act. However, those who dared do it have faced major obstacles. We present below such an experience. In mid-November 2014, the customer receives a notice from the gas supplier, announcing the customer that as of January 1st 2015 the market of non-household customers would be liberalized and that it had two options:

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If you want cheap gas, let the market work

Fără titluThe “Fair Gas Prices” campaign, which I launched early this year, is likely to enter an area of populism, although our arguments of economic nature have no connection with it. Unfortunately, when you dare to say that gas prices could fall by a certain percentage (estimated of course), the media takes over only the percentage and not the argument. Energy-Center sells no illusions or “titles” with impact on readers. We seek solutions, we come up with arguments and accept opposing views. Which we also publish. In conclusion, beyond one interpretation or another, we will continue to argue that a free market must give the fair price. Moreover, we want, at all costs, this market to be competitive and regulated only at the level in which no agreements can be reached between parties to the detriment of other parties.

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In the absence of information, non-household customers become easy victims of natural gas suppliers

imagesGas market liberalization for non-household customers as of January 1st 2015 determined the gas suppliers to increase gas prices on average by around 1.42%, i.e. approximately RON 2.2 for each MWh consumed. The free market can set the fair price for gas only if the customer has the necessary knowledge, is well and properly informed and is not subject to pressure from suppliers. Following the analysis of price offers submitted by part of the gas suppliers to non-household customers, with which they had a gas supply contract in regulated regime until December 31st 2014, we can determine the behavior of these suppliers. It’s important to show that in November 2014 ANRE established the regulated prices for non-household customers to which these suppliers sold gas. Given that during December 2014 – January 2015 there were no essential changes in the structure of suppliers’ costs, gas price as of January 1st 2015 for non-household customers had to be lower or equal to the gas price for December 2014. This statement is confirmed by the practice of several suppliers, which offered smaller prices, respectively by suppliers which under the pressure of negotiations with customers informed and assisted by consultants have concluded contracts at prices below the price of December 2014. In the table below you can see that most suppliers offered an average price (B1, B2, B3, B4) higher than the regulated gas price at which these suppliers sold gas until December 31st 2014.

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Dominant position granted to suppliers in gas market liberalization for non-customers as of January 1st 2015

fără titlauThe way in which the switch from the regulated market to the free market takes place for non-household consumers is marked by a dominant position of suppliers (suppliers which sold gas at regulated prices to non-household customers until December 31st 2014) in relation to non-household customers. Under the Gas Law, the date of January 1st 2015 was established, two and a half years ago, as the date when the regulated market disappears for non-households, establishing the market in which gas can be traded freely.

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While gas for Romanian consumers is overcharged, gas for export is exempt

A year after the entry into force of Government Ordinance 7/2013 on overcharging the windfall incomes obtained as a result of gas price deregulation, we find out that while numerous taxes have increased in Romania, about EUR 4.4mln was lost by failing to tax gas exported to Hungary. In the spring of 2012, the Ungureanu Government initiated an Emergency Ordinance for the additional taxation of windfall incomes, which were to be obtained by gas producers, following the application of the domestic gas price deregulation calendar and the establishment of a fund for vulnerable customers. In this regard, the Ministry of Finance has prepared an initial draft emergency ordinance on the establishment of energy companies’ contribution for the financial support of vulnerable consumers due to gas and electricity price deregulation. The draft provided that these companies were forced to pay a contribution of 50-100% of the windfall incomes achieved as a result of gas price liberalization. Provisions were to be applied with the price liberalization calendar. The taxable base consisted of additional incomes obtained by the economic operator as a result of price deregulation, incomes achieved from the exploitation of existing production capacities, including by exploiting investments initiated before the entry into force of the ordinance and which were to be commissioned subsequently, minus the value of investments in expansion, upgrade or rehabilitation performed at the existing production capacities on the date of entry into force of the emergency ordinance, but no more than 30% of the additional incomes achieved. According to art. 3 of the draft Emergency Ordinance on the establishment of energy economic operators’ contribution for the financial support of vulnerable consumers:

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