Romanian electricity market in ‘turmoil’ after supplier platform launch

Romania’s new dedicated trading platform for electricity suppliers is mired in controversy after just one day of operation, with Monday’s prices on the auction-based system well above those on equivalent over-the-counter (OTC) products.

This comes despite the platform’s design being intended to deliver the best deal for suppliers by weighting the access rules firmly in their favour.

Romania announced the new electricity platform, which like six others in the country is run by market operator OPCOM, in February (see EDEM 9 February 2015). The auction, named PCSU, operates differently from OPCOM’s other bilateral platforms.

This is because buyer licenses on the platform are exclusively available to companies with end-users. But any participant can sell on the platform. The intention was for this imbalance to result in a consumer-friendly buyers’ market.

However the interventionist approach clearly failed to have the desired outcome on Monday, when results from the auction revealed that Q2 ’15 Baseload changed hands in total volume of 485MW at New Lei 165.00/MWh (€37.22/MWh).

This was well above a single 5MW trade of New Lei 150.50/MWh recorded on the over-the-counter (OTC) platform in the morning.

“Suppliers with end-users were supposed to secure lower prices, but it seems it did not have the intended effect,” said Romanian Association of Electricity Suppliers (AFEER) head Ion Lungu.

This is potentially because the manufactured disparity in supply-demand access actually scared off generators on the assumption they would be entering into bad deals.

Data from OPCOM showed seven companies entered offers into Monday’s tender.

But Lungu also added it was difficult to draw a concrete conclusion after just one auction.

Forced

Adding an additional layer of controversy, a spokeswoman for Romanian utility CEZ confirmed suppliers are forced by energy regulator ANRE to buy a percentage of the electricity they deliver to end-users on the platform.

The starting price at auction is set by ANRE following an algorithm based on the quantity needed. This is decided prior to the auction. CEZ did not make any further comments on the price outturn.

OPCOM failed to comment on the matter.

One trader said: “The mechanism wasn’t really well thought out. The market will be in turmoil because of this result, which is obviously a lot higher than the free market.”

A second market source said the higher price will now attract stronger interest and bring more generators to the platform. With more sellers active, prices will drop, he said.

But the false start means a question mark now hangs over the need for such a platform.

“It was not necessary to have a platform with a special purpose. The OTC [platform] was sufficient,” Lungu told ICIS on Tuesday, adding the OTC regulations provided the market with a fair price.

Market participants previously raised eyebrows over the addition. “Why do we need yet another platform? Are the six on OPCOM not enough?” one trader said previously.

Auctions on the platform are to be held quarterly for products with delivery in the consecutive quarter. The auctions will be announced 28 working days before the start of the delivery period.

A statement from OPCOM on Tuesday said the auction was carried out over 13 rounds.

Energy regulator ANRE was also unavailable for comment at the time if writing.

The largest suppliers include Romanian giant Electrica, Italian utility ENEL, Czech utility CEZ and Germany utility E.ON. Sophie Udubasceanu