From 2024 Energocom Will Have to Purchase Energy Without Public Auctions

Energocom (100% state capital) will be obliged by the government to purchase all necessary electricity for the period from 1 January 2024 to 31 December 2024 without a public auction in order to provide the country with electricity. This is stipulated in a draft government decree promoted by the Ministry of Energy, under the terms of which the state of emergency will be lifted from January 2024. Procurement without auction, through direct negotiations According to the document, Energocom will purchase electricity “through direct negotiations and/or electricity exchanges and sell it to universal service providers, last option and system operators”. It is stipulated that universal service and last option suppliers as well as system operators will sign framework power purchase agreements with SA Energocom. According to the Ministry of Energy, the decision is aimed at “ensuring the safe, reliable and efficient operation of the electricity system, which, in turn, aimed at guaranteeing the uninterrupted supply of electricity and meeting the energy needs of end consumers, as well as establishing measures on ensuring the security of supply, predictability and stability of the national economy’s functioning”. Over the last two years, energy procurement has been centralized Thus, over the last two years, energy procurement has been carried out centrally on the basis of the utility obligation imposed on Energocom by the CES Regulation, and has been extended for short periods of time during states of emergency and in derogation of the procedures provided for by law. “Accordingly, in circumstances when the state of emergency extended by Parliamentary Decision 361/2023 is coming to an end and, of course, electricity purchases will be resumed on the basis of the Electricity Purchase Order according to a pre-planned procedure, there is a risk of a situation similar to the beginning of 2022, when insufficient bids will be submitted at auctions or when these auctions will offer price bids that are unaffordable to consumers and do not reflect the real costs of production. This may lead to prolongation of electricity procurement procedures and, according to previous practice, may cause a market blockage, which may jeopardize the country’s energy security and, accordingly, lead to a possible emergency situation, which is an unacceptable fact both from an economic and social point of view,” the Ministry of Energy states. Therefore, the Ministry of Energy considers necessary “to apply this transitional mechanism, adapted to the current situation in conditions of market instability, lack of competitive offers at an affordable price, until the moment when electricity purchases can be resumed on a standard procedure based on tenders, which take about 2 months to organize and conduct”. MoldGRES will remain the main supplier The Ministry of Energy also highlights another important point - the extension of the power purchase contract between SA Energocom and Cuciurgan power station (Moldavskaya GRES - MoldGRES) for 2024. According to the institution, in the absence of the obligation to provide universal service imposed by the CES provision, Energocom “will not have the legal basis to contract with universal service providers/system operators to make daily purchases to cover load peaks. Moreover, it will not be able to intervene to make emergency purchases if MoldGRES SA fails to fulfil its contractual obligations, which would jeopardize the continuity of supply and the provision of electricity to end-users”. It is also mentioned that, by imposing the public service obligation, Energocom, as appropriate, will be able to purchase energy at a favorable price from electricity producers in Romania, based on Emergency Decision no. 119/2022 approved by the Romanian Government (Centralized Electricity Procurement Mechanism). “Thus, as a result of the approval of the draft Government Decision, a legal mechanism will be created through which Energocom SA will be able to purchase the necessary amount of electricity to cover the needs of end consumers,” the Ministry of Energy concludes. We should note that over the last two years, Energocom has become the main buyer and supplier of natural gas, which it then sells to Moldovagaz.