Moldova’s Energy Deadlock: The Illusion of Independence and the Reality of Debt

Moldova’s free-floating energy policy puts growing strain on citizens and the state budget. Meanwhile, the long-awaited reduction in tariffs for the population is being deliberately postponed until closer to the elections

Opposition politicians and experts are voicing more frequently the long-overdue need to lower electricity and gas tariffs – yet their calls continue to be completely ignored by the ruling regime. Unlike gas purchases, which are now completely non-transparent, electricity market prices have not yet been classified. This allows anyone interested to get a general sense of the cost structure. This year, Energocom has been reporting monthly on the price of purchased megawatts. In January, the average price was €129.7; in February, €137.5. After that, it steadily declined: €119.8 in March, €109.18 in April, and finally €106.6 in May. The motivation for disclosing these figures was simple: to show the public that the state-owned company is managing to stay within the tariff cap of €145 and is becoming more efficient each month. Moreover, the monopoly has been credited with preventing an electricity shortage caused by the shutdown of the thermal power plant and the need to increase imports. The share of imports indeed rose from 60% to 70% of total consumption, with 10% to 25% acquired at a preferential price set by Bucharest. There were also electricity supplies from Ukraine. On certain days, significant volumes of electricity were delivered simultaneously to both the left and right banks of the Prut. How this import was accounted for by our relevant authorities remains unclear. It may have been compensation for electricity previously sent to Ukraine, or something else entirely. In any case, since PAS officials approved the publication of such data, they should also explain their refusal to revise the tariffs. References to the “exclusive powers of ANRE” sound unconvincing in this context. It’s no secret that our regulator is highly sensitive to signals from top government offices. If government officials or ruling party MPs were to publicly acknowledge that consumer demands for price adjustments are justified, the necessary decision would likely follow the very next day. In fact, the agency’s loyalty was once again underlined in its press release yesterday, which attempted to shield the ruling regime from criticism. It once again cited the approved average annual tariff, arguing that it cannot be adjusted based on a single month’s drop in electricity prices. One could certainly argue that prices have been significantly below the annual average for four consecutive months now, and the trend – supported by Energocom’s optimistic updates – only reinforces the case for lowering tariffs. In April alone, the cost of imports was a quarter lower than the calculated rate, and in February there was also a €10 million EU grant. However, it’s worth noting ANRE’s recommendation to “take into account the actual costs of suppliers.” The agency has the right to revise tariffs if deviations exceed 5%. This implies that, in reality, there has been no significant reduction in the cost of imported electricity – and Energocom’s publications may merely serve as a smokescreen. So what is the actual price of the kilowatts we consume right now? And what will it be next month, after the Romanian government ordinance – allowing us to purchase electricity across the Prut at a special rate – expires? We should also keep in mind that electricity consumption in the hot summer months may nearly double from the current 400 MW. It turns out that, aside from the mere fact that the right bank's energy system now operates independently from the left bank (and, by extension, from Russia), there have been no real achievements in the first half of the year. Bold claims about avoiding another blackout don’t count for much. It’s also hard to feel optimistic about the imminent completion of the Vulcanesti – Chisinau transmission line or the efforts to activate the three 110 kV lines across the Prut. Ultimately, the key issue is the price for consumers – and it remains far from reasonable. We will be reminiscing about the \$66 deliveries from MGRES for a long time to come. Yes, it is highly likely that the tariff will indeed be reduced closer to the elections. The delay is driven not only by the desire for cheap publicity, but also by a wish to avoid a potential crisis if summer prices exceed the planned ceiling of €145. After all, lowering the tariff now and then raising it again at the end of summer would be a poor move for PAS’s election strategy. As for the gas supply situation, it is both simpler and more complicated. We’ve been living with exorbitant tariffs for four years now. In that time, Voronin’s gasification program has essentially started to reverse. Energocom has classified the prices in its contracts with traders, but even without that, the picture is clear: no reductions for the population are on the horizon. The average annual tariff is based on a purchase price of €488, while in recent weeks the typical exchange price with delivery to Moldova has hovered around €545. Prices remain high, and competition for the available volumes of gas on the European market is even fiercer. For instance, Ukraine is injecting 15–20 million cubic meters per day into its storage facilities from Slovakia, Hungary, and Poland. EU member states themselves are actively building up reserves. In neighboring Romania, around 10 million cubic meters are added to reserves daily, 3 million of which is imported gas coming through the Trans-Balkan route. Then there’s the situation with Moldovagaz JSC, which, by a unilateral decision of ANRE, will be stripped of its core function of supplying gas to end consumers as of August 1. This decision will undoubtedly be touted by the authorities as “historic” all the way up to the elections, as it effectively deprives Gazprom and the Kremlin of their last leverage over right-bank Moldova. As for what the change of supplier will mean for the population, the answer is quite clear: any organizational restructuring inevitably leads to additional costs – costs that will ultimately be passed on to consumers. However, the most notable event in recent days has been the government’s intention to provide state guarantees for an external loan of up to €400 million, which Energocom is set to receive from the European Bank for Reconstruction and Development (EBRD). This immediately brings to mind numerous parallels with past schemes, especially the “theft of the century.” It’s fair to expect a repeat of the situation involving overpriced gas purchased under Andrei Spinu from suppliers handpicked with a nod from the EBRD. The new loan is €100 million larger than the previous one, yet it’s once again presented under the banner of “strengthening Moldova’s energy security.” The logic of the ruling party is understandable: since all consumers are being moved under Energocom, the company needs financial backing for further gas purchases. But what about the billion-euro aid package from the European Union? It turns out that even that isn’t enough to cover current consumption. All of this once again exposes an unpleasant reality. Not only are we failing to achieve any real energy independence, but we’re also plunging deeper into debt for decades to come. In practice, one monopolistic scheme is simply replacing another. In the business world, such actions by senior managers would long ago be labeled manipulation or fraud, and the institutions themselves declared bankrupt. In politics, however, such things are considered routine – though the outcome, ultimately, is the same.