Double electricity bills will be paid by most Romanians from July 1, the Romanian media are sounding the alarm and predicting a wave of price increases as a result of the change.
The scheme that kept electricity bills low disappears from today, the newspaper “Ziarul Financiar“ points out and recalls that the scheme to impose a ceiling on electricity bills was introduced in March 2022 against the backdrop of the outbreak of war in Ukraine, writes BTA.
LIBERALIZATION OF THE MARKET, BUT NOT COMPLETELY
Romania officially liberalized the electricity market for household consumers on January 1, 2021. A year earlier (July 1, 2020), the natural gas market was also liberalized, Radio Free Europe's Romanian section recalls.
The liberalization was a requirement for Romania under EU rules, but it also aimed to strengthen competition and lead to new investments.
For many, the immediate effect was an explosion of bills and an avalanche of indecipherable technical terms, Radio Free Europe recalls.
Soon after the official liberalization, prices literally exploded, and in October 2021, the government, headed by the liberal Florin Cutu, decided to start compensating household consumers' bills.
The war in Ukraine deepened the energy crisis and in March 2022 The Romanian government introduced a scheme to compensate energy costs for businesses as well.
Since then, the measure has been extended several times - until today. For natural gas, the compensation scheme will expire on March 31, 2026.
"Despite all the misinformation, this cap and compensation scheme has provided Romanians with the fourth lowest natural gas prices in the EU and the fifth lowest electricity prices for households. These data are correct and come from Eurostat", said former Energy Minister Sebastian Burduzha.
His successor Bogdan Ivan, however, believes that the measure was unfair.
“(…) A billionaire, a shopping mall and an elderly person with a pension of 1,500 lei (577 leva) benefited from the same support scheme from the Romanian state“, commented the new Energy Minister last week.
HOW DID THIS COST THE STATE?
The electricity and gas price compensation scheme has cost the Romanian budget over 30 billion lei (6 billion euros) in the three years since its introduction, Radio Free Europe reports, estimating that this is nearly 1.7 percent of the country's gross domestic product. Romania.
However, Romania cannot afford any more unnecessary spending, after last year's budget deficit reached 9.3 percent and threatens to deprive the country of access to much-needed European funds.
Romania has been in an excessive deficit procedure since 2020 and has committed to the European Commission with a seven-year plan to gradually reduce it to below 3 percent of GDP by 2031. This year's budget foresees a deficit of 7 percent, but local and foreign experts admit that this goal will not be met. The European Commission predicts that Romania's deficit will reach 8.6 percent this year and 8.4 percent next.
The new government, led by the interim leader of the National Liberal Party Ilie Bologian, is trying to control the situation, but has already faced protests and discontent with the first austerity measures.
„THE HORROR BILLS“
V. „Evenimentul Zilei“ writes that many are already calling the new electricity bills „the horror bills“.
The final electricity bill will increase by at least 100 percent for about half of households. The main change is in the way the price of clean energy is calculated, which will no longer be limited or subsidized, but will be based directly on free market prices. The energy component itself will now account for around 50 percent of the total bill, compared to just 20 percent so far, explains “Evenimentul Zilei“.
For consumers, this change is even more difficult to understand, as the energy bill is already one of the most complex documents they receive each month. The sheer number of cost elements, such as transmission, distribution, contributions, excise duties and VAT, makes it difficult to truly understand the final price, and transparency from suppliers is often insufficient, the analysis in the newspaper pointed out. “Ziarul financiar“.
AID FOR THE ENERGY POOR
The new Romanian government has nevertheless maintained aid for vulnerable people.
Over two million households will benefit from monthly vouchers to co-finance electricity bills worth 50 lei (nearly 20 leva), Energy Minister Bogdan Ivan announced last week, as quoted by Agerpres.
According to him, the protection of vulnerable social groups will cover around 2.1 million households in Romania, which automatically leads to over 4 million people. Asked how the value of the voucher was calculated, the minister said that from the data available to the government, it is clear that in 2024, an average of 3.7 million households consumed less than 100 kilowatt hours (kWh) each month.
“This automatically means that these people had bills of up to 50 lei“, the minister pointed out and calculated that after the electricity price ceiling falls, the bills of these households will amount to around 100 lei.
With the 50 lei voucher, there should not be any major changes for them. Until today, consumers in Romania paid energy bills at marginal prices of 0.68 lei/kilowatt hour (kWh), 0.80 lei/kWh and 1.3 lei/kWh depending on consumption, recalls "Ziarul Financiar". From July 1, 2025, consumers will now pay the prices specified in their contract with the supplier. Everyone must analyze the market for themselves in search of the best offer. According to the offers sent to consumers, the new prices reach around 1.5 lei/kWh, which means that in the case of consumers who consume up to 100 kWh, the bill could double.
For other consumers, the jump in bills is also inevitable, points out "Ziarul Financiar" and gives several examples. For a household with a consumption of 92 kWh per month, its bill for April is 63 lei. From July, his bill will be 138 lei, or 2.2 times higher.
For consumers with monthly consumption between 100.01 kWh and 255 kWh, the increase will also be significant. If a consumer with 175 kWh had a bill of 140 lei in April, since the limited level is 0.8 lei/kWh, his bill will increase to 262 lei in July, shows the simulation of “Ziarul Financiar“.
For customers with consumption between 255.01 and 300 kWh, the calculation is as follows: in the limited version 0.8 lei/kWh for the amount up to 255 kWh and 1.3 lei/kWh for the rest up to 300 kWh. In this case, for an estimated consumption of 275 kWh, the limited bill is 236 lei, and from July it will increase to 412 lei.
The smallest percentage increase will be for consumers with over 300 kWh per month, shows the simulation of “Ziarul Financiar“, since in this case it goes from 1.3 lei/kWh to 1.5 lei/kWh.
Analysts warn that liberalization will put additional pressure on household budgets, especially those with low and middle incomes. Although in theory the removal of restrictions can stimulate competition, the positive effects can only be seen in the long term, while costs will increase immediately, comments the newspaper “Adeverul“.