Electricity consumption slump sparks price debate

Newsroom 26/10/2009 | 15:28

It's been a year since international financial institutions started falling like dominos heralding a deep economic crisis, an international phenomenon which has also left its mark on the Romanian economy. Production cuts, reduced purchasing power and higher unemployment are just some of the ramifications of the crisis. The power generation sector has also been affected by the falls in production of the major industrial companies with operations on the local market. Official data show that the electricity sold to large consumers decreased by 24 percent in H1, compared with the same period of last year, a figure confirmed by energy production companies. “There is a decrease in industrial electricity consumption by companies, primarily due to the reduced activity of industrial firms in the current economic climate. The main customers of E.ON Moldova Furnizare which reduced their electricity consumption during the first eight months of this year were large industrial buyers from the chemical, pulp and paper industries,” Iulian Carja, media relations officer at E.ON Romania, told Business Review. Among the main industrial consumers severely hit by the crisis are big names such as ArcelorMittal Galati, Alro Slatina and Oltchim Ramnicu Valcea, companies which have endured an ongoing drop in sales during this period. But the situation is completely different on the regulated market, represented by individuals and small electricity consumers, which has registered a slight increase in electricity consumption in H1, compared with the same period of last year, according to a report from the Romanian Energy Regulatory Authority (ANRE). In this context, power-generating companies are shifting their attention to smaller customers, thus trying to gain some new clients.”We have a list of several companies that we're negotiating with now. In times of crisis, we try to diversify our portfolio and we have oriented towards customers that purchase electricity in smaller quantities. For example, this year we signed a contract with dye maker Policolor Bucharest. Also, we are trying to ink a contract for low-voltage electricity and with telecom company Vodafone,” said Ioan Folescu, Electrica GM. According to him, Electrica has already formed a team to renegotiate with former clients of the company, which it hopes to win back. Moreover, E.ON Romania representatives said that one major step on the company's path to gaining new customers is to become an integrated supplier able to provide both electricity and gas. “E.ON Gaz Romania and E.ON Moldova Furnizare have this year developed a project to merge all supply activities in order to provide both gas and electricity to consumers,” said Carja.
Electricity prices flicker Companies which have maintained consistent electricity consumption say that despite the crisis prices have not fallen. “This year, energy purchase costs have increased by 6 percent, compared with last year. We are a large energy consumer. Taking this into account we have requested and received a license to supply energy by directly participating in the energy market to avoid intermediary companies and to obtain a lower price,” Mihai Rohan, president and GM of Carpatcement Holding, told Business Review. He added: “The current energy prices on the free market are high and are not the result of transparent sales on the energy market. We can say that energy prices are being distorted by selling the energy in the last month of the year, which puts pressure both on suppliers and consumers.”But the opposite opinion was expressed by Ioan Silvas, electricity sales manager at Electrica, who said that during the crisis some industrial consumers have demanded suppliers cut prices by 15 percent. “The negotiation power of eligible consumers has increased during these times. They have dictated lower energy prices to suppliers. Electricity consumption has decreased steadily and, moreover, there is a surplus of energy. Therefore, the consumer has more options, which allow him to go and look for another provider,” said Silvas. Eligible customers are those who are not on the regulated market, meaning large and medium electricity consumers. Electricity prices will probably remain a hot topic in the coming period as they are still hard to forecast, because the energy market operator OPCOM is not functioning properly due to its lack of liquidity. Moreover, the Carpatcement president added, “Producers have not put electricity for 2010 up for sale, arguing that the imminent establishment of the two state energy companies is likely to bring about a substantial increase in energy prices.”

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