The fine of the year leaves Hidroelectrica’s clients in blackout

The Romanian Competition Council has finally reached a long waited conclusion on the electricity production and sales markets: Hidroelectrica (partially state-owned Romanian electricity generator) and 10 of its buyers have been fined with a total amount of up to EUR 37 million.

The companies, energy traders (including a Swiss Company operating on the Romanian market) and industrial consumers, were investigated for the conclusion of long-term contracts for a decade (2003 and 2012).

According to the press release issued by the RCC, the energy traders, so called by the media “wise guys”, were buying electricity from Hidroelectrica at prices significantly below the market level and resold the commodity at higher prices on the electricity market. The contractual terms also compelled Hidroelectrica to purchase energy from other producers at prices beyond the contractual prices set with its buyers, only to be able to perform the contracts at times when the electric energy was scarce.

The press release issued on January 11th, 2016 concluded that the “wise guys” were guilty of blocking the competitive process by not allowing other traders and industrial consumers (up to 450 similar requests for supply of energy were rejected by Hidroelectrica during the investigated period) to have access to the energy produced by Hidroelectrica.

Considering the gravity of the accusations, the fines applied are quite large (up to 10%), as shows in the list below, as published by the RCC:

  1. HIDROELECTRICA SA: approx. 4.6 mil. Euro;
  2. ALPIQ ROMINDUSTRIES SRL: approx. 4.8 mil. Euro;
  3. ALPIQ ROMENERGIE SRL: approx. 20000 Euro;
  4. ALRO SA: approx. 4.7 mil. Euro;
  5. ELECTROCARBON SA: approx. 193000 euro;
  6. ELECTROMAGNETICA SA: approx. 2.0 mil. Euro;
  7. ELSID SA: approx. 570000 Euro;
  8. ENERGY FINANCING TEAM AG (SWITZERLAND): approx. 16.0 mil. Euro;
  9. ENERGY HOLDING SRL: approx. 2.8 mil. Euro;
  10. LUXTEN LIGHTING COMPANY SA: approx. 1.2 mil. Euro;
  11. MENAROM-P.E.C. SA (successor EURO-P.E.C. SA): approx. 162000 Euro.

The investigation launched in 2012 by the RCC was contemporaneous with five other investigations conducted by the European Union Commission. The European Union Commission opened an in-depth inquiry into preferential electricity tariffs granted by Hidroelectrica to some of its commercial partners, in April 2012, analysing same contracts for allegations of illicit state aid. In June 2015, the EU Commission found that the contracts were concluded in line with the market requirement conditions and that the relatively minor favorable tariffs below the market level could not be attributed to the Romanian authorities, and therefore, none of the sales contracts involved state aid.

However, the RCC anticipated to some extent the conclusions from January 11th, 2016 in its recent sector inquiry in the electricity market Report, released in 2015, by expressing concerns about the long-term contracts concluded between Hidroelectrica and its commercial partners.

We are looking forward with anticipation to the release of the Decision, especially to the legal qualification and the arguments pertaining to the effect on the market.