Mechanisms of protection against changes in energy costs

I. Context

At the moment, one of the recurring discussions in our society is centered on the issue of the increase in energy costs, in terms of both electricity and natural gas.

Therefore, presenting the relevant legal remedies capable of ensuring protection for final customers is of interest.

II. Legislative requirements for energy costs

The increase in the costs must be carried out in compliance with both the contractual provisions and the requirements established by Law no. No 123/2012 (hereinafter also the 'Energy Law').

As a matter of priority, we consider it important to mention the rights of the consumers, established by the aforementioned law, rights whose knowledge and exercise are necessary for the context of the exponential increase of costs in the field of energy.

a. In regards to electricity

Thus, we note that protection is granted to the final customer/consumer, who is defined as any natural or legal person who buys electricity for his own consumption, according to art. (3) point 20 of the Energy Law.

In this respect, we note the provisions of art. 62 para. (1)  h)1, of the Energy Law, according to which the final customer has the right to be notified of any intention to modify the contractual conditions, at least 30 days in advance.

Moreover, according to art. 62 para. (1) h)3 of the Energy Law, the final customer must receive transparent information on the prices and costs charged by his supplier,  a right which is nuanced in h9) of the previous norm. The latter provision requires that the consumer be informed of the actual costs of electricity frequently enough so that they are able to make informed decisions about their energy consumption.

At the same time, with regard to household customers who buy electricity for their own household consumption, excluding consumption for commercial or professional activities, energy suppliers must, in accordance with Article 62 para. (4) of Law 123/2021, make available, free of charge,  alternative measures in order to avoid the interruption of electricity deliveries, sufficiently in advance of the date provided for the shutdown of the power supply. Alternative measures consist of prepayment systems, energy audits, energy advisory services, alternative payment plans, debt management advice, or power cut-off moratoriums.

In order to balance the imbalance of power between the supplier and household customers, the legislation allows the latter to change the energy supplier, without paying any additional fees.

b. In regards to natural gas

Provisions similar to those presented above are also established in order to protect the final consumer in the field of natural gas. Also in this case the notion of consumer / final customer refers to the customer who buys natural gas for his own use, be it a natural or legal person.

Therefore, there is a general obligation of the gas suppliers to supply the final customer with natural gas of a specified quality, at reasonable prices,  established by Art. 143 para. (1)  o) of the Energy Law. Point (a)1  of the same rule obliges suppliers, with regard to household customers (those who do not use energy for industrial purposes), to ensure at all times that costs are minimized, meaning that purchases of natural gas by those operators must be carried out in compliance with that rule.

Also, in relation to the pricing method, the supplier must provide final customers with transparent information about the costs, explaining the actual costs of the gas.

Any intention to modify costs must be communicated by the supplier to the consumer, directly and in due time,  at the latest at the end of the first normal billing period following the entry into force of the increase pursuant to Article 143 (1). (1) h) of the Energy Law.

Also, art. 143 para. (1) g) of the Energy Law allows, in order to protect consumers from possible abuses of operators, for the change of natural gas supplier, free of charge within a maximum of 21 days from the date of a request made in this sense by the customer. Therefore, the legislative framework prevents the occurrence of captive consumers.

c. Remedies in the event of non-compliance with the legal requirements in the field of costs

According to the provisions of the Energy Law, consumers have the right to make complaints in case of finding violations of its provisions,  addressed with priority to the supplier, which has the obligation to establish an internal system in this regard.

Moreover, consumers are allowed to address directly ANRE  (National Regulatory Authority for Energy) with such complaints regarding the violation of Law no. 123/2012. The Authority must carry out investigations in order to solve the complaint, being assigned wide powers in this regard.

Thus, any violation of the aforementioned rights must be stopped by using these mechanisms.

As a final remedy, we show that according to art. 93 para. (1) point 24 of Law no. 123/2012, the practice of prices or tariffs not approved by ANRE is a contravention and is sanctioned with fines of significant value. In this regard, you are entitled to refer the matter to authority.

It is therefore forbidden to supply electricity at a charge exceeding that which has already been approved by the competent authority in the field in respect of the supplier in question.

III. Price caps

a. Capping by legislative means

In the context of the tariff increases that followed the liberalization of the energy market in 2021, GEO 118/2021 was adopted, on the establishment of a compensation scheme for the consumption of electricity and natural gas for the cold season 2021-2022.

However, it only targets a number of final consumers:

• small and medium-sized enterprises, individual medical offices and other liberal professions, regardless of the form of organization;
• micro-enterprises, authorized freelancers, individual enterprises, family businesses, organized according to the law;
• public and private hospitals, public and private schools, as well as crèches;
• nongovernmental organizations, as well as religious establishments;
• household customers;
• public and private providers of social services.

The support scheme includes for the above mentioned economic operators certain exemptions from payment, as follows:

•  in the case of electricity, the cost for introduction/extraction from the network, the distribution cost, the system service tariff, the transmission tariff, the green certificates, the contribution for high-efficiency cogeneration, and the excise duty;
• in the case of natural gas, the equivalent value of the transmission cost, the distribution cost, and the excise duty. Therefore, the price to be paid will only decrease.

For household customers, it grants a unit compensation in the amount of not more than 0.291 lei/kWh, in the case of electricity, and amounting to no more than 33% of the value of the natural gas price component of the concluded supply contract.

At the same time, for all the mentioned categories, except for the economic operators, the following cost caps were also established:

• for electricity, the final invoiced price is capped at no more than 1 leu/kWh, out of which the electricity price component will be worth up to 0.525 lei/kWh;
• for natural gas, the final invoiced price is capped at no more than 0.37 lei/kWh, of which the price component of natural gas will be worth up to 0.250 lei/kWh.

As a solution of last resort, according to art. 180 of the Energy Law, in the event of a major imbalance between supply and demand and/or of an obvious malfunction of the natural gas market, the Government, at the proposal of ANRE and with the approval of the Competition Council, may limit the excessive increase of prices/tariffs or their cap the prices, for a determined period of maximum 6 months,  which can be extended successively for durations of no more than 3 months.

b. Provisional capping by the courts

At this moment, however, although the excessive price of energy is notorious, the intervention of the legislator by activating the pre-specified mechanisms is yet to see.

As a result, an innovative practice was created by the courts: electricity costs were provisionally capped by way of the presidential ordinance.

In this respect, we refer the Sentence no. 141 of 17 December 2021 of the Mureș Commercial Court.

The case brought before the court concerned the provisional suspension, by way of the presidential ordinance, of the effects of a notification issued by a natural gas supplier to its customer, notification through which the latter was informed of the unilateral change in the supply price starting with 01.01.2022. This change was justified by the increase in gas prices. The consequence of not accepting that change was the termination of the supply contract.

The Mureș Commercial Court considered fulfilled the four conditions for issuing the presidential ordinance, established by art. 997 of the Civil Procedure Code: the appearance of the law, the urgency, the need to prevent imminent damage, and the temporal character of the measure requested to be ordered.

The first aspect investigated was the appearance of the right. The court held in this regard that the supplier has not demonstrated the existence of an increase in the direct purchase price of gas, from October 2021 until now, especially in relation to the adoption of GEO no. 118/2021.

The supplier did not provide concrete data in the notification on the market situation, such as the change in the purchase price of natural gas that is bought by itself. Evidence supporting these affirmations was not presented before the court either.

Therefore, the court found that the increase in the contract price had no factual basis.

Consequently, the court finds the appearance of the consumer's right to benefit from the supply of natural gas based on the contract between the parties at the last price agreed by them in the last additional act drawn up. The unilateral change in costs was thus censored.

Moreover, given that the sanction of not accepting the tariff change is the cease of supply, the court noted the existence of a risk that the production and the pace of operation of the customer will be irretrievably compromised, by blocking the production activity, which would inevitably lead to the bankruptcy of the consumer company.

Therefore, obviously, imminent damage was to occur on 01.01.2021, less than 2 weeks after the moment of judging the case, and therefore the condition of urgency was also met.

At the same time, the consumer brought, in parallel, an action for the annulment of the notification. The suspension of the effects of this unilateral act was requested until the previous file was finalized, meaning that the measures requested by way of the presidential order were considered to be temporary in nature.

Following the fulfillment of all the conditions laid down by law, the court granted the request for a presidential order and ordered the suspension of the effects of the notification, on a provisional basis, implicitly censoring the tariff change.

Thus, as long as the tariff increase was not justified, it must be noted that the courts intervened and provisionally suspended its implementation. This practice was also confirmed by the Cluj Specialized Court, by means of Civil Sentence no. 77/2022, delivered on the 13th of January 2022.

IV. Conclusions

In conclusion, we note that certain price control mechanisms exist in our legislation, meaning that we advise people who can be classified as final consumers or household consumers to use these remedies in order to ensure adequate protection against unilateral and arbitrary changes in energy costs.

MAXIM / Associates

Av. Alexandra Tomuța

19.01.2022