Hidroelectrica, investigated by the European Commission

European Commission wants to determine whether Hidroelectrica subsidized indirectly their customers by selling electricity at below-market prices or buying from them at above-market prices, it said in a statement.

It would be about industrial customers and electricity producers.

They could have been favoured by reducing operating costs, increasing revenues or a combination of the two.

Hidroelectrica is controlled by the Romanian state and, according to the European Commission, there are indications that the state would be influenced decisions to enter into these contracts.

The initiation of a thorough investigation allows interested third parties to comment on these actions, without anticipating the final conclusions of the investigation.

European Commission press release quotes the statement of Vice President Commission responsible for competition policy, Joaquín Almunia, according to whom "indirect subsidies to help reduce the normal operating costs of enterprises can have a distorting effect on competition just as significant as the one caused by direct subsidies. We must consider whether preferential rates granted by Hidroelectrica privileged customers who benefited from these compared to their domestic competitors."

The cases investigated by the European Commission

"In December 2009 and December 2010, following public auctions on the wholesale electricity market of Romania, OPCOM, Hidroelectrica concluded two bilateral agreements with steel producer ArcelorMittal, each contract having the supply of 1.75 terawatt hours (TWh) of electricity per year, at prices that seem to be below market.

"ALRO Slatina is implementing a long term contract with Hidroelectrica to supply 3 terawatt hours (TWh) of electricity per year at a price close to production cost of Hidroelectrica, price to be indexed annually based on the London Metal Exchange aluminium quotation.

"The contracts between Hidroelectrica and eight electricity traders, some dating since 2004 agreements as well as the contracts between Hidroelectrica and two industrial producers were concluded at prices that appear to be below the prevailing market price. On the other hand, in the contracts concluded with two producers of heat, Hidroelectrica bought electricity at prices that appear to be higher than market prices."

The European Commission concludes that these contracts appear to have been largely beneficial for selected enterprises.

According to the specifications given by the Commission, some contracts were concluded before Romania joined the European Union, but the Government has the power to investigate electricity prices which have been applied under these contracts.

Translated by Ioana Vioreanu
MTTLC, Bucharest University