Commission Report 2002 (Romania)

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 14: Energy

Progress since the last Regular Report

Since the last Regular Report, Romania has made progress in preparing for the internal energy market, in particular as regards the level of market opening, pricing policy, and restructuring of some utilities. However, progress in implementing key structural reforms and improving administrative capacity has been limited.

Concerning security of supply, an Emergency Ordinance adopted in April 2002 established an oil stock monitoring system in Romania. While the country has sufficient storage capacity to meet the requirements of the acquis, Romania does not have the requisite stocks of oil products. The Ordinance stipulates that the level of these oil stocks will be gradually increased, and will be 50% financed by the state, through the National Agency for State Reserves, and 50% by private operators.

Significant progress has been made in the field of competitiveness and the internal energy market. In the electricity sector, following a Government Decision in January 2002, market openness was increased to 33%, with licensed suppliers and eligible customers defined by the regulatory authority. In practice, the contracts signed between licensed suppliers and eligible customers amount to around 8% of the market.

Electricity prices were adjusted several times and now reflect production costs to an acceptable degree. Prices have also been indexed with the US dollar, which prevents some of the negative effects of inflation. An Ordinance adopted in March 2002 gave the Prime Minister responsibility for appointing the President of the National Electricity Regulatory Authority (ANRE), which reinforces its independence vis-à-vis the Ministry of Industry and Resources. In addition, two regional distribution companies have been prepared for privatisation.

Tests with a view to future inter-connection with the Western European UCTE (Union co-ordinating the Transport of Electricity) were finalised and the monitoring of the inter-connected operation with UCTE is currently being carried out.

In the gas sector, the rate of market opening was increased from 10% to 25%, and the regulatory authority has selected 45 eligible customers. As with the electricity sector, gas prices have been adjusted to reflect production costs, they are now indexed with the US dollar, and the president of the National Gas Regulatory Authority (ANRGN) is appointed by the Prime Minister.

The Government has adopted an action plan for the improvement of bill collection in the energy sector, including the disconnection of non-paying companies. However, problems of non-payment remain acute in the state sector (state-run industries, local authorities or public services). Although there are no reliable figures available, the energy bill collection rates remain at an insufficient level.

In the sectors of oil and solid fuels, no major developments have been recorded.

As far as energy efficiency and renewable energy is concerned, little substantial progress was made during the reporting period. In October 2001, the Romanian Fund for Energy Efficiency was legally established but it is not yet operational.

In the field of nuclear energy, Romania operates, at the Cernavoda Nuclear Power Plant, a Canadian-designed CANDU 6 type reactor with a nominal capacity of 700 MWe. This unit has been licensed following the Canadian licensing requirements for similar reactors in Canada. Cernavoda Unit 1 provides 11% of the country`s electricity. Unit 2 of Cernavoda is being completed and is expected to be operational by 2005 - 2006.

As regards nuclear safety, Romania has continued to develop the legislative and regulatory framework. However, no progress has been achieved in dealing with spent fuel and nuclear waste.

Legislation has been harmonised with the adoption of orders for approving EURATOM safeguards, on radiological safety norms in September 2001, and on international transit of nuclear materials through Romanian space in February 2002.

As part of the Strategic Plan for Safety Analysis, a technical agreement was concluded between the National Company Nuclearelectrica and a Korean nuclear power company in order to assist the Romanian operator to develop its capability to perform accident analyses at Cernavoda Nuclear Power Plant. This Strategic Plan is scheduled to be finalised by 2004.

Overall assessment

As regards security of supply, Romania has adopted legislation that should provide the basis for future compliance with the acquis on oil stocks. While storage capacities are sufficient, required oil stocks will have to be built up.

In the electricity sector, important steps have been taken to adjust electricity prices to reflect production costs and to establish the legal framework for market opening. Similar positive reforms have taken place in the gas sector. However, there has been a continued lack of progress with restructuring the state-owned energy producer Termoelectrica in order to improve its management and to make its production costs competitive. The key priority should now be a thorough reform of Termoelectrica in order to reduce production costs of thermal power plants.

Poor collection of energy bills remains a fundamental problem in Romania which impacts negatively on the financial situation of the utilities and prevents them from making the necessary investments to modernise their networks and improve their efficiency. This situation distorts the entire Romanian economy and Romanian efforts should be devoted to ensuring a genuine improvement of bill payment. For the solid fuels sector, it is important that Romania continues with its restructuring efforts and, for the hard coal sector, ensures compliance with the Community state aid acquis.

Romania does not devote the necessary resources to improving energy efficiency and to promoting renewal energy. The present efficiency of production means and networks is very poor, mainly due to a lack of investment. The Romanian Agency for Energy Conservation is in charge of promoting energy efficiency but has very limited financial and human resources - which is a demonstration of the low priority Romania gives to energy efficiency. This is particularly worrying, since the energy intensity of the economy is very high (estimated at around 8 times the EC average).

The European Union has repeatedly emphasised the importance of a high level of nuclear safety in candidate countries. In June 2001, the Council of the European Union took note of a Report on Nuclear Safety in the Context of Enlargement. This report contains recommendations to all candidate countries to continue their national safety improvement programmes, including the safe management of spent fuel and radioactive waste, and regarding the safety of their research reactors. During the first half of 2002, a special Peer Review on nuclear safety assessed the progress made by candidate countries in implementing the 2001 Report`s recommendations. This exercise under the auspices of the Council resulted in a Status Report, published in June 2002, which concludes that Romania has accepted and addressed all the recommendations contained in the Report on Nuclear Safety in the Context of Enlargement of June 2001.

Most recommendations have been adequately addressed. Romania should devote further attention to six recommendations: to systematically consider and implement relevant safety improvements for similar plants adopted in Canada; to strengthen the co-operation between the Nuclear Safety Regulatory Authority (CNCAN) and the Canada Nuclear Safety Commission; to install an emergency Operating Centre at Cernavoda; to pay attention to the continued financial resources of the operator, as well as to the preservation of its management`s and staff`s competence; and to complete the update and regulatory reviews regarding fire and seismic hazard assessments at Cernavoda.

The Status Report recommends further monitoring with regard to four recommendations: to ensure the implementation of relevant safety improvements adopted in similar CANDU plants in Canada; to ensure the timely implementation of the Strategic Plan for Safety Analysis of Cernavoda Unit 1 and the development of the Safety Analysis Report for Cernavoda Unit 2; and to ensure that sufficient resources are allocated to the Nuclear Regulatory Authority in order to strengthen its capabilities.

Salaries at CNCAN remain low when compared with employees in the nuclear industry and there is a steady turnover of personnel, who leave the institution to work for Cernavoda or other industries that pay better salaries. Romania is therefore encouraged to address this specific issue and to further strengthen the resources and capabilities of CNCAN within a stable framework.

The unresolved issues of spent fuel and nuclear waste will have to be addressed in the short-term.

In order to ensure compliance with Euratom requirements and procedures Romania should give due attention to preparing the implementation of Euratom safeguards, in particular regarding the direct reporting of nuclear material flows and inventories by the persons or bodies operating nuclear installations or storing nuclear material. Romania has concluded a Full Scope Safeguards Agreement with the International Atomic Energy Agency.

Conclusion

In its 1997 Opinion, the Commission concluded that Romania had to step up considerably its efforts in the energy sector in order to prepare for integration. The following areas were identified as requiring particularly close attention: the adjustment of monopolies; energy pricing; emergency preparedness, including the building-up of mandatory oil stocks; state interventions in the solid fuels sector; and development of energy efficiency. The Commission added that, although no major difficulties were foreseen for compliance with the Euratom Treaty, Romania should implement some international nuclear norms. Nuclear safety standards, especially those related to plant operation, should be handled appropriately and longer-term solutions needed to be found for radioactive waste.

Since the Opinion, Romania has made progress in aligning itself with the relevant acquis. However, many structural issues still have to be addressed in the energy sector. Legislative alignment is limited and the new administrative structures remain to be consolidated.

Negotiations on this chapter continue.

Romania should focus further efforts on addressing the structural problems that are facing the sector: non-payment of energy bills, restructuring of Termoelectrica, and improving the efficiency of its energy networks. It should also move away from its current energy production-oriented policy, and towards a policy based on energy saving. Romania should take the necessary measures to ensure the full and timely implementation of legislation in the energy sector as well as strengthening the administrative capacity of the newly established bodies (in particular the energy regulators, the energy efficiency body and the nuclear safety authority). Romania should ensure compliance with Euratom requirements and procedures and take measures for the progressive building up of oil stocks.

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