21 October 2020

Gheorghe Russu

Vice-director, The Center for Combating Economic Crimes and Corruption

Parties-Phantoms, Parties - State Institutions, Parties - State Enterprises


20 parties have registered in the current election campaign. Many people say it is a too big number for such a small country as Moldova. At the same time, much more parties could take part in the election campaign.

Last week illustrated

Activists launch Moldova’s first ‘Space Camp’ © Susan Coughtrie

Liberalization of energy market in Moldova could be nothing but fiction

Until the end of this year Moldova might finally become a full-fledged member of the Energy Community. This structure created in 2005 is sort of an energy front office of the European Union. It is the first step towards the integration into EU structures, which is good news.
Ion PREAŞCĂ, 3 December 2009, 10:30

In order to achieve this goal, we must adopt, as soon as possible, the new text of the law on electric energy and the one on natural gas. Within the next years Moldova will have to follow a schedule of law harmonization with the community aquis. We are talking about 13 community law documents on electric energy, gas, environment, renewable energy and security of transmission.

Moldova will have to implement a number of European directives on common laws for internal natural gas and electric energy market, to take steps for the insurance of power transmission safety and security, to limit emissions in the air of certain contaminants from large power plants, to contribute to the development of bio fuel or of other renewable fuel for transportation, to ensure that, from January 1, 2013, all non-household consumers, and from January 1, 2015 the remaining consumers will be eligible consumers.

We are not the only country in such a situation. Ukraine is also eager to become a full-fledged member of Energy Community.

Harmonized law is only part of the problem. Maybe the easiest to solve.

Moldova will have to fulfil some very tough technical preconditions. For example, internal power generation capacity must cover 120% of the demand. That is, to exceed the demand by 20%. Currently, local power plants ensure only 23-25% of the consumption. They are not even able to cover the consumption needs of the population. Specialists say that because of the insufficiency of internal capacity Moldova is not able to fulfil the provisions of art. 3 of the Directive 2003/54/CE „Public service and consumer protection obligations".

However, within the next 5 years there is no chance of increasing the internal power generation capacity. The project of Ungheni plant construction, initiated a year ago, is still just a project. But even if this project, oriented towards energy export, will be implemented, the problem will still remain unsolved. Construction of new equipment and modernization of the old one requires investments of hundred millions euro. Within the last 13 years no investments into central power plants were made and they produce energy twice as expensive as the energy from Cuciurgan plant or imported energy.
It seems that the solution chosen by former authorities and accepted by current ones is to use the Cuciurgan plant as internal supplier. The problem is that this plant, with a dominant position on the market, is not regulated in any way. The plant is property of the Russian company Inter RAO EES, which has no intention to fulfil the conditions imposed by local legislation.

There is also the risk that the Russian company will suddenly increase the price for electric energy, as it happened in Ukraine's case, which started with a price of 2.3-2.4 cents and ended up with a 5.6 cents/kWh. Some specialists claim that only the Cuciurgan plant and, eventually, the suppliers from Ukraine, if they return to Moldovan market, will have to gain from these projects.

The Energy Community Treaty provides for the need to develop cross border power transmission networks (interconnections), so that the energy system of the region will be able to cover the energy demand of each state. At the same time, it is necessary to extend the national power, natural gas and oil transportation networks which are interconnected with European networks, in order to facilitate the access of local consumers to the European energy market. This involves consolidation and extension of internal networks and of interconnection capacities necessary for the development of the connection to the EU network.

We have been talking about the need to construct new power transmission interconnection lines with Romania since 1992. So far nothing has been done in this respect. Same for Ukraine. By the way, our neighbouring country started to build a high tension power transmission line allowing it to take a roundabout way, thus being able to avoid Moldova's energy system. Without Ukraine, Chisinau will depend even more on the Cuciurgan plant.

An extremely delicate issue is the liberalization of the energy market, which should happen until January 1, 2015. The experience of European countries shows that household consumers and small companies will be most affected by liberalization. Large consumers will have the most to gain. It is absolutely normal when the tariffs for electric energy are smaller for industrial consumers. This way economic activity is encouraged. Moreover, power transmission costs are smaller for large consumers, than for the population. The question is how the consumers (i.e electors) will accept such a situation.

The negative effects of these actions will be even more obvious when cross-subsidies will be eliminated and the tariffs will be calculated according to tension levels, on electric energy delivered to the final consumer, an indispensable factor for market liberalization. Without an appropriate mechanism of social protection of vulnerable population, this could trigger certain discontent. Such a change will determine an increase of tariffs for consumers connected to 0.4 kV power networks, most of which are household consumers. For example, in EU states the tariffs for household consumers are 2-3 times higher than those for industrial consumers.

Local specialists think that the liberalization concept under Moldova's circumstances is nothing but fiction, nonsense, and the implementation of such an option would be extremely expensive from a social and economic point of view. According to them, several studies of European experts carried out in 2007-2009 revealed that the Directive 2003/54/CE on common norms for internal electric energy market is completely or partially ignored by 82% of EU countries. The studies show that, in fact, the liberalization did not allow captive final consumers to identify an alternative viable power sources (producers or suppliers) according to prices and technical conditions, the switch from one supplier to another being difficult to organize, and on country level the public and universal service obligations are inappropriately reflected in primary and especially secondary legislation. For all these reasons EU has been considering the introduction of a third Directive on energy and the experts are wondering what for, if the previous ones 96/92/CE and 2003/54/CE did not achieve their main objectives.

Our question is do we need fiction or not?

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