IMF: Romanian Industrial Gas Prices To Rise Under New Calculation Formula

05.10.2011 By Andrei Circhelan

The price of gas delivered to corporate clients is set to rise since the Romanian government has pledged to change the tariff calculation formula, aligning it with international evolutions, the head of the IMF delegation to Romania, Jeffrey Franks told MEDIAFAX.

Authorities had pledged to set up a price adjustment calendar for industrial consumers by April 1, 2011, based on the unit cost of gas, or CUG.

This marker was overshot by the government, and the adjustment was included as a priority in the new letter of intent to the IMF, meaning the calendar should be set up before the IMF board meeting in June.

Franks added the government will enact an emergency ordinance setting up two calculation formulas, distinguishing between household and industrial consumers.

"In different times of year, the formula calculates a weighted average of international price and domestic price, and because the share of the international prices varies through the year this CUG goes up and down," Franks said.

According to energy regulator ANRE, imports peak in winter, when they reach more than 40% of the consumption basket, but local gas is almost exclusively used in summer.

"What we are going to work with them (Romanian authorities - e.n.) is a formula to smoothe this (variation) throughout the year and then there will be some increase in price that will be necessary, but the exact percentage depends on the smoothing of this formula," Franks added.

The IMF official also said, without stating numbers, that prices will need to undergo significant adjustment by 2015, the deadline for complete liberalization.

"Over the last six or eight months, international prices have gone up quite sharply so the gap is rather large. International prices may be more stable in five years and it may be a little bit less. But certainly the process needs to begin now," Franks said.

On Monday, Franks told a news conference in Bucharest that Romania will free the natural gas market in stages by 2013 for companies and between 2013 and 2015 for household consumers.