The Romanian government is planning new taxes on energy producers, as well as on energy distribution companies, according to draft proposals laid out on January 21. The taxes come in response to the higher profits energy companies can make as the energy market is deregulated and the extra revenues will be used to help Romanian households pay their energy bills.

Romania hopes to make an additional EUR 127 million by end 2014 by applying the natural monopoly tax on transport and distribution operators on the electricity and methane gas markets. This tax will be applied for each MWh  billed by transport and distribution companies, and will be enforced on companies ranseletrica, CEZ Distribuţie, Enel Distribuţie Muntenia, Enel Distribuţie Banat, Enel Distribuţie Dobrogea, E.ON Moldova Distribuţie, Electrica Distribuţie Transilvania Nord, Electrica Distribuţie Transilvania Sud, Electrica Distribuţie Muntenia Nord, Transgaz, E.ON Gaz Distribuţie and Distrigaz Sud Reţele. The tax will be of RON 0.45/MWh in case of the transported quantity, of RON 1.25 per MWh for the distributed quantity and of RON 1.7 per MWh for the quantity only transported via the grid.

Another tax will be applied to companies which exploit natural resources in Romania, other than natural gas. The tax will be of 0.5 percent of revenues and will be applied from February 2013 until end of 2014. Forestry, the extraction of coal, oil, ferrous and non-ferrous minerals will be subject to the new tax.

A third tax will be applied to companies extracting oil and gas from various area of Romania, including the Black Sea. Romania will apply a 60 percent tax on the extra revenues made from the deregulation of the energy market. Companies will have to calculate the extra revenues, declare and pay the tax. The royalties, and investments in the upstream segment will be deducted from the 60 percent tax, but no more than 30 percent, according to the project.

The new taxes came as a surprise and the Association of Energy Utilities Companies already said it will trigger a drop in oil and gas investments and endanger the industry privatizations planned for this year. The association argues that the Government wants to apply a tax on the extra profit which will come after the market deregulation, but these profits will land in the producers' pockets, not in the distributors'. This would also be a double taxation, as energy and gas distributors already pay royalties to the Romanian state.

Romania is currently in the process of liberalizing the gas and electricity markets. Legislation has previously restricted the prices that energy companies can charge, but the government is lifting these controls gradually to meet EU demands for a liberalized energy market.

Back in August 2012, the Romanian authorities announced plans for a new tax on energy producers, set up specifically to help poorer households meet rising energy costs. As per the draft proposal announced on January 21, the plan was to tax companies that stand to benefit directly from deregulation of energy prices. Last year, Deputy Finance Minister Liviu Voinea said that the tax would affect companies that are making no additional investments and simply benefiting from deregulation of energy prices, which are currently set by the state energy authority.

Romania has pledged to end state capping of energy costs as part of its deal with the International Monetary Fund (IMF), the EU and the World Bank, which translates as increases in the cost of electricity and gas for households and commercial customers. There have already been price rises for businesses and increased costs for households kicked in last year, according to agreements with the IMF. Some ideas for new taxes were previously cleared with the IMF.

editor@romania-insider.com