Talking to Experts: Ion Lungu, AFEER President

Ion Lungu has been President of Association of Electricity Suppliers in Romania (AFEER) since 2006. He joined CEZ team in early 2007, after an experience of more than 30 years in the energy sector where he held various positions, including that of President of the National Energy Regulatory Authority (ANRE). He initially held the position of commercial and supply manager at Electrica, currently being CEO at CEZ Trade, a company within CEZ Romania, specializing in energy trading.

Ion Lungu has also had a dynamic academic activity, at the Polytechnic University of Bucharest and ‘Valahia’ University of Targoviste, during 1979 – 2006, and currently at the Academy of Economic Studies (ASE). He is member of numerous notorious national and international organizations, including: AFEER, Romanian Energy Policy Association (APER); Energy Regulators Regional Association (ERRA) (2000-2004). He is author and co-author of five technical publications and 125 scientific papers in the field of high voltage technique, electricity use and regulations in the energy sector. Ion Lungu, PhD, was decorated with the ‘National Order of Merit’ as Knight.

 

Discussing about the influence of the decisive factors on the evolution of the energy sector in the current period, AFEER President has mentioned: the major legislative changes generated by the Regulation no. 943 and transposition of the Directive (EU) no. 944/2019, which bring substantial changes in the energy market; the elections that will take place this year, with impact on political decisions and, last but not least, the crisis overlapping these issues.

Thus, specific measures are required in order to adapt to the crisis period. Legislative changes have been made, generated by the need for the economy to work, as well as some aspects relating to the impact on the positioning of decision-makers in the future elections.

GEO 29/20 provided the SMEs with the possibility to postpone the payment for utilities during the emergency period, without having any provision on a potential support for utility suppliers, which ensure the relationship with the end-customers and collect the money. AFEER opinion is that if there is a disruption in suppliers’ cash, it will also reflect on the other operators and there could be malfunctions in the transmission, distribution or production of electricity. The Association has had a reaction and requested that support be granted to suppliers to ensure a cash flow, amid this GEO, in conjunction with the reduction of energy consumption and consequently of revenues.

Regarding energy consumption, during March 15 – April 10, it fell by approximately 7%. And for the end of April AFEER estimates a decline of energy consumption by approximately 10%. “We hope that at the end of the state of emergency period the decrease in consumption, at country level, will be around 10-12%,” the association says.

“A surprise for us was also represented by granting the right to postpone utility payment for three months for almost all household and industrial consumers (legislative initiative). AFEER has had a rapid response. We understand and act in this regard so that those who really need it be helped. It is absolutely necessary to define the vulnerable consumer, which would be the beneficiary of a support. Unfortunately, we found that the last proposal adopted in the Parliament was not a reasonable one, especially regarding the possibility for suppliers to access advantageous loans for ensuring the cash flow. I can say that from our discussions, carried out with bank representatives, they were not willing to finance the energy trading and supply activity, considered activities with a relatively high risk. Guaranteeing payments by the state would be the ideal element. Financing from state treasury is illusory!” said Ion Lungu.

Regarding the opportunities after the crisis, AFEER has learned in this period the importance and necessity of digitization and computerization of the energy sector. The suppliers understood and aligned themselves with this process. After the crisis, many of the business models will be changed and accommodated, operations will be digitized, but work from home cannot replace entirely the office work, the association believes.

As punctual recommendations, AFEER considers the recovery of the entire economy at the level before the crisis and supporting investments in the energy sector. The decrease in energy consumption and the reduction of energy prices decrease the appetite for investments in the energy sector. Investments in the production segment are recovered in the long run; obviously there will be reluctance. A fundamental support from the Government is needed, so that we don’t face a decrease in investments, with a devastating impact in energy and in the entire economy. The Association points out that adequate and optimal solutions are needed after emerging from the crisis.

Regarding the long-term bilateral contracts, AFEER has been a constant supporter thereof.

“We see that ANRE shows openness towards this type of contracts, defining them as contracts exceeding the period of one year. We consider that long-term means that it is not a short term, i.e. without DAM and ID,” Ion Lungu points out.

“Once again, I emphasize that the deferral of payment of energy bills for very large categories of consumers, without real possibilities of loans and guarantee of payment to suppliers, attracts a chain of non-payments throughout the energy system: production, transmission and distribution, operators who, in their turn, will not be able to pay their suppliers for raw materials, equipment, services and, as a result, will disturb a large part of the economy,” concludes the president of the association.