The Romanian Energy Regulator (ANRE) recently published a proposal for a new procedure regarding the passporting in Romania of energy or natural gas supply and trading licenses issued in other EU countries, based on ANRE’s confirmatory decisions (New Passporting Procedure).
The New Passporting Procedure is set to replace the existing rules, dating from 2015, currently providing a very swift screening process for EU operators who intend to passport their energy or gas supply and trading licenses in Romania (EU Licensees). In a bid to strengthen monitoring powers, the ANRE proposes notable changes to the existing license passporting regime. These involve enhanced scrutiny both from a financial and regulatory compliance perspective while also enhancing ANRE’s monitoring and sanctioning powers over EU Licensees.
The New Passporting Procedure was published for consultations in February 2024. Interested parties could contribute observations until March 22, 2024.
Enhanced Scrutiny of Prior Regulatory Compliance and Trading Behavior
Departing from the current relaxed rules, the New Passporting Procedure renders the passporting conditional on the good financial standing of the applicants, explicitly excluding those undergoing bankruptcy proceedings.
Crucially, applicants must have clean regulatory compliance records, namely (i) no cancellation of licenses by energy regulators or other competent authorities in any EU country in the last five years, and (ii) no cancellation by the ANRE of passport for participation to Romanian energy or gas markets, for reasons attributable to the applicant, in the last five years.
Moreover, applicants’ controlling shareholders and directors or BoD members must also have clean operational records. Namely, they must not have held similar positions in licensed entities having defaulted on their payment obligations arising from trades on the energy or gas markets in Romania.
Financial Guarantees and Local Treasury Accounts in Domestic Currency
To strengthen market security and ensure compliance with the tax payment obligations arising from trades made on the Romanian markets, EU Licensees must (i) open separate accounts in domestic currency with the state’s treasury in Romania, and (ii) (in the case of non-residents) provide a EUR 1 million financial guarantee (in the form of a bank letter of guarantee or cash collateral) to guarantee the payment of windfall taxes on trades due under the temporary mechanism enacted in Romania in 2022 to combat the sharp increase in energy prices.
EU Licensees who have already passported their licenses under the existing rules must also ensure compliance with the above rules within three months from the entry into force of the New Passporting Procedure. If not, they risk the suspension or even cancellation of their rights to participate in the Romanian energy markets.
Additional Requirements for EU Licensees Holding Digital Licenses
The ANRE also recognizes digital licenses issued by other EU countries. However, where applicants submit such digital licenses or where the passported activities may be performed in their EU country of origin without a license, they will be subject to additional requirements. In these situations, applicants must submit to the ANRE formal letters from the competent authorities to (i) confirm the regulatory framework of the country of origin, and (ii) provide a history of the trading operations performed by the applicant on the relevant markets of the country of origin and of the sanctions applied to them, if any.
Reduced Initial Validity for Passported Licenses
Departing from the existing regime, where the passporting of EU licenses is automatically granted for the duration of the license issued in their EU country of origin, under the new passporting rules, the ANRE’s confirmatory decisions will have an initial validity period of one year, which may be renewed for successive periods of up to five years (not exceeding the validity of the passported license).
Detailed Dedicated Provisions for Suspension and Withdrawal of Passports
Unlike the existing rules, which contain a casual mention of the ANRE’s rights to suspend or cancel the rights of EU Licensees to trade on the Romanian markets, the New Passporting Procedure contains detailed provisions regarding the ANRE’s prerogatives to suspend or cancel the respective rights. Among these are an indication of various cases where the suspension or cancellation operates automatically. These include repeated defaults on payment obligations regarding mandatory purchase quotas of green certificates or unilateral termination by the EU Licensees of their energy supply agreements with end customers.
By Monica Cojocaru, Partner, Vlad Cordea, Managing Attorney at Law, and Cristina Olariu, Attorney at Law, Schoenherr Romania
This article was originally published in Issue 11.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
