Romanian city covers consumers’ energy bills through municipal budget

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Romanian city covers consumers’ energy bills through municipal budget

The city of Focşani will cap prices for consumers at around 58 euros for one gigacalorie, roughly the energy a household consumes for two weeks

Yesterday the mayor of Romanian town of Focşani, Cristi Misăilaannounced a energy price cap for citizens. He explained that the difference in bill would be covered by the municipal budget to ensure that local energy and heat suppliers do not go under in winter 2022/2023.

Consumer energy bills will be capped at 285 lei per gigacalorie or around 58 euros. One gigacal is equivalent to one megawatt-hour of electricity, or approximately the energy needed to power a house for about two weeks.

Relief Options and Additional Subsidies

According AGERPRESSMayor Misăilă explained that the municipal authorities of Focşani have about 12 million lei to finance their price cap system. This is equivalent to approximately 2.4 million euros and it comes on top of the energy price subsidy scheme that was previously in place.

The mayor went further by urging all eligible citizens to continue applying for the energy subsidy, which is aimed at low-income households.

Imminent bankruptcy for energy producers

One of the biggest problems for state or municipal companies would be to respect the purchase prices of raw materials for energy production, such as natural gas and coal (the latter comes with a tax premium carbon).

Although governments technically have the power to set the price for consumersthere is little they can do to affect the free market for goods and help maintain the liquidity of a public company except to pump it with public funds.

ENET SA, the local energy producer, has, and will accumulate, a lot of debt and is currently undergoing a debt restructuring project. Anyway, Mayor Misăilă explained that the company will not go bankrupt during the 2022-2023 cold season, even if Russia decides to cut off 100% of its natural gas deliveries.

However, and this is the real danger for the tightrope walker in this city of 100,000 inhabitants, if the restructuring of the debt does not succeed, the company will go bankrupt. At the same time, the mayor insisted that the Romanian government had pledged around 2.4 million euros to fund the generous plan with almost half of the money already available for local authorities.

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