Romania's government to extend energy support bill, tax entire energy chain

BUCHAREST (Reuters) -Romania's government extended on Thursday a support scheme to shield households and small businesses from soaring energy bills until end-August 2023, and will apply an additional tax across the energy supply chain.

Romania has been capping gas and power bills for households, small businesses, hospitals, schools and public institutions up to certain monthly consumption levels and compensating suppliers for the difference since November last year.

The first cap-and-compensation scheme ran until March. The second was initially set to run until end-March 2023 and cost an estimated 16 billion lei ($3.3 billion).

The government approved new measures in a meeting on Thursday. Apart from extending the deadline for the scheme by five months, changes include reducing the monthly consumption levels that will benefit from the price caps by 15% and enforcing a contribution tax to an energy transition fund on energy and gas producers as well as traders.

The government has also set a ceiling for the weighted average electricity purchasing price that it will use to compensate suppliers, and introduced a fine of 5% of turnover that can be applied to traders or suppliers for successive sales meant to artificially boost energy prices.

"The measures will discourage speculative behaviours on the electricity and natural gas markets," Prime Minister Nicolae Ciuca said before the government meeting.

The modified support scheme, which was approved through a decree without public consultation, is expected to cost an overall 12 billion lei at a rate of 1 billion lei per month, Finance Minister Adrian Caciu said, to be neutralised by the new tax.

"We are on the third attempt to find a solution to a problem which concerns everyone," said Radu Burnete, the director of employer association Concordia, one of the country's largest.

"An emergency decree we learn about shortly before its approval does not respect the law or the public interest."

The energy support scheme is seen as a major risk for Romania's already large budget deficit, with the government's ability to reduce the shortfall a main driver of its credit rating.

($1 = 4.8467 lei)

(Reporting by Luiza Ilie; Editing by Kirsten Donovan and)