Bucharest Mayor fights for government district heating subsidy to cover natural gas price spike

Considering Bucharest's razor-thin budget margins, the mayor explained that without a subsidy, 2022 will be a year of cut spending after years of austerity

During the weekend, Bucharest mayor Nicusor Dan met with officials from the national government to discuss a possible subsidy for heating in the city. Today, in an attempt to balance the local budget, he proposed a massive 70% increase in consumer prices to cover the rising cost of heat production.

Currently, the local government covers around two thirds of consumer heating costs, and despite rising prices, Mayor Dan aims to keep that ratio.

The government needs to step in

In a press conference after Saturday’s meeting with the government, the mayor explained that consumer prices need to go up, as production prices have doubled. At the same time, if the government does not do anything to help the local budget, Bucharest will have a difficult time fulfilling its financial obligations.

According to Nicusor Dan, currently, the city’s budget margins are razor-thin and there is no surplus. If the government does not step in, in his opinion, local authorities will be forced to institute further austerity measures by postponing major development works, debt payments and by avoiding expenses on, as he put it, ‘nonsense, concerts, fairs and other things’.

How does the increase look in absolute terms?

Currently, there are over 500,000 apartments in the Romanian capital, which are connected to the central heating system or roughly 70% of the overall housing stock. The price of heating is measured in gigacalories. One gigacalory is roughly the equivalent of energy needed to heat one room per month during the winter.

The price of a gigacalory right now is around 33 euros. In the mayor’s proposition, that number would increase to 56 euros. For comparison, the production and distribution prices have also seen a major increase from around 100 euros per gigacalory to around 200.

The difference between consumer and production prices in Bucharest is covered by the local government’s budget, thus, the increase would put a major hole in city officials’ plans for 2022.

During Mayor Dan’s meeting with government officials, after he petitioned for aid for the gigacalory situation, he also raised the question of Bucharest’s overall budget. According to him, the capital city has been operating in an emergency austerity mode for years now and it needs additional funds to do big infrastructure projects.

One such project is the modernisation of the district heating system. The city has managed to update just over 10% of the distribution infrastructure. According to ELCEN, the local heating company, the registered losses in 2020 were more than 2 million litres per hour. Furthermore, last year, many buildings were left without hot water due to system failures.

According to AGERPRESS news agency, the government is currently looking to revise municipal budgets across the board. For this purpose, it has commissioned a 600,000-euro feasibility study to determine the best course of action. At the same time, the Minister of Finance Adrian Câciu, who stepped into office last Thursday, had a lukewarm response to the subsidy proposition.