Romanian city covers consumers’ energy bills through the municipal budget

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

Yesterday, the mayor of the Romanian city of Focşani, Cristi Misăilă, announced an energy price cap for citizens. He explained that the difference in the bill would be covered by the municipal budget to guarantee that the local energy and heat providers do not go under during the winter of 2022/2023.

Consumers’ energy bills will be capped at 285 lei per gigacalorie or around 58 euros. One gigacalorie is equivalent to one megawatt-hour of electricity, approximately the energy it takes to power a home for around two weeks.

Back-up options and additional subsidies

According to AGERPRESS, Mayor Misăilă explained that municipal authorities in Focşani have around 12 million lei to fund their price cap scheme. This is the equivalent of around 2.4 million euros and it comes as an addition to the energy price subsidy scheme that was previously in place.

The mayor went a step further when he urged all citizens who are eligible to still apply for the energy subsidy, which is aimed at low-income households.

Looming bankruptcy for energy producers

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

While governments technically do have the power to set the price for consumers, they can do little to affect the free market of goods and help to maintain a public company’s liquidity, save from pumping it with public funds.

ENET SA, the local energy producer, has, and will rack up, a lot of debt and is also currently going through a proposed debt restructuring. Regardless, Mayor Misăilă explained that the company will not go bankrupt during the 2022-2023 cold season, even if Russia decides to cut 100% of their natural gas deliveries. 

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