Such frozen projects are a heavy burden for the electricity transmission company, whose revenue is tied to the pace of investment in upgrading and expanding its high voltage network. As a natural monopoly, Transelectrica lives off the electricity transmission charges, set by the energy market watchdog ANRE based on the rate of return regulation (RRR) and the regulatory asset base (RAB), i.e. those assets used in the transmission process.
The rate of return regulation is fixed so the only way Transelectrica can increase profit and pay higher dividends to shareholders is to constantly invest in its network to boost the regulatory asset base value. Keeping investments constant or increasing them is all the more important since ANRE has recently cut the RRR from 8.52% to 7.7%. Transelectrica challenged it in court.
The rate of return regulation cut foretells the impending electricity transmission charge reduction likely to happen as of July 2015, so Transelectrica is under pressure to speed up investment pace.
Yet its most important projects (connecting its grid to the grids of the neighboring countries) are expected to progress slowly. Out of the about RON800 million required by such investments, the company estimates it will pay less than RON200 million in 2015-2017, as shown in the spending, investment and revenue budget proposal that shareholders will discuss on March 23.
A really serious case in this regard is the overhead power line between Oradea, Romania and Bekescsaba, Hungary, 90% done and then mothballed because the builder was unable to enter privately owned plots of land to install five transmission towers.
The other interconnection projects, especially those with the Republic of Moldova and Turkey, are still waiting for environmental permits and approval by the government. The only such investment in progress at the moment is the Resita-Pancevo line, worth RON85 million, which Transelectrica expects to complete in the next few years. Serbia is one of the main export destinations for Romania’s electricity generation companies and a new line would enable a rise in exports.
The electricity transmission company’s effort to expand interconnection capacity is because of the low capacity of the local market to absorb the entire generation potential of the local power plants. An improved export capacity would stimulate Romanian energy producers to generate even more electricity so Transelectrica’s transmission charge-related revenue would go up. The company said one of the reasons for the record high profit in the first nine months of 2014 was precisely the record power exports.
The bulk of Transelectrica’s investment budget will go towards retooling the network and its substations, as well as the upgrade of its computer systems. Its most valuable project financed in 2015-2017 is the connection of the Isaccea-Varna and Isaccea-Dobrudja lines (both crossing into Bulgaria) to the Medgidia Sud substation. The project will get more than RON100 million over the three years.
(English version by Loredana Fratila-Cristescu)