Cosse: Energy tariffs should go up

Electricity and natural gas tariffs in Romania should be set as high as to cover costs in the long run, while any social issues that may arise can be addressed by direct budgetary subsidisation. This is what an IMF policy discussion paper devised by the former IMF resident representative in Romania, Stephane Cosse, shows. Cosse’s paper, titled “The Energy Sector Reform and Macroeconomic Adjustment in a Transition Economy: The Case of Romania”, explains that notwithstanding the recent adjustments in energy prices, tariffs remain subject to distortions and are low compared with long-term marginal costs. This creates inappropriate incentives for investment and private sector involvement. As regards the natural gas prices, they are about three times lower than in OECD countries and two times lower compared to other EU accession countries in the region. In the electricity sector, prices in Romania are among the lowest in Europe, particularly for households: tariffs are more than two times higher in the European Union and about 20 percent higher in EU accession countries in the region. “Prices should ensure the financing of investment. In the electricity sector, this implies moving gradually to an optimal tariff closer to the long-run marginal cost, that is closer to the average in Europe. In the natural gas sector, prices should be targeted to reach a level close to import parity, also taking into account distribution costs,” the report shows. Mediafax