EU warns Romania to remove gas price cap or face legal action

By Kate Abnett

BRUSSELS (Reuters) -The European Commission warned Romania on Wednesday to remove its cap on gas prices or potentially face legal action over the policy, which the EU executive branch said violates the bloc's energy market rules.

Gas and power bills for Romanian households, small businesses and public institutions have been capped up to certain monthly consumption levels since November 2021, with suppliers compensated for the difference. 

In a notice published on Wednesday, the European Commission said the policy violates EU rules on the free formation of wholesale gas prices, since Romania's measure obliges firms to sell part of their production at a fixed wholesale price.

"Regulated prices at the level of the EU-wide wholesale market distort price signals and effective market functioning," the Commission said.

European wholesale gas prices began climbing in 2021 after Russia limited deliveries. Prices soared to record highs the following year when Moscow further slashed supplies after its February 2022 invasion of Ukraine.

Romania's government has two months to respond to the EU warning, after which the Commission can refer the case to the EU's top court, if the matter is unresolved.

Ahead of its May 18 presidential election run-off, Romania currently has an interim government which cannot issue decrees or introduce policies. 

Former Prime Minister Marcel Ciolacu resigned on Monday after hard-right eurosceptic George Simion won the first round of the presidential election re-run. The president elected this month will appoint a new prime minister.

In February, the former government extended the gas price cap for a year, and prolonged the power price limits until June, to rein in consumers' bills.

Romania produces almost all the gas it consumes domestically, through producers OMV Petrom, state-owned Romgaz and offshore producer Black Sea Oil & Gas.

(Reporting by Kate Abnett; additional reporting by Luiza Ilie; Editing by Ewan Harwood)