Romania's energy bill support scheme set to cost $3.27 bln

Romanian Energy Minister, Virgil Popescu, talks on the phone before an interview with Reuters
Romanian Energy Minister, Virgil Popescu, talks on the phone before an interview with Reuters, in Bucharest, Romania, January 13, 2022. Picture taken January 13, 2022. Inquam Photos/Octav Ganea via REUTERS

BUCHAREST, Aug 24 (Reuters) - Romania's scheme to shield households and smaller businesses from soaring energy bills will cost around 16 billion lei ($3.27 billion), Energy Minister Virgil Popescu said on Wednesday.

He added that the coalition government was also considering windfall taxes on the entire energy supply chain.

Romania has capped gas and electricity bills for households and most other consumers up to certain monthly consumption levels, and is compensating suppliers for the difference.

But already high prices are set to rise further, amplified by the war in Ukraine and European sanctions on Russia.

The energy support scheme is seen as a major risk for Romania's already large budget deficit, with the government's ability to reduce the shortfall a main driver of its credit rating.

Popescu said the country's independent energy regulator ANRE had initially estimated the support scheme, which will run until end-March 2023, would cost 40 billion lei before revising it down to 16 billion lei.

A previous support scheme, which ran from November 2021 until March cost 4.5 billion lei, ANRE has said.

The government already has windfall taxes in place on gas and electricity producers, but has stopped short of taxing traders and suppliers.

"We are very much thinking about taxing the entire chain: production, intermediaries, suppliers," Popescu told reporters, adding the government had yet to finalise specifics. "Taxation must be as fair as possible ... we tax everybody when profits are very high."

The leftist Social Democrats, parliament's biggest party and part of the governing coalition, support replacing the cap-and-subsidy scheme with regulated prices from next year on a short-term basis, but the coalition has yet to agree.

The president of the Romanian association of energy suppliers estimated earlier this week that the government will gain more than 43 billion lei ($8.78 billion) from the energy sector in regular and windfall taxes as well as dividends.

($1 = 4.8953 lei)

Reporting by Luiza Ilie; Editing by Kirsten Donovan

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