Shock of rates and government’s remedies for diminishing its impact on population. IPN debate

The approval of the new natural gas rates that exceeded 11 lei per cubic meter caused a shock on the citizens who will have to pay more than twice more for bills. The rise was generated by a series of factors, including objective, political and geopolitical. The authorities said that to alleviate the shock caused by the new rates, they increased the cold-month assistance and created a new mechanism that envisions direct subsidies through bills. Even so, the representatives of the opposition accuse the government of inefficiency, saying the people are desperate as the prices will rise in a row now that the gas is more expensive. Such statements were made by participants in IPN’s public debate “Shock of rates and government’s remedies for diminishing its impact on the population”.

Igor Boțan, the standing expert of IPN‘s project, said statistics show that the average price for consumers the past ten years was about 5 lei per cubic meter of gas. A shock was now experienced as the National Agency for Energy Regulation accepted a rate of over 11 lei per cubic meter of gas. The shock represents the sudden variation of the parameters as the price rose over two times together with the NAER’s decision. This has a major impact on the costs of citizens. Respectively, compensatory measures are needed and these were announced by the Government on November 10.

“Could such a shock have been avoided? It is an interesting question, but it is somehow rhetoric as the shock is the result of the global and regional energy crisis. Such a decision was reached because there are objective reasons. Everyone went through the pandemic crisis last year. Many enterprises didn’t work and economic activity declined. As a result, the demand for hydrocarbons was lower. Respectively, investments in the exploration of new places from which hydrocarbons can be extracted weren’t made. This is a consequence. Last year we paid less, while this year hydrocarbon producers want to offset the higher costs,” explained Igor Boțan.

According to him, there are also purely economic factors. It goes to the EU’s decarbonization policy that affects the interests of hydrocarbon producers, firsts of all the Russian Federation. Fifteen years ago, Russia proclaimed its strategy for becoming an energy superpower and the plans of the EU and other consumers of hydrocarbons somehow thwart this strategy. There are also geopolitical or geo-economic factors related to the building of pipes, more exactly Nord Stream 2. This will be used to pump gas to Europe bypassing Ukraine, which is in a conflict with Russia. But the Republic of Moldova is somehow a collateral victim of this conflict.

Minister of Labor and Social Protection Marcel Spatari said that the rise in natural gas is significant and the goal of the authorities is to create mechanisms for attenuating the impact on the citizens. Before the crisis, the population was supported through cold-month allowances, paid for November-March, based on a mechanism that has been used since 2009. This way, the persons from vulnerable groups file an application for benefitting from 500 lei during the cold period of the year. Respectively, together with the rise in the gas rate, the authorities set the goal of extending the eligibility criteria and of increasing the compensation from 500 to 700 lei. “This is the first mechanism and it is maximally targeted. So, effectively, this mechanism is intended for vulnerable families that cannot easily cover the costs and for those who cannot cover them at all,” stated the minister.

Marcel Spatari noted that this mechanism is limited owing to the eligibility criteria and implies a heavier workload as all the documents need to be processed, but the number of social assistants who can do this is low. It is evident that the impact of the rise will be felt not only by the beneficiaries of cold-month allowances, but also by the general population that should also be helped. The only new mechanism is direct subsidization though bills. This way the people will not need to make addition approaches. The compensation solutions are identified directly with the natural gas and heat providers.

According to the minister, the recipients of compensations and those who afford to pay the bills cannot be identified depending on the consumer’s profile because there is no information about the socioeconomic status of the consumer. No country can implement a subsidization mechanism through the bill in accordance with the status of the family. The authorities had to choose – either to pay compensations to everyone or to pay cold-month allowances to a particular category of people only.

Nicolae Pascaru, former MP of the Party of Socialists, said that such a difficult situation hasn’t existed since the declaring of Moldova’s independence. Responsibility should be assumed by the whole Government that implemented an inefficient policy that led to a complete failure in the supply of gas. The differences that the citizens will have to pay after the explosion of gas prices will be very high. The prices of other products will also rise and the National Bank of Moldova already made public worrisome inflation forecasts.

According to the ex-MP, the disaster didn’t bypass the small and medium-sized companies and the farmers who found themselves in an exceptional situation. “The temperature in the country is rather high. Probably the whole country became infected with this political and social COVID. We will see the effects primarily in spring,” he stated, noting that the announced compensations are beneficial, but insufficient and the Party of Specialists proposed fully compensating the difference between the previous and new gas rates.

Nicolae Pascaru also said that the new rates will be applied for November and it will take time to identify the disfavored families. The procedure for applying for cold-month allowances is extremely bureaucratic and “relatives” can be added to the list of recipients owing to the human factor.

The public debate “Shock of rates and government’s remedies for diminishing its impact on the population” is the 213th installment of the series of debates “Developing Political Culture through Public Debates”. The project is supported by the Hanns Seidel Foundation.

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