By Karolin Schaps
LONDON, Oct 24 (Reuters) - New legislation in Romania that has halted over-the-counter power trade likely breaches European Union laws and is hindering the goal of a liberalized EU energy market, the European Federation of Energy Traders said on Wednesday.
The Romanian government, facing a December parliamentary election, had wanted to promote transparency in wholesale trading after cancelling a number of highly-criticised contracts state-owned producer Hidroelectrica awarded at below market prices. Those deals had set off a European Union probe.
Regulator ANRE's decision to put into effect the law passed in July mandating that producers sell their output through the OPCOM exchange has ended all bi-lateral and brokered power contracts in the European Union nation of 20 million people.
Market participants had kept trading as they waited for the regulator to clarify the law many have described as confusing. But that loophole ended in September when ANRE told energy companies they could no longer trade outside OPCOM.
Since then traders say the government has been working to find a solution but screens remain blank because of the ban - something a spokeswoman for the European Federation of Energy traders said likely contravenes EU law.
"EFET is very strongly concerned about the amendments in the Romanian Energy Act," said a spokeswoman for the group that represents energy traders across Europe.
"We believe...amendments of the national law must be in contravention of (EU law). They are likely to impede rather than facilitate the realisation of the EU wholesale electricity target model."
She added she was unaware whether her group had contacted the European Commission about potential breaches of EU trade agreements and whether any members had been caught short in open positions before trading stopped.
An EU spokesperson could not immediately be reached for comment.
One potential solution could be that OPCOM creates some kind of a screen on its platform that would allow traders to do bi-lateral deals, traders say.
Market participants also say they are unsure what penalties they might incur for trading outside OPCOM. Some said they believed such a penalty could amount to 5 percent of a company's turnover, which would represent a death blow for many firms.
The ban has forced traders to look to other markets as they wait for regulators and lawmakers to figure a way to address the problems in the wholesale market stemming from the new law.
"We will likely only see some changes after the December elections," one trader said. "Until then nobody from the market expects any improvement of the situation." (Writing by Michael Kahn, additional reporting by Michael Kahn and Barbara Lewis, Editing by William Hardy)