The energy sector of the Republic of Moldova faces a range of major challenges for the national energy security. Besides the major dependence on the same foreign suppliers , there is a systemic vulnerability due to the insufficient and defective regulation of the sector. Thus, the regulator in the field (electricity, natural gas, renewable energy, oil, thermal energy and water supply and sewerage), represented by the National Energy Regulatory Agency (hereinafter referred to as ANRE), encounters various deficiencies , which have a significant negative impact on the energy governance. The key problems are caused by the legal, institutional and management regulatory defects that reduce ANRE independence and transparency when adopting decisions. These shortcomings impact the interests of end consumers and sector operators, undermining the stability and security of the whole energy sector.

The transposition of the European legislation, as part of Moldova’s commitments to the European Union, through the Association Agreement, and to Energy Community, plays a huge role in reducing the adverse regulatory effects. Specifically, the authorities are obliged to implement the “Third Energy Package”, which focuses mainly on strengthening the sector regulator. So far, they only reviewed the Law on Natural Gas and Electricity (May 2016), where certain updated provisions on ANRE duties are found. In addition, an individualised approach to ANRE was adopted through the initiative to amend the Law on Energy, which is outdated and does not meet the current energy requirements and context, dating back to 1998 . Now, the draft Law on Energy is in the Parliament and was examined in the first reading on 3 November 2016.

The need to increase the transparency of the regulatory decisions in the energy sector is one of the conditions accepted by Moldovan authorities to access the IMF financing program. In their Letter of Intent, submitted IMF, the authorities undertook to strengthen ANRE’ s budgetary independence and make the appointment of directors a transparent and merit-based process. Also, the improvement of the regulatory quality in the energy sector was featured in the “Moldova’s Priority Reform Action Roadmap”, initiated by the Government in early 2016 and implemented during March-August. According to this document, the Prime Minister and the Parliament of the Republic of Moldova required the Energy Community Secretariat to assess ANRE’s competencies and capacities, the evaluation report being published already in September 2016. In the report provided by the Secretariat , ANRE is diagnosed with a range of institutional, operational and decisional constraints, which undermine its activity. Among the most significant sector problems, including those mentioned in the Secretariat Review are the following:

• Poor transparency and vague provisions on the process of appointment and dismissal of ANRE’s directors, which generates the risk of conflicts of interest, abuses and political influences on the institution’s activity and decisions;

• Insufficient selection criteria for the appointment of Director General by the Parliamentary Committee for Economy, Budget and Finance, which hinders the ANRE’s effective management and, respectively, the regulation of the whole sector.

• Lack of a strong and inclusive mechanism of consultation on the regulatory activity. This is determined in part by the delay in establishing the Committee of Experts under ANRE, which limits the transparency and participation of sector relevant stakeholders in ANRE’s decision-making.

• Failure to ensure ANRE’s financial independence, determined by (in)actions of the Parliament, in charge of approving ANRE’s budget, which may impede the appropriate operation of the institution;

• Existence of certain indirect political and public pressures on ANRE’s decisions on adjusting the tariff for natural gas and electricity, especially during 2015-2016;

• The need to increase the staff’s professionalism through training seminars.

The aforementioned shortcomings explain why ANRE decisions lack dynamics and public support, which decreased significantly during 2013-2016. Therefore, enhancing the transparency and strengthening the independence of ANRE are crucially important in order to restore the market players’ confidence (state and private operators, and consumers) in the sector’s sustainability and to boost domestic and foreign investments in the sector.

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This publication has been funded by the British Embassy in Chisinau, through the Good Governance Fund. The content of this publication is the sole responsibility of the author and does not necessarily reflect the views of the British Government.