Uncapped electricity prices rise 61% in Romania, pulling inflation upwards in July
<p>Inflation jumped by 2.7% in a single month in Romania in July, compared to June 2025, to an annual rate of 7.8%. Although food prices did not increase significantly, the removal of the electricity price cap on July 1 led to an average 61% increase in electricity bills, according to a report from the National Institute of Statistics.&nbsp;</p>
<p>Romania capped gas and electricity prices since the start of the war in Ukraine to ease inflation and accompanying costs. As a result, small consumers paid a fixed rate for the past three years, which, on July 1, 2025, at the time of the cap removal, was three times lower than the European average.&nbsp;</p>
<p>Romania had to remove the price cap system, the most complex and costly in Europe, after a <a href="https://www.romania-insider.com/ec-romania-end-energy-price-capping-october-2024">formal notice</a> from the European Commission. Aside from the benefit to small consumers, the system tended to keep the prices on the wholesale and retail markets above those expected to emerge from a functioning market mechanism.&nbsp;</p>
<p>As a result, Romania saw the<a href="https://www.romania-insider.com/romania-expensive-electricity-markets-first-half-2025"> third-highest electricity</a> spot price in the EU from the beginning of the year to date, EUR 103.53/MWh (or RON 525 /MWh), maintaining the position it held last year. The only European countries that reported a higher spot price than Romania in July were Italy (EUR 115/MWh) and Slovenia (EUR 103.77/MWh).</p>
<p>The removal of the cap system, however, is set to cause a price shock. According to the National Institute of Statistics, the removal of the electricity price cap on July 1 resulted in an average bill increase of +61.5% compared to June 2025 and +63% compared to July 2024. Gas bills, where prices remain capped until March 2026, also rose by +3% last month, but are still below the level of a year ago.&nbsp;</p>
<p>Rising energy costs are set to contribute to a rising inflation.&nbsp;Overall, on August 1, before the VAT increase, annual inflation in Romania had reached 7.85%, with an annual increase of +7.6% in food prices and of +8.2% in non-food goods prices (which include energy, gas, and fuels).</p>
<p>Last week, Romania’s central bank <a href="https://www.romania-insider.com/bnr-monetary-policy-rate-august-2025">announced</a> it has maintained the monetary policy rate at 6.5% given the already higher-than-expected inflation in June, but particularly the expected price shock prompted by the electricity price in July, following the market liberalization and the VAT rate hike.&nbsp;</p>
<p><em><a href="mailto:radu@romania-insider.com">radu@romania-insider.com</a></em></p>
<p><em>(Photo source: Bubbersbb | <a href="https://www.dreamstime.com/">Dreamstime.com</a>)</em></p>