Tax, closed market driving up power cost, central bank notes

The cost of electricity in Greece has increased by 150 percent for households and 44 percent for businesses over the past 11 years as a result of sharp tax increases, especially since 2010, and the main power utility PPC’s ongoing dominance, which has slowed down the development of market competition in the energy sector, a Bank of Greece report has noted.

Though still below the EU average, the cost of electricity for households in Greece reached 0.17 euros per KWh in 2016 from 0.07 euros per KWh in 2005, a significant increase that has further impacted the cost of living n Greece, the central bank’s report noted.

The industrial sector has also had to shoulder heavier energy costs between 2005 and 2016, the report added. The cost of electricity for the sector has risen from 0.06 euros per KWh in 2005 to 0.09 euros per KWh in 2016, a 44 percent increase, over the EU average increase, the Bank of Greece report pointed out. This has served as a disincentive for production-related investments in Greece and contributed to the deterioration of the country’s competitiveness, the report noted.

A lack of competition, both in production and supply, has affected the Greek market by limiting consumer choices for lower prices and better services, the report noted.

PPC, the main power utility, continues to dominate electricity production in Greece and represents 79 percent of installed capacity and roughly 75 percent of thermal electricity generation, the Bank of Greece report informed.

PPC’s retail electricity market share also remains particularly high despite a modest drop following market reforms implemented in 2013, the reported added. The main power utility’s retail electricity market share stood at 88 percent at the end of 2016, while the biggest market share of 17 other suppliers also active in this market was 2.9 percent, the Bank of Greece report underlined.

PPC’s market share is the biggest held by any European power utility, including utilities operating in less liberalized electricity markets such as those of Spain, Portugal and Romania, the report added.

Certain consumer groups such as farmers, major-scale industrial firms and public sector enterprises, which make up a significant share of PPC’s customer base, have no incentive to switch electricity suppliers as they enjoy low-price tariffs offered by the power utility.

Energy-sector tax revenues in Greece rose to nearly 5.5 billion euros in 2016 from 2.5 billion euros in 2005 and about 4 billion euros in 2010, the report noted. Given the country’s fiscal adjustment objectives and revenue targets, no energy sector tax revisions are expected any time soon, it added.