Creditor doubts over NOME starting price could lower level

The country’s creditor representatives, currently engaged in the second review of Greece’s bailout program, are pressuring Greek government officials to redetermine the NOME auction starting price.

However, contrary to the intentions of main power utility PPC, which has just declared it will endeavour to have the starting price level raised, claiming it does not cover the utility’s operating costs, this creditor demand will most likely lead to a price drop. Creditors want the starting price level reset once the European Energy Exchange sets, in December, the forward price for CO2 emmisions allowance prices. A price drop is anticipated at the exchange.

The creditors do not want to wait for PPC to present cost-related data, scheduled for March, before the NOME starting price is redetermined.

CO2 emmisions allowance prices and PPC’s cost-related data are the two factors that could lead to a revision of the NOME auction starting price set last month, at 37.37 euros per MWh, by local authorities.

Earlier this week, PPC officials implied the utility would build a case in order to persuade sector authorities to increase the NOME auctions starting price.

The NOME auctions, intended to provide third parties with access to PPC’s low-cost lignite and hydropower sources as a measure to help break the utility’s market dominance, were introduced last month.

The 37.37 euro per MWh starting price was set through a ministerial decision based on a price-setting formula provided by RAE, the Regulatory Authority for Energy.

If the creditor representatives have their way, the starting price is expected to drop to a level of around 32 euros per MWh. If so, independent electricity suppliers who ordered electricity amounts at last month’s inaugural NOME auction are likely to export these quantities and seek even lower prices at the next auction for supply to the local market.

The creditor representatives are also pressuring local officials for a NOME auction schedule, to be prepared by RAE, covering 2017. Auction dates and amounts to be offered will need to be specified in the plan.

A second NOME auctioned for 2016 is unlikely to be held. A November 15 date proposed by LAGIE, the Electricity Market Operator, responsible for the operation of the wholesale electricity market, has already gone by.

A NOME auction schedule for 2017 is most likely to be announced towards the end of December, as demanded by the lenders.

The electricity amount to be offered in 2017 is being disputed by the lenders and government officials. According to the current plan, PPC is obligated to offer 16 percent of total production in 2017, which works out to 675 MWh. The lenders want the 460 MWh quantity set for 2016 to be compounded onto the 2017 figure. This could unsettle the market as it is considered highly unlikely that such an amount can be absorbed.