Electricity suppliers pressured by rising wholesale prices

Price levels at yesterday’s NOME auction exceeded all expectations to reach a record high of 58.65 euros per MWh, creating stifling, if not impossible, market conditions for suppliers, as market sources have pointed out.

Current NOME prices, plus existing and prospective surcharges, have now reached levels higher than the retail electricity price for certain consumer groups, such as the mid-voltage category.

Besides independent electricity suppliers, who have depended on NOME auctions for access to lower-cost wholesale electricity purchases, the main power utility PPC’s administration has admitted pricing policy adjustments are necessary for sustainability.

Set to announce its 2018 results next week, state-controlled PPC is incurring losses and will keep facing major financial issues if its tariffs remain subdued, mainly due to government orders ahead of elections.

As for independent electricity suppliers, they are being forced to survive on extremely tight profit margins. Leftover electricity quantities bought at previous auctions for lower prices are still helpful.  But once these amounts are gone, the more recent higher-priced electricity purchases will come into play, making operations less sustainable. The introduction of a CAT surcharge, expected by early 2020, will further increase the burden.

CO2 emission right costs have also been on a sharp upward trajectory, reaching 27.56 euros per ton yesterday.

The week’s average System Marginal Price (SMP), or official wholesale electricity price, is just over 68 euros per MWh, close to the 69 euros per MWh average level in February, when demand peaked as a result of the cold winter weather. Prices are expected to rise as the summer approaches.