Energy economy academic decries choice of supplier surcharge formula

A prominent local energy economy academic has condemned as unnecessarily complex the energy ministry’s recent choice of formula determining the levels of a RES-supporting surcharge imposed on electricity suppliers. The surcharge’s recent exorbitant levels, far higher than expected, have prompted concerns in the electricity market, especially among independent suppliers seeking to gain market-share ground.

“The choice of this complex method is offering nothing and causing problems in the market,” noted Pantelis Capros, Professor of Energy Economics at the National Technical University of Athens. “It is well known in economic theory, as well as simple logic, that the recovery of an external cost cannot be achieved through a varying marginal market cost, simply because, by definition, it is not determined by the market as it is an external cost, in other words, the result of State intervention.”

The surcharge, which is revised weekly, factors in the System Marginal Price (SMP). Introduced recently to help balance the RES special account deficit, the surcharge has skyrocketed to levels well above expected levels, prompting independent electricity suppliers, whose business prospects have been negatively impacted, to put plans on hold and proceed with legal challenges.

The main power utility PPC, which controls nearly 90 percent of the retail electricity market, has declared it refuses to pay its surcharge amounts. Its dominant electricity supply, covering most of the market, makes unimaginable the prospect of the utility being removed from the suppliers registry. Independent suppliers, fearing such a development following a warning by authorities, have kept up with their surcharge payments but filed legal cases seeking revisions and protection.

Though the professor stressed that the RES sector needs to be supported as part of the effort to combat climate change, increase energy security, and foster RES sector growth, he also noted that a more appropriate supportive measure needs to be applied.