The progress made by local officials on at least four energy market reforms – NOME-type auctions, “disruption management” plan, new CAT mechanism, and reintroduction of a Variable Cost Recovery Mechanism – will all be reviewed at a meeting today between energy minister Panos Skourletis and creditor representatives.
This will be the Greek minister’s first meeting with the institution representatives following his appointment to the country’s top energy post two months before the Syriza-led coalition was re-elected into power in September.
Any pending energy-sector issues that may emerge from the meeting will not be resolved today. As has been previously reported, Greece has been granted an informal deadline extension of a few weeks on all the aforementioned energy reforms. These have not been included in the list of prior actions expected for Greece to secure its next sub-tranche of bailout money, worth two billion euros.
Three details concerning the NOME auction plan, to offer electricity wholesalers access to main power utility PPC’s low-cost lignite-fired production, are expected to be discussed at today’s meeting, these being the model to be implemented, the formula to determine auction starting prices, and the road map of the plan, aiming to reduce PPC’s market share to 50 percent by 2020. If a solution is not found, an alternative plan, such as the part-privatization of PPC, will need to be implemented.
The opinion of lenders on Greece’s intention to disregard their more immediate objective for a reduction of PPC’s retail market share by 25 percent and instead focus on the 2020 objective instead remains unclear. The ministry claims lenders have no objections to this more gradual approach.
According to sources, Greece’s NOME proposal includes offering electricity wholesalers between 300 and 400 MW on an initial trial basis to test market demand before a full-scale model is implemented in 2017, allowing leeway for the 2020 objective.
No details have emerged on the starting price of auctions but a large gap has separated PPC and independent wholesalers. PPC has pushed for a price of 59 euros per MWh, but this level is believed to be too high and would fail to draw wholesalers to the NOME auctions. A court decision has noted the starting price should be set at 36 euros per MWh. At this stage, a figure somewhere in between seems most likely.
As for the new CAT mechanism, delivery of the plan has now been extended for next month. Lenders appear to have endorsed a temporary mechanism concerning payments to electricity producers for output in 2015. RAE, the Regulatory Authority for Energy, has commissioned a British economic consultancy firm, Frontier Economics, for assistance in shaping the longer-term CAT mechanism.
The “disruption management” plan, to enable energy cost savings for major-scale industry in exchange for shifting energy usage to off-peak hours whenever required by IPTO, the power grid operator, will, more or less, be based on a pre-Syriza proposal that had been endorsed by the European Commission. This measure promises to offer the industrial sector some relief following the abolition of a 20 percent discount offered to the sector by PPC, a bailout demand.
However, this version of the “disruption management” plan will burden the renewable energy sources (RES) sector. According to the plan, PV sector producers will need to contribute 3.6 percent of their total turnover to help finance the plan, while wind-energy enterprises must pay 1.8 percent of their revenues. A strong reaction is expected from the RES sector.