Greek CAT proposal includes UK-type auction capacity system

Greek officials have finalized their proposals for the country’s two new CAT mechanisms, one serving as a temporary model and the other as a fixed plan to be activated once a number of required electricity market reforms have been implemented. According to local officials, this stage could be reached by the end of 2016.

Prior actions required as part of Greece’s bailout agreement are intended to make the Greek electricity market competitive and pave the way for the adoption of the fixed CAT mechanism, an auction-based system.

The prior actions needed include liberalizing the upper limit imposed on the current System Marginal Price (SMP), currently at 150 euros per MWh, increasing the price for supplementary services, and abolishing all additional charges for electricity exports.

The transitional CAT mechanism is expected to be valid only for production units offering flexibility, namely natural gas-fueled power stations and hydropower stations, as had been planned by the previous administration at RAE, the Regulatory Authority for Energy.

The fixed CAT mechanism will be shaped as an auction capacity system based on the UK model, without pre-determined prices. The intention is to achieve an improved balance amid a system whose needs may differ each year.

Officials are pushing to soon have acquired a clear picture on how the market will operate over the next two to three years so as to introduce a plan that will not require any revisions or intervention, while also avoiding market distortions that may prompt loss-incurring operations at some production units or overpayment at others.