Cost recovery mechanism’s scrapping affects producers

The abolishment of the Cost Recovery system, a variable cost recovery mechanism applied to reward natural gas units with the aim of offering stability and adequacy to the energy system, has prompted serious problems in the electricity market, especially for matters concerning the operation and finances of private-sector power plants.

According to EnergyPress sources, data accumulated by IPTO, Greece’s Independent Power Transmission Operator, locally referred to as ADMIE, confirm the operator’s fears that the mechanism’s potential scrapping risked causing problems. IPTO had been commissioned by RAE, the Regulatory Authority for Energy, to conduct a detailed study focused on the financial and technical impact on the electricity market in the event that the cost recovery mechanism was abolished.

Besides the study’s results, IPTO has also received negative responses from independent power producing units detailing the disastrous consequences on their finances whenever ordered to inject energy into the system for reasons of stability and adequacy. One electricity power producer claims to have lost 100,000 euro over two days as a result of having to inject energy into the system.

Once completed, the IPTO study will provide a comparative cost analysis, for all involved, depicting two scenarios, one, had the cost recovery system not been abolished, and another, following its abolishment. The operator may also offer proposals to RAE for necessary intervention. If so, these recommendations would be forwarded for public consultation.

Private-sector power plants affected by the abolishment have asked to be compensated. They have also requested that IPTO re-examine the market’s functioning and also adopt temporary transitional measures until a target model is achieved and implemented.

Prior to these results, IPTO had made an official request for the implementation of the cost recovery system to be extended until at least September, citing the possibility of problems arising during the summer months, crucial for the tourism sector and, by extension, economy.