Industry wants end to power producers minimum-offer rule

Greece’s industrial players, negatively impacted by delays in the implementation of local electricity market reforms, have proposed the lifting of a minimum-offer rule imposed on electricity producers that is distorting prices and affecting levels of competitiveness.

The industrial sector wants this revision incorporated into Greece’s bailout-required electricity market reforms, intended to allign the country with the target model, aiming for a single European electricity market.

Current local regulations force electricity producers to observe a minimum-offer regulation in the day-ahead market, where contracts between sellers and buyers for the delivery of power the next day are agreed to. Electricity producers are obligated to offer electricity at prices that exceed the market’s variable cost, an old local rule intended to limit the dominance of PPC, the main power utility.

Market officials have pointed out that this minimum-offer rule is the main reason why electricity price discrepancies exist between the Greek market and other European markets. The rule leads to considerably higher prices, especially during low-demand hours, compared to price levels elsewhere in Europe.

This situation increases electricity imports, the frequency of local electricity production unit closures, as well as variable production costs. Electricity producers are left unable to react, which lowers their competitiveness on a regional scale.

Also, major-scale electricity consumers are being deprived of the opportunity to lower their energy-related operating costs by operating at low-demand hours. Instead, they are forced to purchase energy at an elevated cost, which affects their level of competitiveness.

Consequences if the minimum-offer regulation is not lifted will include price distortions in electricity forward markets and artificially high prices that would increase energy imports and turn market interconnections into a problem rather than an opportunity for market participants.

Market officials, especially major-scale energy consumers, believe that the abolishment of the minimum-offer regulation would benefit electricity producers, industrial consumers and suppliers, while market dominance abuse issues could be handled more effectively by regulatory authorities and the competition committee.

Market officials also believe abolishing the minimum-offer regulation will help allign the Greek market with European markets and offer incentives for investments that would increase flexibility for producers and consumers.