New CAT model headed for politically related delays

Of all the pending regulatory issues in Greece’s electricity market, the adoption of a new CAT (Capacity Availability Tickets) model, an EU obligation, appears the most likely to proceed. Afterall, the validity of the preceding model expired on January 1.

Even so, there are growing signs that the procedure’s finalization and implementation will be affected by the country’s political uncertainty and subsequently delayed or even postponed, as has been strongly indicated by PPC’s (Public Power Corporation) reported request for a fifteen-day extension to the plan’s upcoming January 19 deadline for public consultation procedures launched by RAE, the Regulatory Authority for Energy.

At this stage, it remains unknown whether PPC’s request will be accepted, but past events suggest this is likely. The European Commission’s Directorate-General for Competition, which has also been sent the new CAT plan, has yet to offer its approval, which is one of the prerequisites before RAE can finalize the plan. Directorate-General for Competition officials have informed they will have an answer by the end of the month.

In practical terms, both the European Commission’s response and the public procedure’s finalization will have arrived around the time a new government has been sworn in – that is, if the January 25 snap elections manage to produce a government and repeat elections are avoided.

The main opposition leftist Syriza party’s frequently expressed opposition to the new CAT model cannot be neglected. The party leads polls ahead of the elections to be staged in eleven days. RAE is not expected to adopt a final plan without knowing who will be at the helm of the Environment, Energy & Climate Change Ministry. A new Syriza government, or Syriza-led coalition, may require some time before eventually accepting that a new CAT mechanism is necessary.

Politically linked delays in the implementation of a new CAT model would cause damage to the electricity market. In such a case, independent producers could be run to the ground, while PPC will incur considerable losses. Even as it currently stands, the new CAT model, planned to be implemented over a transitionary ten-month period, poses major problems for independent thermal units as a result of the considerably lower CAT prices to be offered. This sector’s sustainability will depend on the success of auctions to be incorporated into the plan.

Details of the new CAT system include payments of 45,000 euros per MW for natural gas-fueled electricity stations and hydropower stations ensuring grid flexibilility. The new model will not include CATs rewarding power adequacy availability, meaning that lignite-fired stations will not be eligible.

Also, as previously reported by energypress, the overall cost of the new CAT system will be significantly reduced to 225 million euros, annually, from 570 million euros at present. A 55 percent share of the new CATs will concern PPC, the Public Power Corporation, while the other 45 percent will support independent producers. Furthermore, according to the plan, revisable CATs will cease applying on November 1 and will be replaced by auctions in the flexibility availability market.