Next gov’t must act fast on high energy costs for industry

The next government to emerge from the upcoming September 20 elections will need to swiftly confront urgent energy-cost matters concerning the country’s industrial sector. The latest bailout agreement for Greece includes a condition to eliminate a 20 percent electricity discount offered by main power utility PPC in 2014, which, in order to be implemented, will require resolving a series of pending issues impacting the industrial sector’s energy-cost problem.

For starters, a general shareholders meeting at PPC will need to be held. This, however, is not possible without the participation of the public sector, the utility’s main shareholder, meaning that the matter will remain stagnant until a new government is formed, as PPC will not be able to issue any new invoices for the time being.

A PPC decision on the elimination of the 20 percent discount offered to industrial consumers cannot be reached if the power utility does not settle the pending implementation of the “power disruption management” plan. A directly related issue, this will 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. The “power disruption management” plan’s tariff levels for the industrial sector remains unclear.

Despite the pressing energy-cost matters faced by Greece’s industrial sector, PPC, in a recent announcement, appeared aloof by noting that high-voltage prices levels are very competitive and do not require any revisions. PPC does not face any competition in the high-voltage consumer category.

In recent years, PPC has benefited from a series of production cost reductions, but they have not been passed on to consumers. The elimination of CATs (Capacity Availability Tickets) and a Variable Cost Recovery Mechanism covering hefty start-up costs for thermal stations, as well as the drastic drop in fuel prices, have all substantially reduced PPC’s operating costs compared to 2013, when the current tariff levels were set.

Many industry officials believe the introduction of the “power disruption management” will not solve industry’s energy-cost problems, which, instead, need to be solved on a broader scale. Besides the implementation of EU guidelines and the “power disruption management” plan, officials believe that a series of complementary measures are also needed, including exempting the industrial sector from a Special Consumption Tax (EFK) imposed on electricity, and a tiered application of the tax on natural gas.

Otherwise, industry risks facing a new round of energy cost increases. This would prover disastrous for the diminished number of industrial enterprises still active in Greece. The next government will need to act fast on the issue and deal with it as a high-priority matter.