New RAE board, headed for approval, facing urgent issues

The new seven-member board at RAE, the Regulatory Authority for Energy, whose three vacant positions, including those of chairman and deputy, are soon expected to be filled following nominations made yesterday by the Production Reconstruction, Environment and Energy Minister Panagiotis Lafazanis, will need to hit the ground running with a series of pressing issues requiring swift action.

The three nominees, all hailing from within the authority’s ranks, meaning the officials are already well informed of the task that lies ahead on long-delayed issues, need to be approved in Parliament before their new roles on the board are official.

The energy minister has nominated Nikos Boulaxis as chairman, Sotiris Manolkidis as deputy chairman, and Nektaria Karakatsani as a board member.

In recent times, RAE has hobbled along dysfunctionally, avoiding taking initiatives, with four board members and nobody at the helm. Also, communication between the energy ministry and RAE has deteriorated. Lafazanis, the energy minister, has publically described RAE as a service protecting private-sector interests, while also noting its executive powers will be diminished.

The major pending issues that need to be swiftly addressed by the new board at RAE include revising surcharges for network transmission, concerning IPTO, the power grid operator, and the distribution network, concerning HEDNO, the Hellenic Electricity Distribution Network Operator. The surcharge revisions concern 2015 and should have been made late in 2014, but were delayed by the country’s political developments. According to energypress sources, both IPTO and HEDNO have submitted proposals for surcharge increases. Any hike that woud lead to increased electricity bills for consumers has been ruled out by the energy ministry.

DESFA, the natural gas grid operator, is expected to forward its latest grid-related cost data to RAE within the next few days. New network surcharge rates are determined by the authority every three years. Gas network-related costs will need to be covered by considerably lower gas consumption, which has fallen from 4.219 billion cubic meters in 2012 to 2.78 billion cubic meters in 2014.

Other pressing issues to be faced by the new RAE board include preparing a new plan for Public Service Compensation (YKO) amounts. Current YKO surcharges being charged on professional and household electricity bills face the risk of being considered illegal state aid by the European Commission if the country does not submit a new and approved plan, energypress sources have noted. Also pending is a plan on the method to be implemented to seek collecting – on behalf of PPC, the main power utility – some 450 milion euros of unpaid YKO surcharges that have accumulated in recent years.

Also, the country has been left without a Capacity Availability Tickets (CAT) system since the end of 2014, when the validity of the previous model expired. The new model, which had been submitted to Brussels by Greece’s previous government, has not been pushed forward by the new administration.

Another issue concerns whether a Variable Cost Recovery Mechanism, locally acronymed MAMK, will be reintroduced or not. PPC opposes a proposal made by RAE. The mechanism would compensate independent thermal power stations, which operate at a loss when forced to turn on and produce electricity to maintain the grid’s adequacy levels. Thermal power stations, which run on natural gas, take about two days to warm up before beginning to produce electricity. The mechanism would compensate these units for the significant cost entailed during the preparation process.

PPC officials believe the mechanism’s return would generate complacency in efforts being made to modernize the market and reduce production costs at power stations. Independent thermal power station operators argue the mechanism is necessary to protect them from prospectively destructive financial losses.

Also, a report justifying the various current Emission Reduction Tariff (ETMEAR) surcharges added to electricity bills, based on categories, needs to be submitted to the European Commission. Responding to consumer complaints, the European Commission has asked Greece to eliminate all possible ETMEAR inequalities, otherwise face penalties as of July 1.