One of the conditions in Greece’s latest bailout agreement may require main power utility PPC to supply a greater amount of electricity to the market through NOME-type auctions than had been intended in a preceding plan, while the industrial sector’s energy cost concerns are being neglected.
PPC will need to make available, through NOME-type auctions, electricity amounts measuring 25 percent of total electricity consumption, according to the latest bailout agreement. If adopted, NOME-type auctions will offer far greater electricity amounts to the market than the quantities proposed in a previous plan prepared by RAE, the Regulatory Authority for Energy. It had called for a proportion of between 25 and 30 percent of PPC’s lignite-fired and hydropower production to be offered through NOME-type auctions.
This discrepancy needs to be cleared up if a working group assembled by RAE is to press ahead and prepare a new NOME-type plan under the pressure of an approaching deadline. The working group has asked the Production Reconstruction, Environment and Energy Ministry and the government to clarify, according to energypress sources.
RAE’s first NOME plan, drafted under the authority’s previous leadership, is currently being used as the basis for the latest auction plan. A follow-up effort, which took industrial sector interests into consideration, had been rejected by the EU because the country’s creditors, especially the European Commission, consider auctions as being a tool for increasing competition in the retail electricity market and not one that may lead to energy cost reductions for the industrial sector.
It remains unknown which consumer groups will need to be served by alternative suppliers acquiring lower-priced electricity through the NOME-type auctions.
The starting price level of NOME-type auctions is a crucial detail. Starting prices will be set at levels linked to the cost of electricity produced by PPC at its lignite-fired power stations. PPC officials consider it a given that the starting price level of its electricity to be offered through auctions will reflect production cost plus a reasonable profit.
Over time, a variety of production cost level claims have emerged. PPC, in a legal battle with Aluminium of Greece, had contended its lignited-fired electricity production cost stood at 59.14 euros per MW, while the court had decided on a lower figure of 36 euros per MW. At a PPC shareholders meeting in February 2014, the figure was presented as being at 44.50 euros per MW.
If set too low, the starting price for NOME-type auctions will prove detrimental for PPC’s interests. If overpriced, the auctions will not attract new suppliers, which will affect the bailout objective of tranfering a 25 percent share of the retail electricity market to private-sector energy firms. If PPC’s dominance is not ended, the creditors will resort to structural changes, meaning part-privatization of PPC, or sale of PPC production facilities.
According to the bailout schedule, Greek authorities need to discuss the country’s NOME-type plan with the European Commission this month. The plan’s objective is to reduce PPC’s retail and wholesale electricity market shares by 25 percent in the immediate future, and below 50 percent by 2020. If a final NOME-type plan is not achieved by the end of October, then Greek officials will need to agree on the structural changes leading to the same market share results.