Though still too early to judge, as three more NOME auctions are scheduled for this year, in March, July and October, yesterday’s auction, the second to be staged following the inaugural session last October, took the procedure’s intention, which is to help liberalize the electricity market and generate competition, a major step back.
Yesterday’s NOME results will surely reignite talks for the need of alternative structural measures. The part-privatization of PPC, which would offer investors a “Little PPC”, as the plan has been locally dubbed, can be expected to be brought back to the negotiating table by the country’s lenders.
The main power utility PPC, whose market dominance and the need to diminish this prompted the NOME auction’s introduction, ended up being the main beneficiary of yesterday’s session.
The utility secured lofty earnings from the electricity offered at the auction as a result of the competitive bidding that drove up price levels. Earnings for the utility reached 52.2 million euros, 4.69 million euros above the electricity amount’s value, estimated at 47.5 milliion euros considering the starting price of 37.37 euros per MWh.
These higher-cost electricity purchases made by independent suppliers make it difficult for them to offer consumers attractive packages. As explained by market officials, at such elevated price levels, even a one-cent difference can prove to be the difference between making a profit and incurring losses.
Some officials noted that such prices make commercial efforts sustainable only if the System Marginal Price (SMP) and wholesale price levels remain high. Otherwise, a large part of the electricity purchased at yesterday’s NOME auction will most likely end up being exported.
The arrival of the NOME auctions bought into play a bailout-required measure aiming to break PPC’s dominance by offering other traders access to the utility’s low-cost lignite and hydropower sources.
However, yesterday’s NOME auction results could make more difficult the Greek government’s effort to reach an agreement with the country’s lenders on the current bailout review’s energy sector requirements.
No major market share shifts can be expected as independent suppliers will not be able to launch aggressive pricing policies based on the auction price levels reached. This makes the bailout objective of a reduced PPC market share more difficult to achieve.
PPC’s proposal to carve out sections of its clientele for the establishment and sale of new companies has gained some credibility. However, this proposal is being viewed with some reservation as delays have already emerged.
Of the 14 participants at yesterday’s session, 12 made successful bids to secure orders. Two bidders failed to acquire electricity amounts. One of these failed bids, concerning an amount of 1 MWh, is believed to have been made by the industrial firm Viohalko. (Some industrial firms have acquired supply licenses so as to be able to take part in the NOME auctions). The other bid, made for a 13 MWh amount, is believed to have been made by Volton, a newcomer to the electricity supply market.
The market’s three major independent suppliers, Protergia, Elpedison and Heron, all vertically integrated, are believed to have acquired the biggest electricity amounts, 31 MWh, 33 MWh and 20 MWh, at prices of 41.05 euros per MWh and 41.06 euros per MWh.
Cement producer Titan is believed to have secured a 1 MWh amount for 41.06 euros per MWh.
The remaining amounts, ranging between 3 MWh and 16 MWh, were bought by Watt & Volt, Green, Volterra, NRG, ELTA, OTE and the newly arrived KEN.