NOME-type auctions plan hangs in the balance

The institutionalization of NOME-type auctions, a plan that has been worked on over the past couple of years or so as a key Ministry of Environment, Energy & Climate Change strategy to counter the electricity market’s rigid form, appears likely to be put on hold until the country’s political climate clears up.

However, even though the plan to be forwarded by the Greek government to the country’s creditor representatives, or troika, including the European Commission, will not, for the time being, be ratified in Parliament and implemented, it does remain crucially important as its content will determine whether reduced electricity rates secured by the local industrial sector for 2014 – at a PPC (Public Power Corporation) shareholders meeting last February – will be considered as constituting state aid.

The industrial sector also hopes to secure a similar deal for 2015 at the next PPC shareholders meeting, scheduled for December 22.

Industrial sector representatives have reacted to confirmed reports, published yesterday, noting that the ministry is currently in the process of making certain revisions to the NOME-type auctions plan, based on troika demands. The industrial sector fears it could end up being deprived of lower electricity price rates.

The fundamental disagreement between the Greek government and troika concerns their respective perceptions of what NOME-type auctions should represent. The troika, especially the European Commission’s Directorate General for Competition, considers the auctions as a means of increasing competition in the retail electricity market, whereas the Greek government sees the plan as a tool for assuring low-cost electricity to the industrial sector.

The price levels offered to the industrial sector in 2014 were based on calculations by RAE, the Regulatory Authority for Energy, of PPC’s lignite-based production. The government is expected to employ this as a key argument to counter state aid claims.

If, however, the prices determined through the NOME-type auctions end up being higher than the current levels, then the Commission could decide that the latter are a result of state aid, in which case it will seek to recover the difference.

Unlike the new CATs (Capacity Availability Tickets) being worked on, a regulatory decision made by RAE, the NOME-type auction plan needs to be ratified in Greek Parliament. Even if early general elections are avoided, the current Parliament, in which the coalition holds a slim majority, is unlikely to ratify a draft bill tailored to the troika’s demands, as certain MPs are expected to side with the negative reactions of industrialists and PPC.

Negotiations on the NOME-type plan will continue in Athens next week, when troika officials visit the country for the next round of talks.