The government’s effort to introduce NOME-type auctions into Greece’s electricity market could put the coalition at odds with the country’s creditor representatives, or troika, as the respective motives by the two sides, behind this plan, differ considerably.
The plan’s main objective, as the Greek government sees it, is to ensure lower-priced electricity for local industry. The troika, on the other hand, views the NOME-type auctions for electricity produced by PPC (Public Power Corporation) at its lignite-fired and hydropower stations as a tool to intensify competition in the retail market, not as a means of lowering the cost of electricity for industry to increase the sector’s competitiveness.
A NOME-type plan completed recently by RAE, the Regulatory Authority, and handed over to the government foresees lower rates for the industrial sector, at price levels set during a PPC general shareholders meeting last February. The plan offers little change in purchase price levels for suppliers intending to sell in the retail market, both household and commercial.
The NOME-type plan’s price levels for suppliers are calculated by applying various coefficients, ranging from 0.7 to 1.3, to a base price. The coefficient applied depends on the category of consumer to be supplied. Lower coefficients will be applied if the supplier intends to sell to industry, resulting in lower prices. If the supplier intends to sell into the retail market, the highest coefficient will be applied, leading to higher prices.
During its previous visit to Greece, the team of troika officials made clear its objections to the NOME-type plan’s current form, noting that it was excessively supportive of the industrial sector while not offering sufficient incentive for the retail market’s liberalization. Certain revisions were made to the plan by Greek officials following the troika’s departure, but the basic line that prompted the disagreements has remained unchanged.
According to reliable energypress sources, if the troika insists with its views on the matter, which is not unlikely, the plan’s development will be jeopardized. If, for example, the government agrees to lower electricity rates in the retail market as a means of ensuring lower industrial rates, then the resulting pressure on PPC could lead to its financial collapse.
Should the NOME-type plan not be adopted, the government will not only need to look for an alternative plan to ensure lower electricity rates for the industrial sector, but rate reductions agreed to at last February’s PPC shareholders meeting will face the risk of being considered illegal state aid. Legal action already taken is being examined by the European Commission.
Another concern for the NOME-type auction plan’s prospects is that, if delayed, its draft bill may coincide, in Parliament, with procedures for the appointment of a new President, at present a cause of troubling political uncertainty. Current President Karolos Papoulias’s five-year term expires next March. Failure by Greek Parliament’s political parties to support a new candidate with 180 votes in the 300-seat house, which seems highly probable, will prompt early elections. If the NOME-type plan becomes entangled amid such developments, chances are it will not be ratified.