PPC gov’t-backed pricing control causing financial woes

Rising CO2 emission right costs over the past year and a half have been a major concern for Greek state-controlled power utility PPC, one of Europe’s most exposed industries to coal-related production cost increases as a result of the many lignite-fired power stations operated by the corporation.

However, rather than increase electricity tariffs to cover these coal-related cost increases, as electricity producers who are far less exposed to coal have done, PPC has maintained, even lowered, prices as a result of intervention by the energy ministry, its objective being to avoid the political cost of higher energy costs.

This has led to a deterioration of PPC’s financial standing, as was recently made clear by a leaked government email.

Over the past couple of years or so, PPC offered consumers a 15 percent punctuality discount for electricity bills paid on time. This discount was recently reduced to 10 percent.

Last September, PPC turned to international consulting support for preparation of a bond issue as well as guidance to improve cash flow.

The power utility was advised to increase electricity tariffs but the prospect that was publically rejected by energy minister Giorgos Stathakis.

The minister also rejected a request by PPC chief executive Manolis Panagiotakis for an electricity bill clause that would have triggered higher tariffs in cases when CO2 emission right costs exceed certain levels.

The government-sponsored price suppression and reduction at PPC is  causing financial woes at the company. Revenues are consistently falling short of production and operating costs.