Part of the national budget’s primary surplus redistribution, an initiative announced by Prime Minister Alexis Tsipras in an address broadcast live last night, will be used to cover a Public Service Compensation (YKO) retroactive payment to the main power utility PPC, totaling 360 million euros and concerning 2012 to 2016.
Settlement of this public service amount owed to the power utility will ensure no electricity tariff hikes next year and also lead to considerable electricity tariff cuts for underpriviledged households supported by the Social Residential Tariff (KOT) program, offering subsidized electricity, the Greek leader noted. At present, 300,000 households are eligible for the KOT program.
The primary surplus redistribution, to total 1.4 billion euros, was made possible by an overperformance that more than covered the 2017 target figure, set at 1.75 percent of GDP, Tsipras explained.
It was previously believed that a 130 million-euro portion of the public service amount owed to PPC would stem from this year’s primary surplus and the rest evenly divided over a four-year period covering 2019 to 2022.
The government opted to cover the entire lot with this year’s primary surplus as the country’s lenders wanted to avoid burdening the budget in 2018 despite insisting that PPC must receive its retroactive YKO sum. Settlement of the YKO amount owed to PPC has been set as a bailout term.
Besides supporting the Social Residential Tariff program, the YKO surcharge primarily subsidizes high-cost electricity production on Greece’s non-interconnected islands.
Most European countries whose land mass includes island territory have developed interconnections to avoid more expensive localized production. In countries where such infrastructure has not been developed, Spain being an example, social residential tariff costs are equally covered by the budget and consumers.