PPC shunning mine cost-cut potential, professional advice

The participation of main power utility PPC’s lignite mines in the “disruption management” plan’s two recent auctions prompted a reaction from disgruntled industrialists as a result of the limited capacity amount that was left over for industrial enterprises, and the consequent flattening of prices caused by the utility’s involvement in the auction process.

PPC’s decision to seek “disruption” plan capacities through the auctions linked to the “disruption management” plan – introduced to enable energy cost savings for major-scale industry in exchange for shifting energy usage to off-peak hours whenever required by the operator – clearly indicated that the utility is not at all interested in reducing its operating costs.

PPC submitted bids worth 5 euros per MW at these auctions, a long way off the nearest bid of 1,000 euros per MW.

PPC’s complete disinterest for more efficient cost-related management of its mines was made all too clear at the “disruption” plan auctions. The approach, however, did not come as a surprise for energy market officials who have closely monitored how PPC has managed its mines over the years. The strategy has been to bloat expenses with disregard for the effects on operating costs.

A cost study conducted by the multinational professional services company Ernst & Young noted that PPC’s mines paid 78.2 million euros for 924,288 MWh of electricity supply in 2012, or an average supply price of 84.6 euros per MWh. The study stressed that the utility’s mines, as a high-voltage electricity consumer, had the potential to pay 65 euros per MWh, or 23.1 percent less. This, alone, would have saved the mines 18 million euros in operating costs.