Price levels at first NOME auction, today, vital for success

Local electricity market players are looking forward to today’s inaugural NOME auction – intended to provide third parties with access to main power utility PPC’s low-cost lignite and hydropower sources as a measure to help break the utility’s market dominance and steer it to bailout-required market share reductions – with high expectations as well as alternative plans.

The twelve registered participants, which have provided letters of guarantee worth a total of over five million euros, are expected to fully absorb the 460 MWh amount to be offered at a starting price of 37.37 euros per MWh. The final price levels reached will be crucial to the effort’s success.

Levels not too far over the starting price will pave the way for more competitive retail electricity pricing policies by independent suppliers, seeking to capture greater market shares as PPC’s grip loosens. PPC, which needs to reduce its market share to less than 50 percent by the end of 2019, currently holds about 89 percent of the retail market.

Certain suppliers have already adjusted their price offers to the anticipated impact of the NOME auctions. Even so, a new environment is being shaped which could drive price levels even lower and also allow suppliers to cater to new consumer categories not easily accessible until now.

Even if the NOME auction prices reach high levels, the amounts purchased may protect buyers from future market fluctuations. If, for example, the System Marginal Price (SMP) increases in 2017, as has been forecast by certain authorities, then suppliers who have acquired electricity amounts through the NOME auctions will have secured stable prices for a part of their trading needs.

Today’s auction is not being staged as an isolated event, but, instead, has been incorporated into a wider framework of initiatives, including the next auction, in 2017, as well as auctions for electricity import rights.

The auction will take place at midday today. Whether it will generate competition and drive prices lower in the retail market remains to be seen in the weeks to come.