RAE, the Regulatory Authority for Energy, responding to Greece’s increased challenges amid the deep recession, will conduct tests intended to determine the level of efficiency of the country’s mazut-fueled electricity power stations on the non-interconnected islands.

In recent years, the main power utility PPC has received annual sums of around 800 million euros in Public Service Compensation (YKO) to finance high-cost electricity producing units on the non-interconnected islands, as well as to offer subsidized electricity supply to vulnerable social groups.

The tests to be conducted will examine whether operating costs at the island-based units can be lowered and to what extent. Internationally recognized benchmarks will be applied to compare the efficiency levels of the mazut-fueled units on the Greek islands with equivalent operations elsewhere. If the RAE tests conclude that these production units should be running on smaller amounts, then the Public Service Compensation to be made available to PPC will be reduced.

According to its website, PPC operates 31 mazut-fueled units with a total capacity of 593 MW on the non-interconnected islands.

PPC’s previous administration had decided, late in 2014, to launch a five-year program to modernize many of the mazut-fueled stations. The power utility’s board had signed an agreement for an 80 million-euro loan to part-finance new power production stations on numerous islands. The fate of this agreement remains unclear.

The RAE tests to be conducted are definitely a step in the right direction, but the ultimate objective will be to interconnect the islands with the mainland grid.

Amounts paid to PPC for Public Service Compensation costs over eight years would cover the cost of interconnecting all the islands to Greece’s mainland grid.

The plunge in crude prices has helped alleviate the cost-related problem to keep the mazut-fueled stations running. Public Service Compensation charges this year are expected to be reduced by about 100 million euros. But this should not lead to any complacency with regards to the interconnection projects for the islands as oil prices could return to an upward trajectory.

Besides the RAE tests on the island-based power units, modern high-precision power meters enabling increased management efficiency will be installed. This project, budgeted at 50 million euros and initiated by HEDNO, the Hellenic Electricity Distribution Network Operator, is planned for the next five years.