The net profit margin for independent electricity suppliers prior to yesterday’s NOME auction – which produced higher-than-expected prices to severely dampen their prospects for near-future market share gains – was estimated at an unsatisfactory level of between two and three euros per MWh, according to a study conducted by Pöyry.
The international consulting company was commissioned by RAE, Greeces’s Regulatory Authority for Energy, to conduct an impact assessment of the NOME auctions, primarily for the first half of the year. They were introduced a year ago to offer independent suppliers access to the main power utility PPC’s lower-cost lignite and hydropower sources.
The gross profit margin for suppliers, which, according to the impact assessment, ranged between 40 and 100 euros per MWh, was narrowed down to the aforementioned net profit margin levels as a result of various expenses, including operational costs such as a surcharge recently imposed on suppliers.
Independent suppliers cannot roll over this surchage cost, either entirely or partially, to consumer electricity bills unless the still-dominant PPC, whose market share remains over 85 percent, does so first.
The Pöyry impact assessment also found that suppliers would be loss-incurring ventures at present if the NOME auctions did not exist.
It should be noted that NOME auction prices in the first half of the year were considerably lower than the levels generated at yesterday’s session, whose results come as a major setback for any major market share shifts in favor of the independent suppliers in the immediate future.
The study’s results confirm the views of many pundits who have insisted market conditions are still not ripe enough to propel full-on competition in Greece’s retail electricity market.
RAE will use the impact assessment’s results to shape its views, while the energy ministry must take into account its findings to shape its position in negotiations with the country’s lenders.
The study’s findings come at a key moment given the result of yesterday’s NOME auction. The high prices generated are expected to renew a push by the lenders for the inclusion of hydropower units into PPC’s bailout-required sale package, until now a lignite-only proposal.