The issue concerning the true level of main power utility PPC’s production cost has returned to the fore following a decision announced this week by the Hellenic Competition Commission, a protector of free competition, which lends support to Aluminium of Greece, a member of the Mytilineos corporate group, for the high-cost energy problem it faces.
PPC must reach an agreement with Aluminium of Greece on a new tariff deal for the energy-intensive industrial enterprise within a three-month period, as of today, according to the commission’s decision.
The matter has re-emerged as Greek government officials prepare to finanize talks with the country’s creditor representatives on the NOME auction plan, to offer third parties access to PPC’s low-cost lignite sources and help break PPC’s near-monopoly in Greece’s electricity market. The NOME plan needs to be completed by no later than February.
The local competition commission’s decision tackles the PPC cost issue directly and sets a tight deadline for the measures that need to be taken.
Local officials and the creditor representatives will need to decide on the starting price of NOME auctions within the next few weeks. The government wants to press ahead with the plan and seems determined to not permit any delays by PPC over technical concerns.
Returning to the tariff dispute between PPC and Aluminium of Greece, the power utility’s true cost must be reflected in the agreement that needs to be reached. This is not an isolated case and will influence the power utility’s tariff-related dealings throughout the entire industrial sector.
The cost level presented by PPC has already been doubted by the local competition commission, the creditor representatives and, most recently, the Greek government as well, energypress has been informed.
During its long-running dispute with Aluminium of Greece, PPC, in 2013, contended its cost level was 59.1 euros per MWh. RAE, the Regulatory Authority for Energy, had cut the level to 36.6 euros per MWh. To back its claims, PPC had hired multinational professional services firm Ernst & Young to confirm its figures, which the latter did. But this endorsement was based on cost-related figures that had already been published by PPC, not an independent survey of the power utility by Ernst & Young.
Responding to a PPC announcement released yesterday, market authorities have noted the power utility’s management has either not fully understood the importance of the local competition commission’s decisions, which are binding, or has done so and intends to apply defensive delay tactics.
However, in its announcement on the tariff dispute with Aluminium of Greece, PPC did acknowledge any solution to emerge will have a wider impact on consumers in the the local electricity market. “Any agreement reached on the tariff to be offered to Aluminium of Greece, which consumes roughly 5.5 percent of power in the country’s mainland, will impact all consumers,” the PPC statement noted.
PPC’s current management, led by CEO Manolis Panagiotakis, who was appointed earlier this year, has persisted with the cost-related views supported by the power utility’s previous administration. PPC insists its average lignite-based production cost is 59.14 euros per MWh, despite the ruling that undercut the figure to 36.6 euros per MWh and a decision at a PPC general shareholders meeting in 2014 that had set the price at 44.5 euros per MWh.
At the time, authorities assumed PPC would apply the 44.5 euros per MWh level as a base for the NOME auctions. But PPC was not obligated to do so. However, the latest decision by the local competition commission, which has demanded that a fair solution be found with Aluminium of Greece, is a binding one.
The committee’s pressure on PPC to reach a tariff agreement with Aluminium of Greece, and the starting price of NOME auctions, essentially boil down to being the same matter, one that concerns PPC’s actual production costs. It promises to shape the upcoming developments in Greece’s electricity market.