New subsidy sources needed, energy prices seen persisting

Energy prices are forecast to remain elevated and turbulent for at least another year or so, until early 2023, according to a number of market reports, including one by the European Commission, which means that the government faces the challenge of finding new support fund sources for consumers and businesses, scrambling to meet exorbitant energy prices brought about by the energy crisis.

Until now, the government has relied on Energy Transition Fund money generated by carbon emission right auctions to offer consumers subsidies, but will need to resort to the state budget should this money eventually run out.

Finance minister Christos Staikouras made this need clear in an interview with Greek media outlet Real. “The finance ministry may now possibly need to make available funds from the state budget, not the Energy Transition Fund, for adverse scenarios in the second half of 2022, in order to subsidize households and businesses,” the minister noted.

PPC public service return for 2011 from 2020 national budget

The government has decided to cover a power utility PPC a public service compensation (YKO) payment of 195 million euros, endorsed by RAE, the Regulatory Authority for Energy, through the 2020 national budget, energypress sources have informed.

Though this solution, agreed to by energy minister Costis Hatzidakis and the finance ministry, does not promise instant relief for state-controlled PPC, burdened by poor finances, it does secure a prospective cash influx that will be taken into account by Ernst & Young, the utility’s certified auditor, scheduled to deliver a report on the Greek power utility on September 24.

This amount is expected to contribute to a sum of over 800 million euros needed by PPC over the next 12 months, according to new chief executive Giorgos Stassis.

RAE’s initial calculations for PPC’s 2011 public service compensation resulted in a sum of 160 million euros before this amount was revised to 195 million euros. PPC originally sought a sum of between 650 and 700 million euros before settling for RAE’s far lower figure.

Gov’t must decide if budget, consumers will cover PPC public service return

The newly elected conservative New Democracy government will need to decide whether a considerable public service compensation (YKO) return to the power utility PPC for 2011, believed to have been officially set at 195 million euros, will be covered by consumers, through electricity bill surcharges, or the national budget.

Though the PPC administration has questioned the amount set by RAE, the Regulatory Authority for Energy, believing it should be greater, it hopes the payment will be made soon, once Parliament resumes full operations, as the cash injection would offer some relief for the power utility’s struggling finances.

PPC previously demanded a sum of between 650 and 700 million euros for 2011.

A RAE letter forwarded to the energy ministry provided a public service compensation estimate of between 160 and 200 million euros for PPC, but, according to sources, the authority has already calculated a precise amount of 195 million euros, which it believes is fair.

A legislative revision is needed before the payment process can proceed as, based on existing law, the case for PPC’s public service compensation claim concerning 2011 is closed, RAE has informed the energy ministry in a letter.

The previous Syriza government did not submit the required amendment to Greek Parliament.

Budget’s energy privatization revenues seen as unrealistic

The national budget’s privatization revenue forecasts for 2018, submitted to Greek Parliament yesterday, are best-case scenarios, if not theoretical or groundless, especially in the case of the energy sector, pundits overwhelmingly agree.

The plan includes revenues in 2018 from three highly complex privatizations, DEPA (Public Gas Corporation), ELPE (Hellenic Petroleum) and PPC (main power utility). Not one of these privatizations is expected to be completed in 2018, even if launched very soon.

Even so, the budget plan anticipates 500 million euros from the sale of a 35 percent of ELPE, 250 million euros from the sale of DEPA’s 65 percent, and 100 million euros from the sale of PPC’s 17 percent.

Essentially, the inclusion of these privatizations in the 2018 budget amounts to nothing more than an attempt by the government to convince the country’s lenders that it is not obstructing procedures at TAIPED, the state privatization fund.

It is commonly known that the sale of PPC’s 17 percent, currently controlled by TAIPED, cannot proceed unless matters concerning the bailout-required sale of a package representing 40 percent of the power utility’s lignite capacity are cleared up.

The PPC lignite units to be placed for sale first need to be split from PPC so that the utility’s new market value may be calculated before the corporation’s 17 percent can be defined and placed for sale.

The sale procedure offering PPC lignite units is scheduled to begin in June. This, too, is seen as a best-case scenario, even if Genop, PPC’s union group, does not fight a battle against the lignite unit sale plan.

The budget plan’s DEPA and ELPE privatizations within 2018 are equally unrealistic. DEPA’s 65 percent cannot be privatized unless a bailout requirement calling for the gas utility’s reduced presence in the Greek gas market is first sorted out. At present DEPA is dominant in both the wholesale and retail natural gas markets.

The picture at ELPE will require at least the first half of 2018 to clear up. It will take consultants hired by TAIPED to assess strategic options concerning the sale of a 35 percent ELPE stake about six months to arrive to any conclusions.