Traders appeal to Brussels over NOME export limit proposal

Energy firms primarily active in transboundary electricity trade are seeking European Commission support in an effort to prevent the adoption, in Greece, of restrictions – including indirect measures – on exports of electricity amounts secured at local NOME auctions.

Traders were prompted into action by a Greek Energy Exchange proposal forwarded to a public consultation procedure staged by RAE, the Regulatory Authority for Energy, calling for NOME-related electricity exports to be sold at just under the System Marginal Price (SMP), or wholesale price, rather than lower prices secured at the auctions.

NOME auctions were introduced about two years ago to offer independent energy firms access to the main power utility PPC’s lower-cost lignite and hydrocarbon sources as a means of breaking the utility’s retail electricity market dominance.

In their appeal, export-minded traders have cited the EU’s free-trade principle as their main argument. It is not yet clear how the European Commission could respond.

 

 

 

Reserved hopes of NOME price containment this Wednesday

New NOME auction-related export disincentives are expected to subdue – at the next session, this Wednesday – the aggressive approaches of certain auction participants buying considerable electricity amounts with the intention to export to higher-price markets.

However, expectations of the measure’s effectiveness remain reserved as other factors could still drive up prices and once again deprive independent electricity suppliers of lower-cost wholesale electricity as a tool to compete against the main power utility PPC in the retail market.

Wholesale electricity prices are currently flying high in European markets but Greece’s SMP, relatively lower at levels of around 70 euros per MWh, has only partially reflected this trend.

Market fears fueled by rising CO2 emission right prices could prompt aggressive bidding among auction participants this Wednesday.

Such factors have raised fears of a repeat, if not deterioration, of results at Greece’s previous auction, which generated a record price level of 48.8 euros per MWh, approximately 3.5 euros over the previous record set at the end of 2017.

Costlier wholesale price mulled for exported NOME electricity

NOME auction participants will not face any quantitative or post-purchase usage restrictions concerning electricity amounts bought at auctions but will need to cover a higher System Marginal Price (SMP), the official electricity wholesale price, for amounts found to have been exported by follow-up checks, according to a proposal expected to soon be forwarded by LAGIE, the Electricity Market Operator.

It is believed that the European Commission, which has objected to the imposition of export limits on NOME amounts, would endorse such a plan.

Certain electricity suppliers, especially traders possessing supply licenses but no – or virtually no – customer bases, have been buying considerable amounts of lower-priced electricity at NOME auctions for export, a practice offering wide profit margins given the higher electricity prices secured abroad.

Such export-minded participants are pushing NOME auction prices higher for independent suppliers seeking lower-cost wholesale electricity prices at the auctions to compete against the still-dominant power utility PPC in the Greek market.

PPC faces retail electricity market share contraction targets of 62.24 percent by the end of 2018 and 49.24 percent by the end of 2019. The power utility’s market share, which has contracted at a slower-than-required rate, remains at a level of around 80 percent. The issue is expected to be tabled for discussion by lender technocrats, now back in Athens.

RAE to impose NOME auction restrictions to counter abuse

RAE, the Regulatory Authority for Energy, appears determined to implement measures aimed at limiting NOME auction abuse by market players and accelerating the main power utility PPC’s retail electricity market share contraction for greater market competition.

In its monitoring of NOME auctions and ensuing sales, by participants, of electricity amounts to secondary markets over the past few months, RAE has noticed an accumulation of futures products disproportionate to customer base sizes and growth rates of certain suppliers and traders.

Subsequently, four companies were summoned by RAE to hearings. Three of these testified yesterday.

According to sources, the representatives of all three companies – traders and electricity suppliers holding small market shares – contended that they have not breached any market rules, while also noting NOME auctions have been staged without restrictions, as was requested by the country’s lenders.

These companies will need to follow up arguments offered at their hearings with related documents before RAE decides whether to hand out charges or not.

RAE has not been able to determine the exact amounts of electricity exported from Greece to other European markets, where wholesale prices are relatively higher, but has resorted to various tools monitoring the market and players, analysts noted.

The authority is preparing to introduce specific NOME auction regulations, including restrictions, sources informed.

During the bailout era, which has just ended, lenders, citing free market rules, did not want any restrictions imposed on Greece’s NOME auctions. However, the country’s lenders have, along the way, given RAE some leeway to take corrective action and counter ongoing abusive practices by NOME participants.

NOME auctions were introduced in Greece about two years ago to offer third parties access to PPC’s lower-cost lignite and hydropower sources.

 

 

 

NOME record price to prompt tariff hikes, exporters unfazed

The record price level of 48.8 euros per MWh reached at yesterday’s NOME auction will most likely force suppliers to raise prices offered to consumers, market officials agree.

Though this price level does offer local electricity suppliers protection against dangers stemming from rising wholesale electricity prices both in Greece and abroad, it does not provide independent suppliers any leeway to undercut prices offered by the still-dominant main power utility PPC.

The power utility must reduce its retail electricity market share to less than 50 percent by 2020, according to the bailout agreement.

The diminished ability for true competition in Greece’s retail electricity market once again brings to the fore PPC’s 15 percent discount offer for punctual customers, introduced two years ago.

However, unlike previous reactions, the discount’s removal is now not only being called for by independent electricity suppliers but also being considered by PPC.

The power utility’s chief executive Manolis Panagiotakis has not ruled out such a move, while a business plan prepared for PPC by consulting firm McKinsey stresses a need for the client to boost revenues by raising customer tariffs.

Should PPC end or revise downwards its 15 percent discount offer, all suppliers can be expected to respond by increasing their tariff price levels. Over the past couple of years, independent suppliers have had choice but to adjust their tariffs based on standards shaped by PPC’s overaggressive pricing policy.

Besides the role played by local suppliers seeking to cover their domestic market needs, NOME prices were also pushed up yesterday by traders who sought to buy for prospective exports to foreign markets offering considerably higher prices.

Evidently, existing NOME auction regulations are insufficient, as was highlighted by the large quantities acquired yesterday by participants with export activity in mind.

A move by RAE, Regulatory Authority for Energy, on the eve of yesterday’s auction, to summon five suppliers to hearings over NOME export abuse suspicions linked to previous auctions, which could lead to fines, did little, or nothing, to thwart such future intentions at the latest auction.

 

 

 

Five firms to face hearings over NOME export suspicions

Five power supply firms that had purchased electricity amounts disproportionate to their retail market shares at previous NOME auctions have been summoned to hearings by RAE, the Regulatory Authority for Energy.

The authority reached this decision yesterday, on the eve of today’s latest NOME auction, to determine whether the five firms have acquired electricity amounts bigger than their domestic market needs in order to export excess amounts either directly or indirectly, via traders. If so, fines could be imposed.

Even though export limits implemented in the past have been lifted following a demand by the country’s lenders, RAE continues to view the NOME auctions as a tool for supporting competition and shifting retail electricity market shares from the still-dominant power utility PPC to independent suppliers.

NOME auctions offer third parties access to PPC’s lower-cost lignite and hydropower sources.

“Anybody contravening this principle is breaking the rules and needs to offer explanations,” a RAE official told energypress.

LAGIE, the Electricity Market Operator, has eliminated two firms, OTE and Eunice, from today’s NOME auction for insufficient provision of electricity load data.

Both OTE and Eunice described their eliminations as unfair and declared they would appeal. But LAGIE appears determined to send out a strict message to all participants that NOME irregularities will not be tolerated.

It is believed traders will bid aggressively at today’s auction for electricity amounts to be exported to markets where wholesale electricity prices are higher.

Aggressive bidding by export-minded traders would force local suppliers to purchase NOME electricity amounts at higher prices offering narrower profit margins for supply activity in the local market.

Officials fear the increasing cost of CO2 emission rights and elevated wholesale electricity prices around Europe could also play a role in lifting bidding prices at today’s auction.

A starting price of 36.34 euros per MWh has been set for today’s session, up from the previous level of 32.05 euros per MWh.

A planned phasing out of the auctions in accordance with PPC’s bailout-required disinvestment of lignite units, as well as an uncertainty surrounding the auctions following the target model’s implementation, are other factors expected to impact today’s session and motivate participants to bid hard to acquire the biggest possible electricity amounts.

 

Mass electricity exports feared as latest NOME auction approaches

Excessively high wholesale electricity prices in regional markets surrounding and directly impacting the Greek market will most likely offer traders major export opportunities for electricity amounts purchased at local NOME auctions, organizers suspect.

This is one of the main reasons why the country’s independent retail electricity suppliers, especially those with wide customer bases and a greater need for lower-cost wholesale electricity, fear auction prices at this Wednesday’s NOME session will be driven up to levels that will dig deeply into profit margins.

RAE, the Regulatory Authority for Energy, appears to be preparing to monitor the situation in an effort to counter abusive behavior by auction participants.

According to sources, RAE has good reason to believe that certain players are planning to bid very aggressively in an effort to secure electricity amounts for export.

RAE has already forwarded related letters to suppliers and traders who took part in the previous NOME auction to examine their use of electricity amounts acquired at previous auctions.

The authority may decide to stage hearings if unjustifiably large NOME electricity quantities are seen exported to foreign markets following Wednesday’s session.

NOME auctions were introduced in Greece roughly two years ago to offer independent players access to the main power utility PPC’s lower-cost lignite and hydrocarbon sources, the objective being to increase price-related competition in the country’s retail market.

Export limits for NOME-acquired electricity amounts have been lifted, enabling players to move freely. Even so, RAE maintains the right to conduct investigations and impose fines if it determines abusive behavior by participants.

A total of 400 MWh/h will be offered at the July 18 auction, whose starting price has been increased to 36.34 euros per MWh.

Besides the influence of regional markets and export opportunities, pundits also expect aggressive bidding this Wednesday as a result of the uncertainty concerning electricity amounts to be offered at future NOME auctions, planned to be phased out as PPC’s bailout-required disinvestment of lignite units progresses.

Many electricity suppliers are expected to bid for the biggest possible quantities at Wednesday’s auction to gain leeway for competitive offers to customers.

Wholesale electricity prices around Europe are also being pushed up by rising fuel and CO2 emission right costs, another factor that could motivate local traders to export bigger amounts.

 

Exporters turn north, Greece-Italy link closed for maintenance

The Greece-Italy electricity interconnection, closed over the past week for maintenance work, has transformed market conditions for local traders as the Italian market, normally offering alluring prices for exports during considerable parts of the day, is currently not accessible.

Over the past year or so, electricity amounts acquired at Greek NOME auctions and left unabsorbed by the local market have been exported to Italy.

As a result of the temporary block towards the Italian market, Greek electricity exports can currently only be channeled through gateways in the country’s north, as has been highlighted by a sharp increase of exports through this region.

Prior to the commencement of maintenance work on the power cable interconnecting Greece and Italy, electricity exports to the north were usually limited to no more than 1,000 MW per day. Over the past week, this figure has risen sharply to levels exceeding 9,000 MW.

Under normal circumstances, Greece’s interconnections in the north are primarily used for electricity imports which are then either absorbed by the local grid or relayed to Italy, Greece serving as a transit zone.

Wholesale electricity prices in neighboring markets north of Greece are generally lower than those available in Greece and Italy.

The increased electricity export activity presently witnessed through the country’s north once again highlights that electricity amounts acquired at local NOME auctions are not being used to intensify domestic market competition, as was intended by authorities, but, instead, greatly exploited by traders for export opportunities.

High hydropower, RES output, exports prompt SMP swings

The Greek electricity wholesale market’s System Marginal Price (SMP) has fluctuated wildly over the past three days, ranging from zero to 75 euros per MWh, key driving factors being the need to lower overfilled water reservoirs at hydropower facilities, increased RES sector output, as well as elevated electricity prices in Italy, which has spurred exports to the neighboring market.

Hydropower facilities have steadily provided 30,000 MWh over the past three days, while, during this period, RES output has risen to as much as 41,000 MWh, meaning the two sources have covered over half the country’s daily electricity needs.

Electricity imports rose to levels ranging from approximately 10,000 to 16,000 MWh over the past three days, while high prices in Italy have prompted electricity exports of roughly 9,000 MWh per day. This export activity has impacted Greece’s SMP during certain hours.

Last Sunday, for nine hours in total, the SMP was down to zero, whch lowered the day’s average SMP to just 29.41 euros per MWh. The increased contributions to the system by the hydropower and RES sectors left no room for imports, leading to the day’s zero-level SMP.

A day later, on Monday, the SMP rose sharply to 53.7 euros per MWh, and, for two hours, climbed even higher to over 75 euros per MWh, a level shaped by high-priced electricity exports to Italy.

A similar picture has prevailed today with the average SMP level positioned at slightly below 51 euros per MWh, as well as high-priced exports to Italy, which took the SMP to 71 euros per MWh for an hour.

The higher average SMP registered yesterday and today led to an increase in thermal production, reaching 52,000 MWh.

Lower international prices prompt decline in electricity exports

Latest market data released by LAGIE, the Electricity Market Operator, for January has confirmed a reduced interest, observed recently, for electricity exports through the country’s interconnections.

Electricity exports from Greece to neighboring countries fell considerably in January compared to December as well as January last year, both in terms of daily averages and monthly totals.

The subdued electricity export activity can be attributed to the electricity price drop in international markets.

This explains why local traders seeking export opportunities expressed little interest in the year’s first NOME auction, staged earlier this month.