PPC market abuse appeal rejection to up EC demands

The European Court’s rejection of an appeal made by main power utility PPC against an older European Commission decision that had condemned the utility for abuse of its dominant position in the lignite market increases the likelihood of greater concessions the utility will need to make.

Based on this latest development, the core issue is no longer about PPC providing third parties access to energy produced by the utility’s low-cost lignite and hydropower sources, as is being carried out through the just-introduced NOME auctions, but giving competitors direct access to these sources prior to energy production.

Older European Commission demands for the sale of certain PPC power stations and coal mines, a taboo subject until now, can be expected to be brought back to the negotiating table by Greece’s creditors, which include the European Commission.

The role to be played by the bailout-required NOME auctions in the Greek electricity market’s ongoing liberalization stands to be diminished. Greater emphasis will now most likely be placed on the sale of PPC energy production units and sources. The sidelined but not forgotten “Little PPC” plan, entailing the utility’s part-privatization, or a variation of it, will be brought back to the fore by the European Commission.

The European Court’s rejection of the PPC appeal was discussed at a meeting yesterday between Greek energy minister Giorgos Stathakis and creditor representatives. According to sources, Greek officials now contend that the verdict lessens the significance of the NOME auctions. Local officials and the creditor representatives are currently locked in negotiations over the level of electricity amounts that need to be offered through the NOME process. The creditors are pushing for increased amounts. A diminished NOME role in the electricity market’s liberalization can be expected to be offset by stricter demands on PPC.

The NOME auctions are seen as a transitionary tool until PPC’s retail electricity market share has fallen to below 50 percent, which is expected by 2020. Looking ahead, if PPC starts regaining a part of its lost market share following 2020 the European Commission can certainly be expected to demand the sale of PPC units. This could also be the case in the immediate future if the NOME auctions fail to produce the needed results.

The European Commission’s decision condemning PPC for abuse of power had been delivered in 2008 but has not been followed up by firm action as a result of the various electricity market revisions at play.

The Greek State’s legal officials and PPC will now need to seek solutions that cannot be too different to the “Little PPC” demand made by Brussels in the past. Options could include the opening up of new coal mines to be controlled by private-sector energy companies or even PPC’s sale of existing mines and lignite-fired power stations.

ELTA an early candidate in PPC sale plan to offer retail portion

ELTA (Hellenic Post) has emerged as the first candidate to express an interest in acquiring a share of main power utility PPC’s clients through the latter’s plan to split and sell a portion of its business in the form of at least one new retail company to be offered through a tender.

Though market players remain hesitant about the PPC plan, fearing it could burden robust independent suppliers with undesirable PPC customers carrying arrears, the power utility appears determined to press ahead with the initiative as a means of avoiding bailout-linked market share contraction targets to be sought through the just-introduced NOME auctions.

The objective of the NOME auctions is to provide third parties with access to PPC’s low-cost lignite and hydropower sources as a measure to help break the utility’s market dominance.

PPC’s new retail company or companies are planned to represent about 6 to 7 percent of the utility’s market share, or roughly 400,000 clients. Last week, PPC’s chief executive Manolis Panagiotakis noted that the new company would be formed by March.

ELTA purchased a 15-MW package of electricity at last month’s inaugural NOME auction but does  not possess a retail network to supply this amount to the market. As things stand, ELTA could either sell this amount to suppliers at a small profit, at best, return it to the grid at a loss.

Alternatively, if PPC carries out its plan to stage a tender selling a new retail company, or companies, and ELTA emerges as the buyer, the latter would not only be able to supply the 15 MW electricity amount to the market but also suddenly emerge as the market follower with a 6 to 7 percent share of the electricity retail market, well ahead of the current second-placed firm, currently holding a share of about 3 percent. PPC still dominates with a market share of about 88 percent.

ELTA had commissioned PPC as a technical adviser for a development plan.

The majority of independent suppliers have declared they cannot adopt positions on the PPC plan as it remains murky, adding that the type of clients to be included in the utility’s split-and-sell plan are a prime factor.




PPC risks greater losses by doubting NOME auction price

Main power utility PPC’s delayed decision to cast doubts the NOME auction starting price level has angered the Greek government, which has refused to comment on the matter, energypress sources have informed.

The utility’s decision to take its case to the Council of State, the Supreme Administrative Court of Greece, a move aiming to stop the next NOME auction from beng held, threatens to destabilize the governmnet’s overall policy concerning PPC.

If PPC’s intervention affects the NOME process, PPC risks facing harsh measures down the road that would take an even greater market share away from the utility.

Commenting last night, PPC officials assured that they are not reacting against the arrival of the NOME auctions – introduced last month with the intention of providing third parties with access to PPC’s low-cost lignite and hydropower sources as a measure to help break the utility’s market dominance – but the formula used to determine the starting price.

The government has highlighted that its avoidance of a majority-stake sale of PPC subsidiary IPTO, the power grid operator, as well as its avoidance of PPC’s part-privatization – an older plan forged by the previous government concerning the sale of 30 percent of the utility, locally dubbed “Little PPC” – stand as key political accomplishments.

However, the country’s bailout agreement stipulates that if the NOME auctions fail to produce the desired results, meaning specific and considerable retail market share gains for independent suppliers, then structural measures will automatically be imposed to deliver these intended results.

These alternative measures would most probably entail the sale of PPC units, prompting the surrender of a 50 percent market share by 2020, well over the “Little PPC” approach’s 30 percent sale.

Responding to PPC’s opposition to the NOME auctions, as well as the country’s temporary CAT mechanism, market officials noted that the utility is repeatedly expressing hostile views against the implementation of market mechanisms needed to reform and liberalize Greece’s electricity market.

The inaugural NOME auction’s low starting price and subdued bidding thoughout the session guranteed low purchase prices for participants, who walked away feeling satisfied. PPC officials, who had anticipated more aggressive bidding and higher prices, were not pleased.

Based on the bailout requirements, PPC will need to have surrended around 20 percent of its market share to independent suppliers in 2017. Even so, judging by its latest move, the utility appears determined to avoid such a development. PPC’s perennial monopoly is slowly eroding. PPC’s market share has slipped to a level of about 88 percent.


Market changes, PPC future spark conference debate

Leading main power utility PPC and energy ministry officials engaged in an impromptu debate at a Greek-Russian energy conference staged in Athens yesterday, trading views on Greek electricity market developments and the utility’s future.

PPC’s deputy director Stavros Goutsios focused on new costs being shouldered by the utility, while the energy ministry’s secretary general Mihalis Veriopoulos countered by defending measures taken to rationalize the electricity market’s functioning within the wider European framework.

The PPC official presented a series of new costs being taken on by the utility, including the additional financial weight prompted by high tariff prices offered for PV production and RES facilities in general, averaging 292 euros per MWh. Legislation was ratified in July to increase contributions provided by suppliers for the RES special account in an effort to eliminate its deficit. This revision will cost PPC 35 million euros in 2016, 180 million euros in 2017 and 190 million euros in 2018, the utility’s official noted. Recent amendments to the bill will increase PPC’s by a further 50 million euros for 2017 and an extra 50 million euros in 2018.

The country’s temporary CAT mechanism requires PPC to provide independent gas-based electricity producers a sum of 48 million euros in 2016 and 54 million euros in 2017, the PPC deputy also noted.

Goutsios contended that the NOME auctions – introduced less than a fortnight ago to provide independent suppliers with access to PPC’s low-cost lignite and hydropower sources as a means of breaking the utility’s market dominance – could lead to profiteering as independent suppliers may purchase low-cost electricity and export it abroad. PPC’s losses over the next two-year period, as a result of the NOME measure, were estimated at 300 million euros.

The deputy also mentioned the negative impact on PPC of the demise of two now-defunct electricity retailers, Energa and Hellas Power, whose retail market entries several years ago both ended in financial scandal. Their fall will cost PPC as much as 70 million euros, including a contribution to the compensation amount accumulated for independent electricity producers, owed an estimated 27 million euros by the two failed electricity retailers.

Veriopoulos, in response, pointed out that the RES-related cost mentioned by the PPC deputy essentially covers the positive impact on suppliers of RES production to the grid.

“The participation of RES producers in the market benefits suppliers, especially PPC. This benefit has, until now, been exclusively enjoyed by the utility and it is only fair that it gradually shoulders the cost,” Veriopoulos responded.


Target model draft bill set for public consultation procedures

Public consultation procedures for a draft bill concerning the electricity market’s target model, a road map to guide Greece through a series of reforms needed as part of the EU’s wider effort to establish an integrated European energy market, are expected to be launched imminently, possibly today.

Ratification of the bill stands as an energy-sector bailout prior action. The next review by the country’s creditors begins today in Athens. Completion of the prior actions will pave the way for the disbursement of a subtranche of 2.8 billion euros.

As part of the European framework, the Greek draft bill will lead to the establishment of four markets, an Electricity Futures Market, a Day-After Market, an Intraday Market, and an Electricity Balancing Market.

According to officials at RAE, the Regulatory Authority for Energy, the Electricity Futures Market will concern trade conducted years in advance of actual delivery. This will offer traders the opportunity to handle risk management as a means of protecting consumers from real-time price fluctuations.

The Intraday Market will allow for trading during the day, just hours ahead of delivery, enabling traders to make corrective measures based on consumer demand and power-station output levels.

Trading in the Day-After Market will take place a day before actual delivery, offering traders the opportunity to cover remaining demand following orders placed in the Future Market.

Trading in the Electricity Balancing Market will primarily take place slightly prior to actual delivery. Its activity will be determined by real-time needs.





Power market reform delays stressed in central bank report

The implementation of reforms intended to help liberalize Greece’s electricity market, such as the upcoming NOME auctions, to provide independent firms access to main power utility PPC’s low-cost lignite and hydropower sources, as well as the breakway of IPTO, the power grid operator, from PPC, its parent company, has been delayed, Bank of Greece Governor Yannis Stournaras has noted in an economic report.

The central bank chief devoted eight pages to the need for electricity market reforms in his report, which highlights how crucial he considers them to be.

“Stagnancy emerged in the electricity market’s liberalization effort, especially in the production and wholesale domains, as a result of the combined effect of unfinished planning and implementation of reforms and the lack of investments due to the economy’s prolonged recession,” Stournaras noted in his report.

Swift implementation of reforms ratified in Greek Parliament in 2015 and 2016 will intensify market competition and activate serious investment efforts in the electricity market’s production, distribution and retail levels, the central bank governor’s report added.

These favorable market developments will be propelled by offering independent electricity companies access to the country’s lignite and hydropower sources – through the NOME auctions expected in September – as well as through IPTO’s breakaway from PPC, the report concluded.