Price caps a risky solution, expert warns, proposing filters for bids

A leading energy market expert, professor Alex Papalexopoulos, has reiterated his opposition to a complete reform of the European electricity market, believing proposals currently being tabled will lead to perilous conditions.

Speaking at the 17th IAEE European Energy Conference, Dr. Papalexopoulos, the architect behind Greece’s target model, noted markets are signaling the need for reduced dependence on natural gas, representing too great a share of the energy mix.

The European electricity market needs reforms, but not in the manner currently being discussed in Brussels, Dr. Papalexopoulos contended. Instead, revisions should focus on issues such as flexibility and back-up solutions, the expert noted.

Dr. Papalexopoulos pointed out that US wholesale markets are equipped with special filters that examine offers submitted by gas units and determine whether these have the potential to manipulate the market. Equivalent filters do not exist in Europe, resulting in excessively high prices, he noted.

Dr. Papalexopoulos expressed doubts about price caps and recovery of windfall profits, noting they actually do not exist.


No essential market share changes for suppliers after some mobility

Consumer switches from one electricity supplier to another appear to be stabilizing following some month-to-month mobility between January and October, a reflection of the unease felt by consumers amid the energy crisis.

Power utility PPC, the dominant market player and key source of new customers for independent suppliers, has virtually regained mild market losses experienced since January.

PPC began the year with a 43.37 percent market share, at the end of January, in the mid-voltage category, before dropping as low as 35.35 percent in March, only to eventually rebound to 41.73 percent by August.

In the low-voltage category, PPC began the year with a market share of 65.16 percent, achieving marginal gains in ensuing months for a market share of 66.78 percent by August.

Overall, PPC’s market share was 64.50 percent in January, experienced a slight dip to no less than 63.36 percent in May, and ended August at 64.41 percent, virtually unchanged from the beginning of the year.



Power suppliers under enormous strain because of increased liquidity needs and high costs

Power suppliers in Greece have reached a critical point considering their inability to finance their increasing liquidity needs and remain in operation.
The suppliers’ capital needs are increasing rapidly along with power prices, since these companies are obligated to pay cash for the electricy they buy daily in the energy exchange.
Given the fact that in August power prices are expected to rise significantly, since the price of gas is passed on one month later in the Greek market, the suppliers’ liquidity needs will also rise considerably.
Furthermore, suppliers are also faced with the following:
Financing for over a month consumer subsidies announced by the government.
The rise of unpaid bills and arrears on behalf of consumers.
Damages from consumers who make use of easy change of supplier.
The obligation to pay their charges to grid operators regardless of having collected it by their consumers.
Suppliers have exhausted their ability to procure new financing from banks, as well as their shareholders’ ability to support them.