electricity tariffs

PPC seeking ways to fully offset tariff hike, maintain discount

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Power utility PPC officials are busy looking for a formula by the end of this working week that could avoid higher overall costs for consumers despite necessary tariff hikes, needed to boost the struggling utility’s revenues.

Various alternatives are being examined ahead of a board meeting scheduled for this Friday, during which PPC’s new electricity pricing policy proposal is expected to be approved.

PPC is looking to fully offset its upcoming tariff hikes through an equivalent reduction of surcharges.

However, the emergence of a number of detrimental factors has made the effort more challenging. For example, the cost of PPC’s rescue plan has risen, the utility’s new chief executive Giorgos Stassis announced just days ago.

PPC is making an effort to maintain a punctuality discount offered to customers paying their electricity bills on time. The utility’s new administration does not want to start its tenure with a measure that would effectively punish reliable customers.

Energy ministry officials contend state-controlled PPC will keep offering a punctuality discount, adding that its size will be determined by the utility.

It could be cut to 5 percent from 10 percent at present, energypress sources informed. The discount was introduced about three years ago at 15 percent before being reduced to 10 percent last spring.

Last week, it was reported that PPC would abolish all or most of its 10 percent discount.

Additional cash needs at PPC to end up burdening consumers

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Power utility PPC requires a cash injection of between 800 and 900 million euros, considerably higher than an initial estimate of 750 million euros, to stabilize its troubled finances, the corporation’s new chief executive Giorgos Stassis indicated yesterday.

This increases the likelihood of measures that could burden consumers by as much 150 million euros.

The termination of PPC’s 10 percent punctuality discount benefiting about four million consumers – of the utility’s seven million in total –  paying their electricity bills on time is seen as one definite source for this needed amount. The discount’s cancellation will increase PPC’s annual turnover by roughly 150 million euros, it is estimated.

Officials at state-controlled PPC and the energy ministry have been looking for a formula that could neutralize the overall cost-effect for consumers. But yesterday’s revelation by the new CEO of even greater cash needs at the utility suggests this will be difficult to accomplish.

Electricity tariff increases combined with a reduction of a RES-supporting ETMEAR surcharge included on power bills will not work given PPC’s need of 800 to 900 million euros.

The urgency of the financial situation at PPC, Greece’s biggest corporation and the backbone of the country’s energy system, requires swift action. Tariff revision decisions will be finalized on August 30 and implemented as of September 1, according to sources.

 

PPC, needing cash inflow, to scrap 10% punctuality discount

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Power utility PPC, shaping a more aggressive pricing policy as a result of its need to boost cash inflow, is preparing to abolish most or all of its 10 percent punctuality discount, offered to customers paying their electricity bills on time.

The power utility is also looking to adjust tariffs for various consumption categories, while the implementation of a clause triggering price hikes when CO2 emission right costs exceed certain levels is now seen as a certainty.

State-controlled PPC needs to have finalized its rescue plan by early September, ahead of an upcoming report from Ernst & Young, the utility’s certified auditor, on September 24.

The government wants a reduction of a RES-supporting ETMEAR surcharge included on electricity bills in order to offset electricity price hikes.

PPC’s recently appointed CEO, Giorgos Stassis, who will be officially approved at an extraordinary shareholders’ meeting tomorrow, faces the challenging task of ensuring greater cash inflow for the utility while concurrently reducing surcharges.

Stassis could offer some clarification, during tomorrow’s meeting, on various models being examined by the government.

New PPC board, approved this week, needs to move fast

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Power utility PPC’s shareholders will approve the corporation’s new CEO, Giorgos Stassis this Thursday, initiating a crucial period for the struggling corporation, Greece’s biggest, in need of life-saving measures from the state-controlled company’s administration and government.

The details of PPC’s rescue plan must be finalized by September 15, ahead of a report from Ernst & Young, the utility’s certified auditor, expected on September 24. The report will feature observations on the utility’s first-half results. In the lead-up, PPC needs to convince of its potential for a rebound to avoid further unfavorable news from the auditor.

Details of measures aiming to accumulate a sum of 750 million euros for PPC have yet to be finalized, sources informed.

The measures will include an electricity tariff increase as well as the endorsement of a clause triggering hikes when CO2 emission right levels exceed upper limits.

The government wants to offset the tariff hike, expected to be about 10 percent, with a reduction of a RES-supporting ETMEAR surcharge included on electricity bills.

PPC is also expected to securitize unpaid receivables of between 1.5 to 1.7 billion euros, the target being to rake in 400 million euros. The first of two securitization packages is expected to be issued in September or October.

PPC is also anticipating 195 million euros in public service compensation (YKO) returns for 2011. A legislative amendment enabling RAE, Regulatory Authority for Energy, to proceed with the details is needed. Also, the government must decide whether the national budget or electricity consumers will cover the cost of this measure.

 

 

 

RES producers seen carrying weight of electricity tariff hike

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Renewable energy producers appear the likeliest market group to be affected by a government plan for electricity tariff hikes at the state-controlled power utility PPC, needed to boost revenues at the struggling utility, as, to protect consumers, these hikes will need to be offset by a reduction of a RES-supporting ETMEAR surcharge included on electricity bills.

All calculations strongly suggest that no other combination than a reduction of the ETMEAR surcharge is possible to avoid higher electricity prices for consumers.

Officials are scrambling for a finalized formula ahead of a September 24 report by Ernst & Young, PPC’s certified auditor, to avoid further bad news on the power utility’s condition.

Officials at the energy ministry, working on the plan daily, see a negative outcome for RES producers as the least detrimental alternative because they constitute a minority group of far less political cost compared to the country’s millions of electricity consumers.

PPC’s new boss faces tough sprint until September 24

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Power utility PPC’s newly appointed chief executive Giorgos Stassis, preparing to officially assume his post on August 22, faces an enormous task comprised of a series of hurdles that will need to be cleared by September 24, when Ernst & Young, the utility’s certified auditor, is due to issue a new report on the utility’s financial standing.

Much will need to be accomplished over this one-month dash if the auditor is to leave out from the report unsettling news on the power utility’s sustainability.

The new PPC boss will need to strike a fine balance in order to increase electricity tariffs, needed to boost the utility’s revenues, without burdening consumers, the idea being to offset these tariff hikes by reducing a RES-supporting ETMEAR surcharge included on electricity bills. However, this could prove tricky as renewable energy producers, too, must not be affected.

It remains to be seen if the collective cash inflow of the upcoming measures will be enough to stabilize PPC.

State-controlled PPC is anticipating a series of cash injections endorsed by the government, including a 190 million-euro return for public service compensation (YKO) concerning 2011.

Also, PPC also intends to securitize unpaid receivables worth 2.7 billion euros. This securitization plan, shaped by PPC’s previous administration, could lead to collections of between 400 and 500 million euros, but they are not expected to start coming in until October.

The electricity tariff increase, which could be around 10 percent, would boost PPC’s annual turnover of 4.7 billion euros by 450 million euros. The hike will most likely be implemented in September, meaning just 110 million of this amount would be injected into PPC’s coffers by the end of this year.

 

 

Minister’s PPC rescue plan aims to inject €500m into utility

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Power utility PPC stands to gain financial support worth an estimated 500 million euros from a series of measures announced in Parliament yesterday by the newly appointed energy minister Costis Hatzidakis, the aim of his measures being to ensure the utility’s sustainability.

The minister’s restructuring plan for PPC, under severe financial pressure, includes an electricity tariff increase that is expected to boost the company’s annual earnings by roughly 200 million euros. This tariff hike, expected to be a single-digit rise, will not burden consumers, the minister pledged, as it will be neutralized by an equivalent reduction of a RES-supporting ETMEAR surcharge included on electricity bills. A 10 percent discount for punctual electricity payments will remain intact.

The government’s support plan for PPC also includes a cash injection of approximately 200 million euros for public service compensation (YKO) returns linked to previous years.

The sale of a minority stake of network operator DEDDIE/HEDNO, a PPC subsidiary, to a strategic investor is also a part of the minister’s plan.

A voluntary exit plan will seek to reduce the company’s payroll, now 16,000 strong, by 2,000 workers. It will target staff members who have qualified for pension rights but have chosen to keep working.

Also, NOME auctions, which, so far, have set back PPC by some 600 million euros since their introduction about three years ago, will be abandoned. The auctions have offered PPC rivals lignite and hydropower electricity generated by the power utility at below-cost prices.

Greater pressure will also be placed on PPC customers dodging electricity bill payments despite believed to be capable of covering required amounts. A mere 60,000 customers owe PPC approximately 800,000 euros, Hatzidakis, the energy minister, reiterated yesterday. PPC’s unpaid receivables figure has reached 2.7 billion euros.

Many aspects of the minister’s speech yesterday echoed proposals included in an older plan by McKinsey. The consulting firm was commissioned by PPC but its proposals have yet to be implemented. Plan features included a call for an operating profit improvement of 500 million euros over a five-year period, a voluntary exit plan for 2,000 persons, as well as tariff hikes.

 

 

EC: PPC tariff hikes needed for cost recovery, competition

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The still-dominant main power utility PPC needs to increase electricity tariffs to improve cost recovery and its financial standing and also enable rivals to make market share gains, the European Commission has noted in its third post-bailout report on the Greek economy.

The report questions how long PPC can maintain its company size based on its current pricing policy.

It also condemns PPC’s lower-priced tariffs for underprivileged households, noting these are leading to market distortions.

The Brussels report salutes PPC’s recent decision to reduce its punctuality discount for consumers paying their electricity bills on time, noting this decision will boost the utility’s earnings and help open up the market for competitors.

It also makes note of a 20 percent increase in unpaid electricity bills by PPC customers switching suppliers.

RAE pushing ahead with fixed tariff option plan, consumers irate

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RAE, the Regulatory Authority for Energy, is preparing to deliver, for public consultation, a plan whose implementation will require the country’s retail electricity suppliers to offer consumers fixed tariffs as an alternative to existing flexible tariffs adjusted by a clause permitting revisions during market cost shifts.

A growing number of consumers have filed complaints in recent times in reaction to higher-than-expected tariffs resulting from decisions by electricity suppliers to trigger price-adjusting clauses as a means of covering elevated wholesale electricity prices, including higher CO2 emisson right costs.

The tariff-revising clause has caused confusion among consumers, caught unaware as to when and under what conditions suppliers may trigger it. Consumers have also complained about the clause being hidden in fine print and for not being notified.

Until recently, independent suppliers had opted to absorb rising wholesale electricity costs for many months before finally triggering the clause at the risk of losing customers.

RAE’s plan proposes the inclusion of fixed tariffs as a customer choice for a one-year period, presumably at relatively higher prices.

Ministry seeking overall balance in PPC pricing policy revisions

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State-controlled main power utility PPC’s new tariffs package been prepared by the energy ministry includes a CO2-related clause enabling price hikes whenever this emissions right cost exceeds a certain level, as well as reductions of RES-supporting ETMEAR and public service compensation (YKO) surcharges paid by consumers through electricity bills, sources have informed.

Though these regulatory charge revisions promise to bring about surcharge changes for PPC’s entire client base, numbering approximately 7.2 million, the energy ministry, mindful of upcoming elections, due later this year, is aiming for a balance that will not affect the overall electricity-bill amounts paid by consumers.

The revisions could be implemented in March in a bid to bolster PPC’s financial standing ahead of a prospective 350 million-euro bond issue.

As part of the upcoming revisions, PPC also plans to reduce a 15 percent discount offered to punctual customers to 10 percent, sources added.

PPC, requiring cash injections, reiterates need for tariff hikes

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The main power utility PPC, facing relentless pressure ahead of an international bond payment obligation worth 350 million euros in May, is using every available opportunity to reiterate its need for electricity tariff hikes.

Commenting yesterday on PPC’s refinancing needs for the current year, PPC officials indicated the utility would need to resort to existing cash reserves to service the maturing international bond if it fails to access capital markets by May. Pundits have interpreted this as an indirect reference to the need for tariff hikes.

A month earlier, PPC’s chief executive Manolis Panagiotakis linked the utility’s need for tariff increases with an effort to improve its finances before heading to capital markets.

Energy minister Giorgos Stathakis, mindful of upcoming elections, has strongly rejected any tariff hike plans by the state-controlled power utility, but appears more lenient towards a reduction of a 15 percent discount offered to customers paying their electricity bills on time.

If PPC ends up not increasing its electricity tariffs, as appears most probable, it will need to postpone a planned bond issue. Despite this threat, an international road show intended for this issue’s promotion may be launched next month, PPC officials informed yesterday.

PPC has faced sharply increased operating costs over the past year or so. Wholesale electricity prices have reached levels of more than 80 euros per MWh, up from 53 euros last year. This includes the cost of CO2 emission rights purchased by PPC for its lignite-fired power stations, which have skyrocketed to 25 euros per ton from just 5 euros per ton in 2017.

‘PPC tariff hikes needed to carry out investment plan’

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The main power utility PPC needs to improve its profit performance in order to carry out an investment program this year of equal worth to last year’s, chief executive Manolis Panagiotakis stressed yesterday at a company event for the New Year, noting tariff increases currently represent the only available source for an increase in profitability.

“As a result of its scale and role played in the Greek economy and society, PPC is expected to also factor into its decisions and actions data and aspects that are unimaginable for other enterprises active in a competitive environment with a goal to achieve profits,” Panagiotakis remarked. “Subsequently, PPC has absorbed over one billion euros in costs without relaying even a small fraction of these to consumers. On the contrary, PPC has reduced tariffs through a 15 percent [punctuality] discount,” he continued.

Taking advice from a business and strategic plan prepared by consulting firm McKinsey, PPC also plans to utilize its enormous property portfolio for increased revenues through the establishment of a real estate company, the power utility’s boss informed during yesterday’s event.

 

Power consumers to be given fixed or flexible tariffs choice

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The country’s retail electricity suppliers will be obligated to also offer consumers the choice of fixed tariffs as an alternative to flexible tariffs linked to clauses permitting revisions in line with cost shifts, including system marginal price (SMP) or CO2 emisson cost fluctuations, according to a plan being prepared by RAE, Regulatory Authority for Energy.

According to the RAE plan, consumers will be offered a choice between fixed electricity tariffs, presumambly at relatively higher prices and for a specific period of time, and flexible tariffs, initially lower but carrying fluctuation risk.

RAE decided to take action as a result of cost-related clauses introduced by electricity suppliers for protection against rising costs. Certain independent suppliers have already triggered clauses to combat sharp wholesale price increases.

The authority plans to soon launch a public consultation procedure ahead of regulation changes intended to make more transparent the pricing policies of all electricity suppliers, from the main power utility PPC to the independent electricity suppliers.

RAE also plans to reduce the public service compensation (YKO) rate imposed on nighttime electricity consumption.