RAE expected to reach decision today on fuel price ceilings

RAE, Greece’s Regulatory Authority for Energy, is examining data provided by the General Secretariat for Commerce to decide if price ceilings will need to be imposed on liquid fuels in order to protect consumers from extraordinarily high price levels observed around the country this summer, especially on islands.

Over the past three days, RAE officials have been examining the details of a 30-page study focused on over-inflated fuel prices to decide if current price levels, which in some cases have exceeded two euros per liter for unleaded gasoline, are justified.

Transportation costs, wholesale and retail fuel market profit margins, fuel price comparisons around the country, fuel tax levels, as well as other factors influencing price levels, both domestically and internationally, are all being examined at RAE.

The authority is seen reaching a decision on the matter today, which is then expected to be forwarded to the Ministry of Economy and Development as a policy proposal, energypress sources informed.

According to unconfirmed reports, extraordinary price-control measures, most probably in the form of fuel price ceilings, will be imposed on certain island markets.

If introduced, these fuel price ceilings will be valid for an initial two-month period and then be revised weekly, sources noted.

Local industrial energy costs 30% higher, authorities tell

Elevated energy costs faced by Greek industry, currently 30 percent over levels in other European countries, stand as a key deterrent for the sector’s level of competitiveness, the head official of Business Europe, a leading advocate for growth and competitiveness at a European level, pointed out at a meeting in Athens yesterday.

The group’s head official Gerhard Koch raised this issue at a meeting in the Greek capital. He and fellow group members were invited by SEV, the Hellenic Association of Industrialists.

Though Greece’s industrial sector is Europe’s hardest hit in terms of energy costs, the issue also concerns the continent on a wider scale as energy costs are as much as double those of rivals, including the US, according to Alexandre Affre, Business Europe’s Director of Industrial Affairs.

High subsidy costs and tax levels are the key factors behind Europe’s elevated energy costs, the group’s officials pointed out.

Electricity production costs differ very little within the EU, according to the Business Europe officials, who cited varying tax levels and subsidies as key factors behind the energy cost differences between EU member states.

The cost of RES support mechanisms – some of these are extremely costly – chosen by EU member states is another factor behind the resulting high energy costs around Europe, which is why the EU is pressuring member states to reform markets, the objective being to limit the impact on energy price levels, Affre noted.

The intergration and harmonization of EU energy markets, a delayed process, promises to further reduce energy costs in Europe, the Business Europe officials supported.

 

 

 

EVIKEN: Target model reforms to nurture market distortions

EVIKEN, the Association of Industrial Energy Consumers, has expressed deep concerns felt by the country’s industrial energy consumers, as well as outright opposition, over regulation changes being prepared as part of the target model.

The association, in a letter contributed to a public consultation procedure staged by LAGIE, the Electricity Market Operator, has listed a series of key concerns, underlining that the revisions being planned would continue to nurture market distortions, maintain obstacles disenabling true regional market interconnections, and, ultimately, increase energy costs for consumers, a prospect that threatens to affect the industrial sector’s level of competitiveness.

The target model process aims to harmonize the electricity wholesale market with EU standards.

In the lead-up to the reforms, the industrial sector has anticipated the establishment of a truly competitive energy market, along the lines of other EU member state markets.

In comments to energypress, one industrial sector official noted that the planned reforms would increase energy costs and create a new high-cost market in which competitive industrial production cannot exist, adding that, if implemented, the measures will help establish an oligopoly.

Besides expressing its opposition to the planned reforms in the letter forwarded to LAGIE, the industrial energy consumers association has also informed the European Commission of its concerns.

Imminent energy exchange to aim for three main objectives

The establishment of a local energy exchange, being incorporated into an imminent draft bill carrying various bailout requirements, will aim to achieve three main objectives.

The first of these will be to harmonize the Greek energy market with all European markets. A second objective will aim for greater competition and transparency, which should offer households and enterprises lower energy costs. A third objective will be to offer energy supply security to the country’s energy mix through diversified energy sources, including greater renewable energy participation.

The establishment of an energy exchange has been incorporated into the Target Model, a process entailing the electricity wholesale market’s harmonisation with EU law.

The energy exchange promises to bridge Greece’s day-ahead market with the Italian and Bulgarian markets, as well as those of other neighboring EU member states, depending on their degree of readiness.

The Target Model is expected to significantly bolster the industrial sector as, on the one hand, energy costs are expected to drop, and, on the other, industrial enterprises will be able to participate in the energy market and establish supply deals with electricity producers. This will provide industrial enterprises with full control over their long-term energy costs.

 

PM pledges €100m, annually, for industrial unit energy upgrades

Prime Minister Alexis Tsipras, speaking yesterday at a Federation of Industries of Northern Greece (SBBE) annual meeting, noted that 100 million euros of an additional 300 million euros expected to become available to Greece as of 2019 for public investments would go towards supporting energy upgrades at energy-intensive industrial units.

The government was promised additional public investment funds in exchange for the latest round of measures added to the Greek bailout agreement.

These energy upgrades will lead to energy cost savings for industrial enterprises and lower production costs, Tsipras told the SBBE audience.

Tsipras described the high energy costs faced by manufacturers as a “thorny” issue, while noting that his government has taken certain steps to combat the issue.

He made reference to the abolition of the special consumption tax (EFK) tax imposed on natural gas used for electricity generation; an EFK reduction for natural gas used in industrial production; as well as the implementation of the demand response mechanism (interruptability). This mechanism enables major industrial enterprises to be compensated when the TSO (IPTO) requests that they shift their energy usage by lowering or stopping consumption during high-demand peak hours so as to balance the electricity system needs.

Reform needs, not additional taxes, Mytilineos stresses

The European Commission needs to intervene more firmly on the Greek bailout program and apply pressure on the government for further reforms needed by the economy instead of tax increases, as is being demanded by the IMF, Evangelos Mytilineos, the chief executive officer at the Mytilineos corporate group, has told Euractiv, a news portal focused on European news.

Mytilineos believes that the European Commission is not applying as much pressure as it should to stop tax increases and instead shift the focus to structural reforms.

“Unfortunately, the bailout agreement is being driven by taxes. The IMF’s position on increasing taxes has dominated over reforms, which Greece’s public administration is continuing to strongly object to without an interest to alter decades-old habits,” Mytilineos noted. “The European Commission has a role to play here, which it is currently not playing, and this is to push for further structural reforms.”

Following a turbulent year in 2015, the Greek government has had no choice but to learn fast from mistakes, Mytilineos believes. “Any government, whether left-wing or right-wing, needs to comply with regulations if it wants the country to remain a member of the EU,” Mytilineos said. “There is not much leeway for maneuvering.”

The need for structural reforms was also highlighted in the latest Economic Cooperation and Development (OECD) report on Greece, released last week.

Energy sector reforms included in Greece’s first bailout agreement back in 2010, intended to generate competition in the electricity market and limit monopolies, have been severely delayed. However, there has ben no holding back on taxes imposed on energy. They have risen dramatically during the bailout era. Taxes imposed on natural gas consumed by the industrial sector amount to 40 percent.

“How can a Greek industrial enterprise remain competitive when tax levels in other countries, both within and beyond the EU, are 5%, 8%, 10%, 12%,” Mytilineos questioned.

The European Commission has set itself the objective of reviving the continent’s industrial sector, which it aspires will represent 20 percent of European GDP by 2020, from 15 percent at present.

This seems like a utopian target, especially if applied to countries such as Greece, where the industrial sector represents just nine percent of the country’s GDP and energy costs remain high despite the plunge in international crude oil prices.

Asked to comment on unchanging electricity prices in the local market, Mytilineos attributed the case to the structures of Greece’s economy and, especially, the energy sector. However, the corporate head said he expects to see gradual benefits for consumers within the next few months from the developing competition between main power utility PPC and privately run suppliers.

At present, PPC controls 94 percent of the local electricity market while several independent enterprises share the remainder.

Mytilineos would like to see a fall in electricity prices. Aluminium of Greece, a member of his corporate group, ranks as PPC’s largest power consumer and requires about five to six percent of the country’s total electricity production to operate.

Responding to a question on whether he considers Greece as being detached from the European energy sector’s wider developments, Mytilineos noted that gradual change was now occurring. DEPA, the Public Gas Corporation, is no longer the country’s exclusive natural gas importer as M&M, a member of the Mytilineos group, has now also entered the market. Also, new electricity interconnections with neighboring countries are being developed to increase Greece’s options.

EU policies increasing energy costs, EVIKEN tells Sefcovic

EU energy policies being implemented in Greece are increasing energy costs and blocking the liberalization of markets as a result of consequent market distortions, officials of EVIKEN, the Association of Industrial Energy Consumers, contended during a meeting in Athens yesterday with Maros Sefcovic, the European Commission vice president responsible for Energy Union.

The industrial consumer association representatives, who were joined at the meeting by members of SEV, the Hellenic Association of Industrialists, did not hesitate to frame the EU, noting that, in some cases, these unfavorable market developments are being tolerated by the European Commission.

The EVIKEN officials submitted a series of demands aimed at countering the market distortions, including the implementation of bilateral agreements and a decrease of natural gas distribution fee costs.

As for the electricity market, EVIKEN demands included an immediate start in the transition towards the target model, exemption of surcharges imposed on imported electricity, and interconnection upgrades.

For the natural gas market, EVIKEN demanded the cancellation of a distribution fee hike, the exclusion of EPA gas supply companies from gas auctions for as long as they remain subsidiaries of DEPA, the Public Gas Corporation, a doubling of the gas amounts auctioned, a reduction to the special consumption tax (EFK) imposed on gas, and reinforced and upgraded interconnections linking Greece, Bulgaria, and Romania.

Sefcovic, who was in Athens as part of a tour of European capitals to check on energy union progress of EU member states, also held separate meetings with Prime Minister Alexis Tsipras, energy minister Panos Skourletis, and other local officials.

OECD report calls for local energy network privatizations

Greece’s energy-sector privatizations – meaning the networks – need to be swiftened, state-controlled monopolies must be restricted, and markets that essentially remain closed need to be liberalized to reduce natural gas and electricity costs, currently among the costliest in the world, the Organization for Economic Cooperation and Development (OECD) has proposed to the Greek government.

A new OECD economic survey on Greece, presented yesterday to Prime Minister Alexis Tsipras by the organization’s secretary-general Angel Gurria, highlights the various chronic issues that continue to mainly affect the country’s electricity market and, to a lesser degree, the natural gas market.

Cross subsidization, the practice of charging higher prices to one group of consumers in order to subsidize lower prices for others, is proving detrimental in the electricity market as many consumer categories of the main power utility PPC are still being weighed down by the approach. This is limiting competition and increasing prices, especially for the industrial sector, the report notes.

In a list of 27 countries, Greece ranked seventh in terms of natural gas costs for the industrial sector. Greece ranked fifteen places above the average price. As for industrial electricity, Greece ranked as the tenth costliest in a list of 29 countries, five places above the average level.

High energy costs are making Greek exports less competitive, the OECD report points out.

Boosting the independence of network operators is another crucial matter that needs to be looked at, the report notes.

Increased contribution of renewable energy (RES) electricity production to the grid would also boost Greek competitiveness, according to the report. The RES share of local power production increased from just five percent in 1990 to 23 percent in 2013, the report observed.

Energy ministry forming committee to look at industrial energy costs

The Enviroment and Energy Ministry is assembling a committee to be charged with examining energy cost issues concerning Greece’s industrial sector, according to energypress sources.

The ministry’s initiative to form the committee follows a recent meeting between energy minister Panos Skourletis with representatives from EVIKEN, the Association of Industrial Energy Consumers, during which the sector’s energy cost problems were presented by industrialists.

According to EVIKEN, prospective supply agreements to be reached between industrial enterprises and PPC, the main power utility, or DEPA, the Public Gas Corporation, may offer favorable energy-cost results, but these benefits risk being offset by various regulated charges and heavy taxes imposed on energy, making the sector non-competitive.

The industrial sector wants the various regulated charges to be restricted, if not abolished, as it believes they do not offer considerable revenues to the state but, even so, significantly reduce Greek industry’s level of competitiveness and lead to job losses, ultimately affecting state revenues and contributions to social security funds.

The industrial sector is placing particular emphasis on the need to reduce the RES-supporting ETMEAR surcharge imposed on electricity bills, as well as a lignite-related surcharge, based on EU guidelines concerning state aid for energy-intensive industries.