Power utility PPC has extended by three months its negotiating period for new high-voltage industrial tariffs following a request by a number of energy-intensive producers, energypress sources have informed.
The negotiating sides acknowledge pandemic-related problems have prompted the need for additional time, during which compromise solutions will be sought.
PPC had given industrial enterprises until February 28 to accept a new high-voltage tariff pricing formula. The previous system’s validity expired December 31.
Industrial electricity charges for the first two months of 2021 have been based on the terms of expired agreements.
According to sources, tariff levels are of secondary importance in these negotiations, the prime concern being a new pricing system sought by PPC, which, if implemented, would bring an end to fixed tariffs and volume discounts.
PPC contends that the target model and its accompanying energy exchange markets, such as the balancing market, need to be taken into account for new pricing formulas.
The negotiating sides appear determined to reach agreements that would bolster the competitiveness of industrial producers without obligating the state-controlled power utility to supply high-voltage electricity at below-cost levels.
Three of eight industrial groups traditionally supplied high-voltage power by power utility PPC and holding contracts that expire at the end of this year are involved in advanced talks with domestic independent suppliers for new supply contracts, energypress sources have informed.
PPC dominates the high-voltage electricity market with a 97 percent share, but this figure could drop considerably if industrial consumers reach agreements with new suppliers.
Leading cement producers AGET Heracles and TITAN, as well as Macedonian Paper Mills (MEL), are the three industrial consumers involved in talks with independent suppliers for high-voltage contracts, the sources noted.
All three have never before held contracts with any other electricity supplier, but their shifts away from PPC, probably not concurrently, now appear highly probable. Such a development would signal the start of competition in Greece’s high-voltage electricity market.
Lower wholesale prices, which have widened profit margins, as well as lower natural gas prices lowering generation costs at gas-fired power stations operated by independent producers, are key factors behind the likely shifts of industrial consumers to independent suppliers.
Industrial producers, gearing up for the post-coronavirus era, are seeking lower energy costs but are not satisfied with the tariff levels offered by PPC, market officials have noted.
Power utility PPC’s abolishment of a CO2 emissions cost clause concerning its mid and high-voltage consumers, a long-standing demand by EVIKEN, the Association of Industrial Energy Consumers, has resulted in a considerable reduction of CO2-related costs for these consumer categories.
CO2-related costs for mid and high-voltage consumers fell sharply to 6 euros per MWh in April, down from levels of 13.40 euros per MWh in January, 13.56 euros per MWh in February and 11.14 euros per MWh in March. CO2 emission costs have dropped considerably, internationally, in recent times.
The CO2 cost level is expected to remain unchanged for May as lignite-based generation has been restricted.
Mid-voltage electricity consumers will need to pay additional RES-supporting ETMEAR surcharges worth 160 million euros for 2019 (retroactively) and 2020 in support of the RES special account.
RES market operator DAPEEP, in a latest report, estimates additional contributions of 80 million euros by mid-voltage consumers for each of the two years.
The ETMEAR surcharge contributions of mid-voltage consumers are set to rise to 17 euros per MWh from the current rate of 9 euros per MWh. This consumer category concerns a range of businesses, including hotels, retail chains, banks as well as small-scale industries.
Meanwhile, RES-supporting surcharge contributions by certain industrial high-voltage consumers will be reduced. An online platform determining which industrial enterprises will qualify for the RES-supporting surcharge reduction has yet to be delivered.
Citing unfavorable conditions and pending issues, the country’s high-voltage industrial consumers are refusing to sign new electricity supply agreements with the main power utility PPC following an invitation extended by the latter to all industries in late July.
High-voltage consumers argue the power utility has refrained from staging tariff negotiations of any substance with industries.
Also, a variety of issues remain unresolved, such as settlement of time frames for peak-hour electricity, the duration of new contracts, and the details of a formula determining cost-offsetting amounts for major-scale industrial firms, sector officials have pointed out.
Industrialists are pushing for high-voltage electricity supply contracts along the lines of favorable arrangements offered by PPC, until 2020, to ATEbank – formerly known as the Agricultural Bank of Greece and now taken over by the Piraeus Bank – and Larco, the troubled state-controlled general mining and nickel producer.
PPC agreed to offer Larco an 11 percent discount for punctual payment of its electricity bills as well as a 21 percent volume-related discount despite the enterprise’s major struggle to keep up with electricity bills. Larco is believed to owe PPC around 250 million euros.
High-voltage industries also noted PPC is offering equal, if not better, terms to consumers in the mid-voltage category, where competition exists.
Major industrial electricity consumers are hesitating to sign new supply contracts with the main power utility PPC, despite the latter’s much-delayed endorsement of a volume-based discounts chart for high-voltage consumers at a recent shareholders’ meeting, as at least two key market factors remain unsettled.
Industrial consumers are still waiting for a clear picture on the power utility’s CO2 emission right costs and transmission system usage costs.
Pundits noted CO2 emission right costs represent a production cost for PPC and cannot be incorporated into invoices.
As for the transmission system usage costs, PPC has promised to revise prices for 2019. Following a recent RAE (Regulatory Authority for Energy) decision, the power grid operator IPTO’s transmission system usage cost will need to be calculated based on average peak-hour consumption levels during the months of December, January and February. However, PPC has continued using peak-hour levels that applied between 2010 and 2014.
The tenure of main power utility PPC’s chief executive Manolis Panagiotakis, recently temporarily extended for a few months, will be given a full-term extension to offer stability and clarity at the firm’s helm and facilitate the endorsement of big decisions, namely the imminent establishment of two new subsidiaries to carry lignite assets in the north and south for the utility’s bailout-required sale of lignite power stations and mines.
The decision, a surprise development, was announced yesterday along with the agenda of the next PPC general shareholders’ meeting, rescheduled for an earlier date, June 7. The CEO’s new term is planned to be endorsed at this meeting, according to sources.
On the contrary, the situation remains unclear for industrial sector tariffs. The endorsement of new tariffs negotiated between PPC and high-voltage industrial consumers was originally planned for the next shareholders’ meeting, on June 7, but has now been postponed for a subsequent PPC shareholders’ meeting, to he held in late June.
The new subsidiaries linked to the sale package of lignite units are also planned to be endorsed at the late-June session.
As a result of this delay, energy costs consumed by the industrial sector from March onwards are unclear.
It is feared this uncertainty will have a wider impact on production planning, orders and industrial-sector investments.
Industrial sector officials have questioned the need for bilateral electricity tariff agreements to be approved at PPC shareholders’ meetings, seen as a code violation. Industrial sector officials have reacted and threatened to take action against PPC.
EVIKEN, the Association of Industrial Energy Consumers, in a letter forwarded to RAE, the Regulatory Authority for Energy, has requested the exclusion of high-voltage electricity amounts from NOME calculations, noting that, one year since their introduction, the auctions have failed to make any impact on the high-voltage electricity market, leaving the main power utility PPC as the sole option for industrial consumers.
The RAE board is expected to meet within the current week, possibly today, to decide on whether to break up an increased NOME electricity amount of 720 MWh/h for the remainder of 2017 into two lots.
EVIKEN, which made the high-voltage exclusion request – estimated at 6,800 GWh, annually, by the association – as part of its first appraisal, one year since the arrival of the NOME auctions, is also expected to take its case to the European Commission, sources informed.
The association, in its letter, also notes that the progress towards a more competitive environment for suppliers has been extremely slow and showing signs of a slowdown.
EVIKEN also makes note of an uneven impact made by the NOME auctions, so far, on the electricity market’s sub-categories. The association pointed out that PPC has lost over 30 percent in the mid-voltage category, no more than 10 percent in the low-voltage category, and lost no ground in the high-voltage supply category.
Besides issues that drew wider attention over the past few days in the negotiations between local officials and the country’s creditor representatives for the first review of Greece’s third bailout package, such as the IPTO (power grid operator) and NOME auction plans, other crucial fronts were also tackled. According to energypress sources, agreements were reached on CATs and high-voltage tariffs.
The lenders, sources informed, demanded that the main power utility PPC reach agreements with its high-voltage customers for the establishment of cost-based prices that take into account respective consumer profile characteristics influencing production costs. It appears that this demand has been accepted.
Establishing a transitional CAT system, as it had been recently approved by the European Union, was also set as a prerequisite for the review’s completion. It was also agreed that a fixed CAT system agreed to between the lenders and the Greek government must be forwarded to the European Commission by June.
The agreement between lenders and Greek officials also includes obligations to legislate a new renewable energy source (RES) support framework that is sustainable and adheres to EU directives; revise the RES-supporting ETMEAR surcharge included on electricity bills with the objective of wiping out the RES special account deficit within 12 months; double the natural gas quantities made available at DEPA (Public Gas Corporation) auctions; and complete energy-sector tax revisions based on terms agreed to with the lender insttutions.