indexation clauses

Ministry’s single variable tariff intended to boost competition

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A decision by energy minister Thodoris Skylakakis to introduce – as of January, for 12 months – a single variable tariff formula for all electricity suppliers, whose level they will set depending on respective profit-margin strategies, is intended to intensify competition leading to lower prices, or at least, price containment at reasonable levels.

The application of a single pricing formula, to be made available to all electricity suppliers, will enable consumers to make instant price comparisons with the push of a button, not possible under the current complicated system.

“If I were to ask you who the lowest-price supplier is would you know? The problem is that we don’t have a common tariff offered by all suppliers. A common tariff will now exist. All details will be announced within the next ten days,” Skylakakis, the energy minister, told local radio station Parapolitika yesterday.

All electricity consumers will be automatically transferred to the new single variable tariff as of January 1, unless they opt, prior to this date, for any other supply deals offered by suppliers.

The energy ministry estimates over 4 million consumers, or at least 70 percent of 5.7 million in total, will favor an automatic transferal to the new single variable tariff over any of the new products to be made available by suppliers.

Some market officials believe consumer preference for the new single variable tariff will be even greater.

Authorities are preparing for the Greek electricity market’s return to normality as of January 1, when subsidies are planned to end and indexation clauses reintroduced.

However, market conditions are currently adverse and challenging given last week’s outbreak of the Israel-Gaza war as an addition to Russia’s ongoing war in Ukraine.

A continuation of current market trends and conditions, which have pushed natural gas prices up 36 percent since the beginning of October, to 49 euros per MWh, would inevitably result in higher domestic electricity prices in January.

Pre-notification term planned for new variable tariffs in 2024

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The extent of possible additional charges included in variable electricity tariff agreements offered by suppliers as of the new year, when new post-crisis market rules are planned to be introduced, will need to be specified and announced by the 1st of each month and remain valid for the entire month, according to a plan being prepared by the energy ministry.

If the ministry’s planned revisions are implemented, consumers would automatically be transferred to variable-tariff categories offered by suppliers as of January 1, unless they opt – prior to this date – for some other type of supply agreement among the alternatives to be offered by their suppliers.

Consumers opting for fixed tariffs will have the right to 12-month supply agreements but will maintain the right to depart ahead of expiry dates, according to the ministry’s plan.

Given the wider insecurity felt by consumers ahead of January’s planned reactivation of indexation clauses, most consumers will probably prefer fixed tariffs, analysts have noted.

Independent suppliers have expressed concerns, noting the ministry is making decisions for new market rules without considering their views. This lack of exchange is breeding ambiguity and preventing suppliers from forming new pricing policies ahead of January 1, suppliers contend.

RAAEY demands notification on upcoming billing changes

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Preparations by RAAEY, the Regulatory Authority for Waste, Energy and Water, for the retail electricity market’s return to post-crisis normality include a framework with rules requiring suppliers to fully inform consumers, both households and businesses, on changes that will be brought about to their supply agreements by the reactivation of indexation clauses as of January 1.

Suppliers will need to pre-notify consumers by November 1 on terms set to be introduced, including any revisions to older terms. Indexation clauses were suspended in August, 2022, when energy-crisis measures were introduced.

The RAAEY framework will also include a new tariffs sub-category for mixed products, or tariffs that will remain fixed for monthly consumption levels up to a certain limit before becoming variable from this limit upwards.

Action to tackle electricity bill evasion, theft, costing plenty

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The energy ministry appears determined to deal with the wider cost and market repercussions caused by strategic electricity bill evaders and electricity theft as it prepares a plan aimed at keeping electricity price levels under control once universal subsidy support for consumers is lifted at the end of the year and indexation clauses are reintroduced by suppliers.

Energy minister Thodoris Skylakakis, a former deputy at the finance ministry, knows well that electricity bill evasion can be likened to tax evasion, as consumers who manage to avoid paying electricity bills, by taking advantage of lax domestic regulations to switch suppliers and leave behind unsettled bills, are ultimately doing so at the cost of punctual consumers, who end up shouldering consequent costs.

Even if a fraction of unpaid receivables owed to electricity suppliers were to be covered, this would help suppliers subdue their tariff levels, market officials pointed out.

Taking all this in mind, the energy ministry is expected to announce tough measures in October, clamping down on serial electricity bill evaders as well as electricity thieves.

Meanwhile, the ministry will also seek to offer reinforced energy-cost support to low-income households as of 2024, when universal energy-crisis aid, in the form of subsidies, will cease to exist and indexation clauses are reactivated by suppliers. Income levels and geographical location are expected to be factored into calculations for support to eligible households.

The ministry’s action plan countering electricity bill evaders, estimated at 30,000, will involve implementing a debt-flagging system similar to one used in the banking sector.

Electricity theft, the other key front that needs to be addressed, cost consumers a total of 789 million euros in 2022, according to recent data.

PPC prices up 25% since freeze of indexation clause a year ago

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Though a suspension of electricity-bill indexation clauses that came into effect last August has offered consumers far greater transparency on charges, tariffs offered by power utility PPC, the dominant retail player, have since risen by 25 percent, if not taking into account subsidies offered as energy-crisis support.

The power utility’s tariffs averaged 34.69 cents per KWh over the past twelve months, but would have averaged 27.77 cents per KWh during the period had the indexation clauses remained active, a survey conducted by energypress has shown.

Last August’s suspension of electricity-bill indexation clauses has resulted in higher-priced electricity tariffs at PPC for seven months, compared to the equivalent months a year earlier.

Also, modest reductions were recorded in February, April, May and July, while a more substantial year-to-year reduction of approximately 5 cents per KWh was recorded in August, 2022, when indexation clauses were first suspended.

The energy ministry recently decided to extend the suspension of electricity-bill indexation clauses until December. The suspension was originally due to end September 30.

 

Emergency measures extended by 3 months over price fears

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Unsettling energy price forecasts have prompted the energy ministry to extend the country’s emergency measures by a further three months, meaning they will now remain valid until December 31, to protect consumers against any new upward price trajectory.

The energy ministry reached a decision last Friday to extend the emergency measures – namely a price cap imposed on the wholesale electricity market and a suspension of indexation clauses usually included in electricity bills. Both measures, introduced a year ago, were due to expire on October 1.

The energy ministry wants the financial support of the Energy Transition Fund, in order to provide electricity subsidies to consumers should the energy crisis flare up again.

Such Energy Transition Fund support would not be possible if the existing price cap in the wholesale electricity market were to be lifted, as any price levels over the cap would remain in the market and not be diverted into the Energy Transition Fund to cover electricity subsidy needs.

Since its introduction last July, the price cap on the wholesale electricity market has so far raised over 3.3 billion euros for electricity bill subsidies, the energy ministry pointed out in its announcement of the decision to extend the country’s emergency measures.

Highlighting concerns of possible energy price rises ahead, German electricity forward contracts for the fourth quarter of 2023 and the first quarter of 2024 have been set at 123 and 146 euros per MWh, respectively.

As for France, one of Europe’s other major energy markets, forward contracts for Q3 2023 and Q1 2024 were set at 155 and 218 euros per MWh, respectively.

Indexation clause set to remain suspended for 2 extra months

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The energy ministry appears to be receptive to a request made by a number of electricity suppliers for a short extension of emergency measures introduced to the retail electricity market during the early stages of the energy crisis.

Suppliers have called for an extension of emergency measures as an adjustment period for a return to normalized tariffs.

The ministry, energypress sources have informed, seems set to keep indexation clauses in electricity bills suspended for a further two months. This means they would be reactivated on December 1 rather than October 1, as was originally planned.

On the contrary, the ministry does not look like it will extend emergency measures that had been introduced to the wholesale electricity market, unless the energy crisis flares up again and leads to skyrocketing natural gas prices, as was the case for several months last year.

If electricity prices, greatly influenced by natural gas prices, remain steady until the end of September, then a current price cap imposed on the wholesale electricity market’s day-ahead and intraday markets will be terminated as of October 1.

Emergency measures expiring, Athens seeks extension

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The energy ministry has forwarded an official request to the European Commission seeking an extension, until the end of the year, of emergency electricity market measures that were introduced last summer to combat energy price rises and are set to expire on July 1. Brussels has yet to respond to Athens’ request.

Over the past nine months, the extraordinary measures have proven effective in subduing electricity prices for households and businesses at levels well below those created by the energy crisis.

The energy ministry imposed a wholesale price cap on electricity, interrupted indexation clauses concerning retail tariffs, and has been subsidizing electricity. Also, in an effort to stimulate competition, the ministry set a rule requiring power suppliers to announce their nominal tariffs – not including subsidies – for each forthcoming month ten days in advance, and has given electricity users the freedom to switch suppliers without any penalty costs.

The Greek request forwarded to the European Commission wants this entire package of measures extended until the end of 2023, as protection against any new wave of energy price rises.

Though energy prices have deescalated over recent months, analysts have not ruled out a rebound and reemergence of energy sufficiency issues in Europe next winter.

Russia’s ongoing war in Ukraine and Europe’s inconclusive plan regarding alternative energy sources are the main factors nurturing these concerns.