PPC must acknowledge true cost, an issue now at the fore

The issue concerning the true level of main power utility PPC’s production cost has returned to the fore following a decision announced this week by the Hellenic Competition Commission, a protector of free competition, which lends support to Aluminium of Greece, a member of the Mytilineos corporate group, for the high-cost energy problem it faces.

PPC must reach an agreement with Aluminium of Greece on a new tariff deal for the energy-intensive industrial enterprise within a three-month period, as of today, according to the commission’s decision.

The matter has re-emerged as Greek government officials prepare to finanize talks with the country’s creditor representatives on the NOME auction plan, to offer third parties access to PPC’s low-cost lignite sources and help break PPC’s near-monopoly in Greece’s electricity market. The NOME plan needs to be completed by no later than February.

The local competition commission’s decision tackles the PPC cost issue directly and sets a tight deadline for the measures that need to be taken.

Local officials and the creditor representatives will need to decide on the starting price of NOME auctions within the next few weeks. The government wants to press ahead with the plan and seems determined to not permit any delays by PPC over technical concerns.

Returning to the tariff dispute between PPC and Aluminium of Greece, the power utility’s true cost must be reflected in the agreement that needs to be reached. This is not an isolated case and will influence the power utility’s tariff-related dealings throughout the entire industrial sector.

The cost level presented by PPC has already been doubted by the local competition commission, the creditor representatives and, most recently, the Greek government as well, energypress has been informed.

During its long-running dispute with Aluminium of Greece, PPC, in 2013, contended its cost level was 59.1 euros per MWh. RAE, the Regulatory Authority for Energy, had cut the level to 36.6 euros per MWh. To back its claims, PPC had hired multinational professional services firm Ernst & Young to confirm its figures, which the latter did. But this endorsement was based on cost-related figures that had already been published by PPC, not an independent survey of the power utility by Ernst & Young.

Responding to a PPC announcement released yesterday, market authorities have noted the power utility’s management has either not fully understood the importance of the local competition commission’s decisions, which are binding, or has done so and intends to apply defensive delay tactics.

However, in its announcement on the tariff dispute with Aluminium of Greece, PPC did acknowledge any solution to emerge will have a wider impact on consumers in the the local electricity market. “Any agreement reached on the tariff to be offered to Aluminium of Greece, which consumes roughly 5.5 percent of power in the country’s mainland, will impact all consumers,” the PPC statement noted.

PPC’s current management, led by CEO Manolis Panagiotakis, who was appointed earlier this year, has persisted with the cost-related views supported by the power utility’s previous administration. PPC insists its average lignite-based production cost is 59.14 euros per MWh, despite the ruling that undercut the figure to 36.6 euros per MWh and a decision at a PPC general shareholders meeting in 2014 that had set the price at 44.5 euros per MWh.

At the time, authorities assumed PPC would apply the 44.5 euros per MWh level as a base for the NOME auctions. But PPC was not obligated to do so. However, the latest decision by the local competition commission, which has demanded that a fair solution be found with Aluminium of Greece, is a binding one.

The committee’s pressure on PPC to reach a tariff agreement with Aluminium of Greece, and the starting price of NOME auctions, essentially boil down to being the same matter, one that concerns PPC’s actual production costs. It promises to shape the upcoming developments in Greece’s electricity market.

 

PPC industrial rate drop refusal prompts extrajudicial action

Greek industrial enterprises among the 60 or so belonging to the medium-voltage category with consumption levels of over 13 GWh per year have forwarded extrajudicial statements to the Deputy Minister of Industry Theodora Tzagri and RAE, the Regulatory Authority for Energy, to inform of the impasse in their negotiations with PPC, the main power utility, for lower electricity tariffs concerning the current year. The industrial companies underlined their levels of competitiveness are being affected.

According to energypress sources, these medium-voltage industrial firms – which belong to different electricity consuming PPC categories than the high-voltage units and other medium-voltage units consuming less than 13 GWh per year – delivered extrajudicial statements as they have expected PPC to make tariff adjustments based on the utility’s reduced operating costs amid the current market conditions. Natural gas and petrol prices have fallen, while a number of regulatory changes have also further contributed to PPC’s lower operating costs.

Sources told energypress that, just days ago, PPC informed medium-voltage industrial firms it cannot make any tariff reductions, prompting the extrajudicial reaction, a possible prelude to legal action, by the industrial firms. PPC had received the findings of a cost-related study commissioned to a foreign consulting firm when it delivered the unfavorable news, sources said.

Until now, PPC officials had contended tariff reductions for 2015, compared to rates offered for 2013 and 2014, could not be considered unless the results of the cost-related study were delivered.

Medium-voltage industrial firms feel that they are being unfairly treated as they are charged the highest tariffs, overall, in the industrial sector. They argue PPC has leeway to reduce their tariffs, basing this argument on a tariff reduction granted last summer to medium-voltage industrial enterprises consuming between 10 and 13 GWh per year.

PPC nearing tariff deals with high-voltage industrial consumers

Officials representing main power utility PPC and high-voltage consuming major-scale industrial enterprises are negotiating in earnest for new tariff deals to replace temporary arrangements. PPC is staging separate negotiations with each of the industrial enterprises.

PPC reports of sound progress being made have been confirmed by industrial company officials, while it is believed the first batch of agreements may be signed imminently.

The country’s large number of medium-voltage consuming industries has been left to wait for the time being.

The apparent progress being made between PPC and industrial enterprises for improved high-voltage tariff agreements, likely to lead to deals by the end of the year, has prompted thoughts among industrialists as to why another energy cost-saving initiative for the industrial sector, the “disruption management” plan – to enable savings for major-scale industry in exchange for shifting energy usage to off-peak hours whenever required by IPTO, the power grid operator – remains pending.

Refering to the issue yesterday, energy minister Panos Skourletis contended the country’s lenders, not Greek officials, are to blame for the “disruption management” plan’s delay.

An industrial sector authority noted an additional period of about three months would be needed to implement the plan once an agreement between Greece and the institutions is signed.

On another front, PPC’s recently announced new campaign to collect overdue unpaid electricity bills may have led to a reduction of the total number of consumers owing amounts to the utility, down from 2.5 million customers to 2.1 million, but the overall amount owed to PPC has risen to over 2.2 billion euros. Latest news claims the arrears figure has now struck 2.5 billion euros.

PPC officials have attributed the aforementioned trends to a lack of cooperation among larger debtors. The utility will continue to press on with its aggressive collections policy, it has said.