Five power suppliers fined for older debt to market operators

Five electricity suppliers have been handed fines by RAE, the Regulatory Authority for Energy, for outstanding debt to market operators totaling 347 million euros, energypress sources have informed.

The RAE board, which was preoccupied with the matter over at least three sessions, reached its decision at a crucial time amid the energy crisis, challenging the sustainability of energy companies.

Power utility PPC, the market’s dominant supplier, is believed to be among the five suppliers handed fines, along with four smaller players.

The five suppliers have agreed to letters of guarantee representing 50 percent of their debts owed to the operators and installment payment programs for settlement of remaining amounts over periods ranging from 8 to 10 months, sources noted.

RAE is expected to reexamine the progress of these payments in December, 2022.

Despite handing out fines, RAE is believed to be extremely concerned about the sustainability of energy suppliers, especially smaller players.

RAE to intensify its operator monitoring, starting with gas

RAE, the Regulatory Authority for Energy, is gearing up to intensify its monitoring of the Greek energy market’s gas and electricity operators with the aim of minimizing operator surcharges for consumers and helping improve operator services, the authority’s chief executive, Thanassis Dagoumas, has told a news conference, reiterating the intention, also stressed during a recent presentation of its annual report.

The regulatory authority’s plan includes commissioning certified auditors to inspect the financial data of market operators.

Gas grid operator DESFA, gas distributors EDA Attiki, EDA THESS and DEDA, as well as the power grid operator IPTO and electricity distribution network operator DEDDIE can, as a result, expected closer inspections.

The authority intends to commence its intensified monitoring effort with the natural gas sector, where numerous new projects are planned for development, in an effort to ensure fair surcharge costs for consumers.

Dagoumas, at the news conference, reiterated that the operators, whose revenues are regulated, cannot enjoy wider profit margins than other market players.

Operators will be offered incentives for swifter completion of projects, which, combined with the stricter monitoring effort, will result in either bonuses or penalties, depending on the degree of progress made, the RAE chief highlighted once again.

RAE intends to introduce incentive-based policies, standard practice around Europe, for all energy market operators active in transmission and distribution.

 

Guaranteed revenues for operators ‘must not breed complacency’

Operators must not become complacent as a result of their guaranteed revenues but, instead, strive to keep improving their services, RAE (Regulatory Authority for Energy) chief executive Thanassis Dagoumas has stressed.

High yields secured by electricity and gas market operators active in Greece’s transmission and distribution networks are breeding complacency and prompting these companies to skip crucial investments needed for upgraded consumer services, the RAE chief has suggested.

The regulatory frameworks these operators are subject to, offering natural monopolies, result in considerable advantages compared to other sectors of the economy, Dagoumas noted.

It must be widely accepted, as a matter of principle, that perpetually high profit margins resulting from activities free of competition, without improved services in return, is not reasonable, the RAE chief noted.

Fair competition is a fundamental component of the EU itself, Dagoumas pointed out.

RAE plans to implement incentives for all operators, not just the electricity distribution network operator DEDDIE/HEDNO, and the gas distributors DEDA, EDA Attiki and EDA THESS, as is the case at present, Dagoumas disclosed.

DEDA, EDA Attiki and EDA THESS have been offered extra WACC returns for meeting gas penetration objectives and reducing overall distribution costs for consumers.

At least 10 candidates emerge for DEDDIE sale’s market test

At least ten prospective bidders, among them a number of infrastructure funds as well as European operators, have taken part in a market test staged by distribution network operator DEDDIE/HEDNO in the lead-up to its sale of a 49 percent stake.

The privatization’s officials have deemed the turnout as considerably satisfactory, both in terms of numbers and the reputations of participants.

Some of the funds, both from Europe and beyond, that emerged for this market test are either already present in the Greek market or have been considering to make an entry for quite some time. They specialize in infrastructure and energy projects as long-term investments.

The board at power utility PPC, DEDDIE/HEDNO’s parent company, will be fully informed on the market test’s participants at a meeting scheduled for today, before the privatization is officially launched.

The privatization’s exact number of first-round participants should become known by the end of January, when the expression-of-interest deadline is expected to be set.

Officials believe the overall sale procedure can be completed by spring in 2021. Attractive WACC levels set recently by RAE, the Regulatory Authority for Energy – 7 percent for 2020 and 6.7 percent for 2021 to 2024 – are expected to lure candidates.

DEDDIE/HEDNO’s ambitious 2.3 billion-euro investment plan, included in the operator’s preliminary network development plan, its projects featuring the installation of 7.5 million digital power meters, transmission network upgrades and expansions, as well as a fiber optics project, should serve as further stimulus for a solid sale price.

PPC debt to end year at €600m, down from €900m last year

Power utility PPC’s debt owed to energy market operators as well as project contractors has continued to fall, quelling fears of a debt-reduction slowdown during the country’s second lockdown.

The power utility’s total debt figure is projected to end the year at approximately 600 million euros, down from 900 million euros in July, 2019, a 35 percent drop in a year and a half, according to sources.

The company’s debt reduction is declining at an average rate of 18 million euros per month, driven by an improved collection record for unpaid receivables and better operating profit figures.

PPC’s payments to RES market operator DAPEEP, power grid operator IPTO and distribution network operator DEDDIE have all improved for a complete turnaround compared to a year earlier.

The power utility’s outlay for liquid fuels, natural gas, solid fuels, CO2 emission rights and electricity purchases, down by 678.1 million euros during this year’s nine-month period compared to the equivalent period a year earlier, has been a favorable factor in PPC’s improved results and debt-reduction effort.

PPC aims to further reduce its total debt to a level of between 250 and 300 million euros by the end of 2021.

 

PPC improves payment rate for operator debt, down to €650m

Power utility PPC has increased its rate of payments for debt to operators, reducing the total amount owed from 900 million euros in July, 2019 to approximately 650 million euros at the end of last July, energypress sources have informed.

This debt, owed to power grid operator IPTO, distribution network operator DEDDIE/HEDNO and RES market operator DAPEEP, has fallen at an average of between 22 to 24 million euros per month.

PPC aims to reduce its debt to these operators by a further 100 million euros by the end of the year, which would reduce the figure to 550 million euros.

If the current payment rate is maintained, PPC’s debt to operators may drop to a level of between 260 and 270 million euros by the end of 2021.

The power utility’s improved operator-related debt performance, a turnaround compared to a year earlier, when company officials had warned better days along this front were a long way off, has, by extension, helped DAPEEP improve its payment record to RES producers for their output.

PPC’s annual deficit was at a level of approximately 900 million euros last year.

Cost-reduction initiatives and a suppression of energy commodity prices during the pandemic have helped PPC stabilize its finances.

The utility’s outlays for liquid fuels, natural gas, CO2 rights and electricity purchases fell by 33.7 percent, or 561.3 million euros, in the first half this year compared to the equivalent period a year earlier.

 

Broader offsetting eligibility for operator, energy firm accounts

The energy ministry intends to maximize the eligibility and coverage of an imminent plan designed to offset unsettled accounts between market operators and energy producers or suppliers.

A related ministerial decision is expected to be delivered by the energy ministry within the next fortnight.

The energy ministry’s upcoming measure, seen as crucial cash-flow support for energy-sector companies amid extraordinary times, will seek to make eligible – for offsetting – as many categories as is legally possible.

This essentially means that the offsetting plan’s terms to be included in the ministerial decision will be far more relaxed than those of a proposal delivered just days ago by RAE, the Regulatory Authority for Energy.

The energy ministry accepts a number of the observations made by RAE but is proceeding with its own appraisal and terms, sources informed.

Security fund initially limited to operators, suppliers must wait

A security fund being established by the energy ministry as financial protection for electricity market players from the pandemic’s repercussions will, for the time being, be limited to covering the needs of market operators.

A wider package also including protection for suppliers, as was initially intended, will need to be examined later on as its cost, estimated anywhere between 600 million and one billion euros, is considered too substantial by authorities.

Limiting the security fund’s coverage for market operators will require an amount of between 100 and 200 million euros, it has been estimated.

The security fund’s sum promises to compensate power grid operator IPTO, distribution network operator DEDDIE/HEDNO and RES market operator DAPEEP for regulatory surcharges not expected to be received under the current conditions.

Consumer electricity bill payments, which include regulatory surcharges, are projected to fall by approximately 30 percent over the next two to three months.

 

 

Operators must plan hydrogen projects to seek PCI funds

Greece’s network operators need to pursue projects concerning the development of networks designed to carry and distribute hydrogen, the new clean fuel whose rise is leading to major changes.

Companies such as Greek gas grid operator DESFA, gas utility DEPA and distributors will need to include hydrogen-related projects in their next network development programs. Hydrogen projects are expected to be eligible for favorable EU funding.

A fortnight ago, EU energy commissioner Kadri Simon informed European Parliament’s Committee on Industry, Research and Energy that a new regulation for projects of common interest (PCI) will place emphasis on hydrogen networks, carbon capture, domain bridging, storage batteries and smart networks.

In addition, a German government official recently declared that hydrogen will become the new gasoline, noting Germany will play a leading role in its overall development.

Quite clearly, national governments and major energy companies around Europe are working to establish hydrogen as a key fuel in the adjustment needed to achieve decarbonization goals.

In Greece, network operators will need to seize the opportunity and plan hydrogen projects eligible for a share of the EU’s PCI funds.

 

 

Incentive regulation considered for operator earnings formula

An incentive-based regulation that would gradually replace a cost-based model is being seriously considered for a formula determining earnings provided to the country’s operators.

The energy ministry and RAE, the Regulatory Authority for Energy, are examining changes to the regulatory framework concerning investments in the energy transmission and distribution networks, officials representing the two bodies have highlighted at the ongoing Thessaloniki International Fair.

Operator earnings include regulated earnings determined by WACC figures for projects.

Regulatory authorities around Europe typically permit higher and lower WACC rates that consider the time required to complete a project, or its cost. This is not so in Greece.

Incentives driven by specific targets or the achievement of specific results need to be offered by the regulatory authority, deputy energy minister Gerassimos Thomas told a forum titled “Energy Developments in the Country amid Structural Changes to the New Energy Model”, staged within the framework of the Thessaloniki International Fair.