Part of the national budget’s primary surplus redistribution, an initiative announced by Prime Minister Alexis Tsipras in an address broadcast live last night, will be used to cover a Public Service Compensation (YKO) retroactive payment to the main power utility PPC, totaling 360 million euros and concerning 2012 to 2016.
Settlement of this public service amount owed to the power utility will ensure no electricity tariff hikes next year and also lead to considerable electricity tariff cuts for underpriviledged households supported by the Social Residential Tariff (KOT) program, offering subsidized electricity, the Greek leader noted. At present, 300,000 households are eligible for the KOT program.
The primary surplus redistribution, to total 1.4 billion euros, was made possible by an overperformance that more than covered the 2017 target figure, set at 1.75 percent of GDP, Tsipras explained.
It was previously believed that a 130 million-euro portion of the public service amount owed to PPC would stem from this year’s primary surplus and the rest evenly divided over a four-year period covering 2019 to 2022.
The government opted to cover the entire lot with this year’s primary surplus as the country’s lenders wanted to avoid burdening the budget in 2018 despite insisting that PPC must receive its retroactive YKO sum. Settlement of the YKO amount owed to PPC has been set as a bailout term.
Besides supporting the Social Residential Tariff program, the YKO surcharge primarily subsidizes high-cost electricity production on Greece’s non-interconnected islands.
Most European countries whose land mass includes island territory have developed interconnections to avoid more expensive localized production. In countries where such infrastructure has not been developed, Spain being an example, social residential tariff costs are equally covered by the budget and consumers.
US support promises to bolster Greece’s role as an energy hub, Greek Prime Minister Alexis Tsipras noted during a speech delivered at the Chicago Council on Global Affairs, included on the agenda of his current official US visit.
On the economy, a key part of his speech, the Greek leader declared that the country’s growth trajectory is now a reality. Greece’s economic recovery is not based on a return to the past but the establishment of new, strong foundations, he stressed.
The objective is to now move ahead with a new and sustainable model for economic growth, placing emphasis on innovation, export orientation, investment attraction and social justice, Tsipras stressed.
The Greek leader made special reference to energy sector projects and developments concerning Greece, citing a long list of projects, these being: the TAP gas pipeline, IGB gas pipeline; the Revythoussa LNG terminal’s expansion; the Alexandroupoli FSRU; plans for additional natural gas imports from the USA; developments leading to US shale gas imports into Europe via Greece; the East Med gas pipeline; the Euro-Asia Interconnector, to link the electricity systems of Greece, Cyprus and Israel; new tenders for offshore hydrocarbon exploration in Cretan and Ionian waters, which have engaged US firms; as well as negotiations with Turkey for the development of a pipeline to supply Russian natural gas to Europe.
Energy sector reforms demanded by the country’s lenders are developing into one of the biggest obstacles preventing the conclusion of the bailout’s second review. Rather than bring the negotiating sides closer together, a teleconference held two days ago between energy minister Giorgos Stathakis and creditor representatives has widened the gap.
The lenders are not making any concessions and, on the contrary, proving relentless in their demand for the launch of a sale process offering 40 percent of main power utility PPC’s lignite-fired and hydropower stations.
This demand is being linked to a recent European Court decision supporting the access of third parties to the country’s coal deposits.
At the same time, the lenders do not appear willing to include into any agreement a proposal made by PPC to sell off new subsidiary retail units with existing clients on board as a means towards satisfying the market share contraction targets imposed on the utility through the bailout.
Instead, the lenders are insisting on their proposal for a drastic increase of electricity amounts offered to independent traders through the recently introduced NOME auctions. Lower-cost electricity produced at the utility’s lignite-fired and hydropower stations is made available to independent traders at these auctions.
Energy ministry officials are unquestionably troubled by the adamant stance of the lenders. Until recently, Stathakis, the energy minister, insisted energy-sector issues would not hold back the second review’s conclusion. However, the sector’s issues have now been become a crucial aspect for any agreement between the government and the lenders.
Prime Minister Alexis Tsipras has been informed of the impasse and is expected to intervene at a political level, especially on the demand for the sale of PPC units.
Such a development could prove devastating for the coalition’s hold on power. A considerable number of MPs supporting the coalition’s slender majority in parliament, especially ones representing seats in northern Greece’s western Macedonian region, have made clear they will not endorse any plan that would include the sale of PPC production units.