Talks begin with lender technocrats on bailout’s energy issues

A team of bailout technocrats, arriving in Athens today, and local authorities will seek solutions to three main energy sector issues as part of the recommencement of talks between government officials and creditor representatives within the next few days.

The main power utility’s bailout-required sale of units, including mines, representing 40 percent of its total lignite capacity, promises to top the agenda. Various unconfirmed reports have surfaced in the lead-up, ranging from claims that the European Commission has rejected the Greek proposal to the emergence of a purported plan that would enable prospective unit buyers to demolish old PPC units and construct new ones in their place with existing permits.

The only certainty at this stage is that Greek officials are battling to keep afloat their initial proposal offering 36 percent of PPC’s lignite-fired power stations and 42 percent of the utility’s lignite mines.

The initial sale package tabled by Athens includes the state-controlled utility’s two lignite-fired stations in Amynteo (550 MW), Meliti I (330 MW), and a license for Meliti II (450 MW).

If Greece’s initial proposal is not accepted by the lenders, then the government will need to produce an alternative plan. Both the energy ministry and PPC want to avoid such a development as it could require the inclusion of the Agios Dimitrios facility (1.450 MW), which neither the ministry nor the utility would want to sell.

Also, rejection of the initial plan could initiate procedures that may eventually lead to the inclusion of hydropower facilities in the utility’s sale package, another dreaded prospect for the ministry and PPC. Their objective is to stage a market test in October based on a lignite-only  sale package.

Greek officials and the country’s lenders also need to settle a backlog of Public Service Compensation (YKO) payments owed to PPC, estimated at 360 million euros by RAE, the Regulatory Authority for Energy. The authority has proposed that nearly 100 million euros of this amount be covered through the national budget in order to avoid electricity bill hikes for consumers. This course of action would need to be approved by the country’s lenders.

YKO surcharges added to electricity bills are paid by consumers to primarily subsidize PPC’s high-cost electricity production on Greece’s non-interconnected islands and also support the Social Residential Tariff (KOT) program offering underpriviledged households subsidies for lower-cost electricity.

Pending natural gas market reforms leading to full liberalization represent the other key issue that will be tackled by Greek officials and the lenders. The Greek government has agreed to present a road map to the lenders by the end of the year. This requirement was added to the most recent bailout revision.

The road map is expected to detail the elimination of current conditions restricting competition in Greece’s natural gas market. The country’s lenders are pushing to limit the omnipotence still maintained by DEPA (Public Gas Corporation). DEPA’s dominance includes an ongoing role in the wholesale and retail gas markets.