Temporary CAT plan for 2015 now regarded as state aid

The country’s creditor representatives have toughened their stance on Greece’s temporary CAT mechanism plan, intended to facilitate payments for producers concerning output in 2015 ahead of the establishment of a permanent mechanism, by denouncing it as a form of state aid. The representatives informed Greek officials of their position on the plan yesterday.

At the same time, the representatives are increasing the pressure on main power utility PPC to swiften procedures for new industrial sector tariffs following the abolition of a 20 percent electricity rate discount offered to the sector, a bailout demand.

In addition, the lenders have offered Greece an informal deadline extension, until mid-November, to shape a final NOME auction plan, to offer electricity wholesalers access to main power utility PPC’s low-cost lignite-fired production as a means of gradually ending the utility’s market dominance.

The developments on these three energy reform fronts dominated proceedings at yesterday’s meeting between energy minister Panos Skourletis and the creditor representatives.

The shift in opinion by lenders on Greece’s temporary CAT plan for 2015 payments to electricity producers surprised local officials. Prior to yesterday’s development, a letter from the European Commission’s Directorate-General for Competition to the energy ministry had warned that the temporary CAT plan is regarded as state aid because, normally, payments through such a mechanism need to be made in advance, not retroactively, as Greek officials have planned.

Greek officials responded by noting the country had submitted a request for its plan early in 2015 and that a decision had remained pending for months.

Approval of the temporary CAT plan, intended to cover six months of production in 2015, had been considered a certainty by local officials. However, following yesterday’s unexpected development, independent producers operating gas-fueled power stations face missing out on a total of 60 million euros.

According to sources, the plan’s denouncement as state aid is not unanimously shared by all creditor representatives.

As for the permanent CAT plan, discussions are continuing and appear to be headed in a promising direction. However, the process is time consuming, Greek officials have noted, adding the entire month of November will be needed.

Developments also appear positive for the reintroduction of a Variable Cost Recovery Mechanism, locally acroymed MAMK, to prevent certain power stations from operating below cost by helping cover their start-up costs whenever they are called into action to help meet the grid’s needs.

On the NOME plan, Greece’s longer-term outlook to aim for a reduction of PPC’s market share to 50 percent by 2020 and not be binded by a shorter term objective of a 25 percent reduction by 2018 appears to have been positively received by lenders. PPC currently holds a 96 percent share of Greece’s retail electricity market.

The “disruption management” plan, to enable energy cost savings for major-scale industry in exchange for shifting energy usage to off-peak hours whenever required by IPTO, the power grid operator, is virtually ready and will soon be announced. As has been reported, its cost will greatly burden the renewable energy sources (RES) sector.

All the aforementioned energy reforms have not been included in the list of prior actions expected for Greece to secure its next sub-tranche of bailout money, worth two billion euros.