Greek Electricity Market At Risk

Greek Electricity Market At Risk

As a part of its obligations deriving from the agreement with the International Monetary Fund (IMF), the European Commission (EC), and the European Central Bank (ECB) in May 2010 and in order for financial support to be provided, Greece committed itself to adopt measures via a Presidential Decree and a Ministerial Decision to accelerate the opening of the electricity market. In particular, the measures refer to the liberalisation of the wholesale electricity market and the rationalisation of the retail prices in a way that cross subsidies and violations of competition rules are prohibited. In parallel, the 3rd energy package of the European Union provides for more stringent rules towards the completion of the internal market. The new provisions have to be implemented within Greek Law until March 2011 and the new legal framework will contribute to Greece becoming a prosperous energy hub and an attractive market in the southeast Europe.

With regard to the matter of the opening of the wholesale market the Greek energy regulatory authority (“RAE”) has issued a public consultation which is so far completed. During this procedure various energy companies have submitted their comments and proposals. Regarding the issue of the retail energy prices on the other hand, RAE has published its opinion no 237/2010 with the title “Regulated prices for the energy company PPC S.A”. According to RAE’s view within the year 2010 a direct application of a new price methodology shall occur according to which in the first phase of the rationalisation procedure only tariffs for certain commercial customers shall decrease promptly. This decrease shall be followed by a gradual increase of tariffs for household customers and other consumers. As a result, RAE suggests the decrease of charges for commercial customers while the prices for other consumers like household customers shall remain the same for a transition period due to reasons of public interest and the financial crisis in Greece which is particularly straining on small consumers. The exclusive right of PPC to supply certain consumers with electricity (i.e. island consumers) de facto continues to exist while other private suppliers and PPC’s competitors are not allowed to supply the said customers on the islands. In anticipation of the adoption of the Ministerial Decision based on the above mentioned opinion of RAE, it has to be noted that the proposed measures entail dangers for competition within the country. In addition to the obligation according to the agreement with the IMF Greek representatives shall take into consideration that the special rules for the liberalisation of the electricity market and the enhancement of competition has not been respected in full until today.

Necessary measures

Measures have to be adopted in relation to the following matters:

  • an efficient legal and functional unbundling of the distribution network and the system of the non-interconnected islands whose operator still remains PPC placing the independence of the network operation from the electricity generation and supply in danger. Especially for the non-interconnected islands where competition is non existent, the necessary changes must take place as soon as possible in order for private suppliers to enter the market and to enjoy free and fair access to the networks.
  • a review of the determination method of the charges for the provision of services of general interest (e.g. issuance of a social public tariff, SOGI for big families) and the allocation mechanism to the different consumer categories in a way that it will not lead to anticompetitive behaviors and an unjustified pressure of private suppliers to abandon the market with negative consequences for the market and the consumers.
  • the rationalisation of the retail prices for electricity with a parallel monitoring of the wholesale supply market with the aim to avoid distortions of the market and to keep the possible violations of the dominant position that PPC holds in the market of generation and electricity supply under control.

In conclusion it is underlined that the attempt of the government to protect an earlier state monopoly as PPC just before the opening of the market will be completed is to a certain extent acceptable. At the same time it is not fair and according to the law when this protective behavior forces the few existing private suppliers to abandon the market. This action would produce severe consequences for Greece and any attempts to overcome the economic crisis that is stifling the country taking into consideration the country’s need for investments by foreign and local companies. New investors have to be attracted with incentives and the sign shall be given that political will is present towards a real opening of the Greek market.

Dr. Markela Stamati, LL.M., Senior Associate
Energy & Competition Law Tea

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