Filenews 2 June 2022 - by Chrysanthos Manolis
EAC has recently been facing serious liquidity problems, as a result of the energy crisis and the pending increase of the permitted electricity tariffs, so that the organization can fully recover the increased costs for the purchase of fuel, the purchase of greenhouse gas emission allowances and other expenses that have increased due to inflationary pressures.
As mentioned to "Phileleftheros", the EAC for a long time receives less than it spends on the purchase of fuel, the purchase of greenhouse gas emission allowances (the cost of which has multiplied since 2020) and more broadly for its smooth operation, which can be called into question without taking decisions quickly, as it seems that the authority's respectable cash reserves are exhausted, which until 1-2 years ago were about €350-400 million.
The information tells us, as an indication of the seriousness of the situation, that a delegation of the EAC, from the administration and the management, had a meeting with the Minister of Energy Natasa Pilidou and yesterday with the Minister of Finance Konstantinos Petrides, whom he informed about the liquidity problems that exist.
CERA changed the clause
However, the EAC's financial problems cannot be solved by decisions of the Ministers of Energy and Finance, since there is no question of emergency state funding of the organization. From yesterday's publications of CERA on its website, it appears that the liquidity problem of the Electricity Authority will be resolved in the coming period, as CERA approved a request by EAC to amend the fuel clause, so that its revenues are more accurately adjusted, whenever the fuel cost (which takes into account the cost of pollutants) borne by it for the production of electricity exceeds €300 per metric ton (baseline price), something that is now done as a rule.
In addition, we are informed that EAC claims from CERA a similar adjustment of electricity tariffs, in order to cover the part of the increased cost of electricity generation that the Authority claims it does not collect at the current level of tariffs. From the decisions taken and published yesterday by CERA, it appears that no decision has been taken for the time being to adjust the tariffs, which will obviously be done in the near future, if the request is deemed justified by the regulatory authority.
Additional costs for customers
According to yesterday's decisions of CERA, the increase in fuel clause rates for the adjustment of the wholesale tariff is partly due to:
* Delays in the implementation of projects included in the Ten-Year Transmission System Development Plan 2022-2031. CERA lists the numbers of 11 projects that are delayed "from one to seven years". The decision adds that "CERA urges the Board of Directors of EAC to address the issue in order for the above projects to be completed by the EAC Transmission System Owner, immediately". The EAC argues that the delay is mainly due to decisions or delays in decision-making/approvals by state agencies or local government authorities.
* The increase in fuel clause coefficients is also due to "the increasing penetration of RES in electricity generation, which is related to the replacement of RES production with production by conventional units during the afternoon hours ( when it decreases or there is no production from photovoltaics)".
The new fuel clause rates (which will bring about an increase in consumer charges) will apply to monthly consumers (household) from bills counted at the end of June and to bi-monthly bills to be counted from July 1st onwards.
Significant cut-offs from reasonable revenues from electricity consumers
Its package of decisions on EAC, published yesterday by CERA, includes decisions for the preliminary approval of permitted revenues (through charges to consumers) for 2022, from the four main regulated activities of the vertically integrated organization, namely Production, Supply, Transportation and Distribution.
It is interesting that CERA has drastically reduced, in some cases, the expenses of EAC for public relations and advertising.
Especially:
◗ The expenses for public relations and advertising of EAC Production were estimated for 2022 by the EAC at €35,200, but CERA approved €10,000.
◗ The advertising expenses of EAC Supply were estimated at €200,000, but CERA approved €110,000.
◗ The corresponding advertising expenses of EAC Transport were estimated at €14,500 and CERA approved €10,000.
◗ Public relations - advertising expenses of €54,800 were requested by EAC Distribution, but CERA approved €10,000.
Of interest is the decision of CERA not to approve as a reasonable expense (for recovery from consumers through bills) the capital expenditure of €5,800,000 (of EAC Production) for the Dismantling of Moni Power Station Steam Units "since it is estimated that this project will not be fulfilled in 2022. When and if this is carried out, then EAC Production can request its inclusion in the Permitted Revenues".
Also important is CERA's decision not to approve the recovery from consumers of electricity of the expenditure of €3.6 million for the acceleration of a project in Vassilikos, since, as the text shows, the acceleration was not achieved. More specifically, the following is mentioned: "The initial contract amount ( for the installation of desulphurization units in units 1 and 2 of Vasilikos Power Station) is reduced by €3,600,000, which is the cost of acceleration, since according to CERA Decision 142/2019 "the expedited cost for the installation of desulphurization and particle retention units in Steam Units 1 & 2 of Vasilikos €1,600,000, it will be considered reasonable only in the event that the works are completed on time within the timescales submitted and Units 1 & 2 of Vasilikos TIS are placed at the disposal of the TSO on 05.06.2020 and 30.06.2020 respectively. A possible delay in the delivery of either of the two Units, regardless of duration and cause, means that the expedited cost paid does not entail any benefit, so it cannot be considered reasonable."
Renewable energy producers welcome CERA decisions
The Association of Participants in the Competitive Electricity Market (SSAH - member of OEB), which consists mainly of owners of photovoltaic or wind farms, welcomes with yesterday's announcement the two Draft Regulatory Decisions recently announced by CERA, in relation to the regulation of the RES-H Purchase Price, in the "Plan of the Ministry of Energy of October 2017" and the licensing of Renewable Energy Sources (RES) projects, from the EAC.
The first preliminary decision limits producers' revenues to 11 cents per kilowatt-hour, instead of the fuel cost of the EAC, which is currently close to 19 cents per kilowatt-hour. The second preliminary decision essentially does not allow the granting of other licenses for the installation of RES parks to the EAC, with a review of the decision every year.
In a statement, the association states: "We recognize that the aim of the Regulatory Decisions is to create conditions of healthy competition in the Electricity Market, with all the economic benefits that competition offers to consumers, applying the Market Model that the state adopted and that is in line with the European regulatory and regulatory framework. This is a development that is reasonably expected to finally lead the Electricity Market of Cyprus to a path out of monopolistic situations, as has been the case in all other Electricity Markets of the other EU countries, always taking into account the safe operation of the electricity system".
