Speech by the President and CEO Mr. Arthouros Zervos At The Conference «ATHENS ENERGY FORUM 2013"

SPEECH BY THE PRESIDENT AND CEO OF PUBLIC POWER CORPORATION Mr. ARTHOUROS ZERVOS

 AT THE CONFERENCE «ATHENS ENERGY FORUM 2013 – ENERGY OUTLOOK IN SOUTHEASTERN EUROPE AND THE EASTERN MEDITERRANEAN»

Title: Restructuring the Greek Electricity Market:
Challenges & Opportunities of electricity market and distribution  

Hotel Grand Bretagne, Athens
Tuesday 26^th of February 2013, 12.00
Embargoed: 26/02/13 – 12.00

Ladies and Gentlemen,

I would like to thank the International Herald Tribune for the invitation, as well as all those who worked to organize this Conference.

The rationalization of the electricity energy market is a prerequisite in order the energy sector to constitute the driver for economic growth and prosperity for the country, with the consumers also benefiting significantly from this process.

PPC – with proven business efficiency and social contribution – has submitted specific proposals to the relevant bodies, for a restructure aiming at the creation of electricity market which:

·        will operate with transparency and predictability in order to attract new investments when and where needed.  

·        will enhance the competitiveness of National Economy and  

·        will contribute efficiently to the security of energy supply in a long-term basis.  

At the same time, the Greek model of energy market should be adjusted to the unified European model – named “target model”, with structural reforms including the replacement of the “mandatory pool” not only with “bilateral agreements between producers and suppliers” but also through “power exchanges”.      

Within the framework of the relevant public consultation, the most important change proposed by RAE regarding the wholesale market, is the implementation of auctions for the sale of electricity from PPC’s lignite power plants portfolio to third parties with their obligation to supply energy to retail customers.  

The aim is to increase the competition in electricity supply so as other Electricity Producers that have just gas plants to acquire an electricity generation mixture equivalent to the one that PPC has.

PPC supports the energy supply from the lignite production portfolio to third parties under the following conditions:

·        Firstly, energy should be supplied to the final consumers and particularly to the most standard mixture of final consumers of Low, Middle and High Voltage, equivalent to the one supplied by PPC, 

·        And secondly, there should be a minimum energy auction price which will reflect the complete cost of electricity generation from lignite power plants plus a reasonable profit for the activity of electricity generation.

Regarding the wholesale market, another important change suggested by RAE is the gradual elimination of the variable cost recovery mechanism and the simultaneous review of the capacity assurance mechanism for the power generation plants.   

We, in PPC, believe that the two mechanisms mentioned above are placed outside the free market since they form the wholesale electricity price, based on administrative criteria and not based on the balance between offer and demand.

The variable cost recovery mechanism was established to financially help the new investments of other Electricity Producers. However, it actually ended up to be misused resulting to significant surcharge on the electricity generation cost and on the trade balance of the Country through aimless consumption of imported gas at the expense of domestic energy sources.

PPC supports the direct and complete elimination of the mechanism, because it introduces distortions and financial surcharges in the electricity wholesale market.

In any case, this mechanism will have to be completely abolished until the implementation of PPC lignite production auctions, at the latest; otherwise, it would be considered as double subsidy to Third parties at the expense of PPC.

Regarding the review of the capacity assurance mechanism, PPC supports the readjustment of the price which will have to be unified for all the plants irrespective of the fuel (e.g. lignite, gas and hydro) provided that all plants provide capacity in the System.

Οn the other hand, the revenues of flexible electricity generation plants (that is, units that can fluctuate capacity quickly and can have frequent initiations and quenching) must be done through the establishment of a “back up energy market" according to the European standards and not through the capacity assurance mechanism.

In relation to the retail market, we totally agree with the proposals of RAE for:

·        Complete liberalization of tariffs – under the condition that there is a special consideration and measures taken for the support of the most vulnerable social groups,

·        The elimination of possible cross subsidies between tariffs,

·        The relief of electricity and fuels from excessive taxation, as well as

·        The full disengagement of the electricity supply activities from the collection of charges for third parties (such as charge to ERT, municipal charges etc.)  

It is obvious that the connection of retail and wholesale market is an indispensable condition for the good operation of both markets and for the elimination of the existing distortions, provided that the two markets practically constitute one unified continuous economic entity which is called "Domestic Energy Market". 

Ladies and Gentlemen, 

During the last three years – under particularly difficult conditions –as an effort of substantial modernization of the Public Power Corporation we implemented series of significant actions offering at the same time important support to vulnerable social groups, such as: 

·        Very significant reduction of our cost – we believe the biggest reduction in costs realized by any other body in Greece, 

·        Successful separation of Networks – a difficult exercise  with possitive results, 

·        Total investments of to 3 billion Euros – the highest investments implemented in Greece within the last three years, 

·        While, at the same time, we stood by our customers who are suffering from the extended crisis providing 400,000 payment facilitations in 2011 and more than 700,000 in 2012.  

Through these actions along with other policies, we do our part for the achievement and creation of a healthy electricity market, enabling it to become one of the most important pillars for the development of the Greek Economy.  

Thank you