NICOSIA (Reuters) – Cyprus power utility EAC said yesterday its charges need to increase to offset the cost of soaring fuel prices, in a move criticized by industrialists as impairing economic competitiveness.

The Electricity Authority of Cyprus is state-controlled and, although the market has been deregulated in recent years, it remains the only power utility on the island.

“A recent assessment of our financial data showed that if EAC is to maintain its financial soundness and competitiveness, a 6.1 percent price increase on average is needed,” said Georgios Petousis, EAC’s executive director for consumer services. “We have submitted a proposal to the (energy) regulator,” Petousis told Reuters.

Industrialists, already hit by high fuel prices, said a price hike could affect their competitiveness even further. “This would be the the worst occasion to increase electricity prices,” said Michalis Pilikos, director of the Cyprus Federation of Employers and Industrialists (OEV).

“Electricity prices in Cyprus are already among the highest in Europe and a new price increase would deal another blow to the competitiveness of the Cyprus economy.”

According to Eurostat figures, Cyprus is the second most expensive EU country in terms of electricity for industry, just behind Italy. In 2006, industrial electricity prices rose 40 percent year-on-year, the highest rate EU-wide. “We feel that this is completely unjust,” said Petros Markou, president of the consumer association.

The EAC’s Petousis said high rates were linked to the costs of heavy fuel oil firing energy grids. “We have to rely on heavy fuel oil, unlike other countries in Europe that use coal, nuclear power or natural gas. Fuel represents 80 percent of our costs.”

The EAC plans to wean itself off heavy fuel oil with the introduction of liquefied natural gas in coming years. The existing pricing scheme has been in place since 1983.

EAC’s 2005 operational profits fell 15.7 percent to 38.9 million Cyprus pounds (–66.1 million) compared to 2004. Should the regulator approve the proposed increases, they will come into force in eight to 10 months time.