Sharing load of power rate hike

Sharing load of power rate hike

The Regulatory Authority for Energy (RAE) is considering spreading the risk from the major fluctuation in wholesale electricity market rates in a bid to avoid placing an excessive load on the final consumer in the form of power rate hikes.

After an initial round of contacts with suppliers and the inspection of their application data for their price adjustment clauses, the energy regulator is examining the legal aspects of forcing suppliers to shoulder part of the rate hikes they activate through those clauses.

The dominant view at RAE is that there can be no business activity with zero risk. On that grounds it will address the suppliers soon, offering them two proposals: They will either adopt fixed power rates (not allowing them to adjust them according to the wholesale prices), or floating rates on the condition the consumer will only should 70% of any hikes passed on to them; the suppliers will have to absorb the remaining 30%.

Supply companies will also be asked to rephrase the terms for the activation of the rate adjustment clause, to render them transparent and clear for consumers from the outset.

RAE’s idea is to have the wholesale power market accept that proposal through an informal gentlemen’s agreement, so as to avoid having to introduce any regulatory measures, though the latter option is also being examined by the watchdog’s legal service.

What the regulator is trying to tackle by proposing some informal rules is to reduce the load on households and corporations from the large hikes in power rates as a result of the rising carbon dioxide (CO2) emission costs and the increase in natural gas rates: These factors drive wholesale market rates higher, with retail prices following them.

The wholesale market rate has risen to 75.53 euros per megawatt-hour from €45.10/MWh in 2020.

The activation of the adjustment clause has taken the rates of alternative power suppliers up by more than 30% since the start of the year.

Even the rates of electricity giant Public Power Corporation (PPC) have risen 7% since last month. To reduce the burden on consumers, PPC cut its nominal rates by 30%.

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