ECONOMY

Loans only a temporary fix for ailing power market

Two loans totaling 210 million euros given to the Public Power Corporation (PPC) and the Public Gas Corporation (DEPA) from the Deposits and Loans Fund saved Greece?s power production sector literally from collapse at the last minute earlier this month.

As Kathimerini has learned, these loans were granted without the approval of the European Commission, which is probing the liquidity problem in the country?s energy market and has asked for a detailed briefing on the issue in a letter to the Greek government dated June 15.

The loans give the new government a leeway of about three months to proceed with a long-term solution. It is now clear that the liquidity problem that emerged under crisis conditions cannot be countered without tackling the causes of the deficit of the Electricity Market Operator (LAGIE), which has reached 400 million euros and is increasing by 1 million a day.

High guaranteed prices for power produced from renewable sources and low electricity tariffs are the two main causes of the deficit, over which the troika has called for action. The guaranteed prices are among the highest in Europe, especially as regards photovoltaic power, which gives returns of 25-30 percent when the EU average is 8-12 percent. According to sources, the troika is pressing for reductions not only in new contracts but also in old ones for which prices were supposed to be guaranteed for 20 years.

It has also called for increases in electricity tariffs to be brought forward by a year, to July 1, 2012.