PPC at odds with opening power market

Plans by the Development Ministry to revitalize the liberalization of the domestic electricity market have raised strong objections at the Public Power Corporation (PPC), which, de facto, retains its production and distribution monopoly, despite the fact that the power production market has been opened up since 2001. Despite hundreds of applications for electricity production projects, most of them using renewable energy sources, such as wind, none of the projects is near completion as the investment required is considerable and banks have been reluctant to lend money for projects unlikely to be profitable. The State and the independent Energy Regulatory Authority (RAE) are trying to boost private participation in electricity production by rationalizing the price structure and giving preference to private projects. It is this exclusion from the construction of future power units that PPC has risen up against. In a memorandum to the government, PPC says the existence of a dominant company at national level is crucial in the new, more competitive market at European level. It counsels against following the UK model, where privatization resulted in the breakup of the national company into several smaller ones taken over by foreign firms. The consolidation that followed has left six companies with very small domestic participation. In the rest of Europe, national companies, instead of breaking up, have entered into alliances and expanded abroad. Today, seven big companies – EON, RWE, EdF, ENEL, Vattenfall, Electrabel and Endesa – control 60 percent of Europe’s electricity market. PPC proposes, among other things, that it be awarded a license to construct a new combined cycle natural gas unit in Lavrion, southeast of Athens, with a generating capacity of 360-400 megawatts. RAE should conduct tenders for similar power stations, with a total capacity of 800 MW, among prospective private operators only, excluding PPC. The winners of each tender would sign a contract with RAE providing for a minimum of five years of electricity availability. This latter term, however, makes it difficult for private electricity producers to get financial backing. European banks, as a rule, finance independent producers only if they have long-term supply contracts, which means a minimum of 15 years. Signing shorter-term contracts would impede transition to an open market.