ECONOMY

Study calls for more dominant and independent role of PPC

Greece’s energy planning for the period up to 2010 must be based on the Public Power Corporation’s (PPC) dominant position in the domestic power market, the National Technical University of Athens (NTUA) argues in a recent study. Despite harmful outside interventions and internal mistakes or omissions, NTUA believes that PPC can and must return to the era of providing reliable and reasonably priced electric energy for the Greek consumer. The report, which is NTUA’s contribution to the public debate on the Regulatory Authority of Energy’s (RAE) draft plan for the country’s long-term energy planning, calls on the government to tap PPC’s valuable human resources and infrastructure, and on both major parties to arrive at a clear national agreement on certain self-evident democratic principles and growth management rules for electric power as a invaluable public good. PPC management is also urged to demand independence from the suffocating embrace of government and to be freed from reliance on various outside advisors on energy policy, not only because their credibility is not a priori considered a given – as evidenced by their involvement in major scandals abroad in recent years – but also for the simple reason their services are not needed apart from rare cases. Competition Private enterprise can and must play a positive role in energy development and PPC projects, but without overcharging the utility and consumers, argues NTUA; the corporation has the best technical infrastructure and should not fear participating in a free market where the principles of healthy competition should prevail. The study criticizes the RAE plan for coming late and for putting forward working hypotheses and data without proposing specific energy policy measures that will ensure that the decentralized business decisions and consumer behavior in a deregulated market will converge around the attainment of the basic goals (security of supplies, environmental protection, balanced regional development, productivity, and a more competitive economy). NTUA says RAE’s plan cannot be compared with PPC’s 10-year rolling plans for production, transportation and distribution of power. Alternative methods The study outlines two alternative methods for securing the uninterrupted supply of electricity at a reasonable cost. The first is licensing production units through tenders in which PPC and private companies participate on equal terms in constructing and operating new plants in the framework of a 10-year plan; this is the only way to ensure that competition is fully present and to avoid cartel pricing. This method has its critics, who express reservations whether it actually helps the opening up of the market, arguing that it will necessarily lead producers to sign contracts (power purchasing agreements) with the central distributor or with PPC. The second method is the use of Capacity Availability Certificates, which the central distributor buys in advance from the producers and sells them to suppliers. RAE’s proposal is similar. The supporters of this method, which is currently under consideration by the Development Ministry, argue that the final price to the consumer will be lower than under the first method. In case no private producers submit bids for a tendered power plant, construction and operation are assigned to PPC for the simple reason that the government has to ensure the uninterrupted and adequate supply of power. The study warns that the gradual abandonment of domestic raw materials for power production (such as lignite), and the consequent growing dependence on imported fuels, is a policy option with obvious developmental and economic risks. If further argues that RAE’s plan does not adequately deal with the major issue of savings and rational use of energy, particularly of electric power, and that it does not analyze the impact of differential pricing of the various forms of energy and of fuel taxes on the rational use of energy. Renewable sources NTUA recommends a «conscious turn» to renewable energy sources (RES), based on serious planning and costly infrastructure investments, focusing in the next decade on hydroelectric and wind power, which are mature forms in technical and economic respects, and on savings and the rational use of energy. It notes that considerable progress has been made in recent years in tapping Greece’s wind power potential, and this is expected to continue at a speedier pace than for any forms of RES; this estimate is based on the strong interest by private investors and PPC itself, as evidenced by the large number of applications and licenses already issued. The report argues, however, that private wind and hydroelectric power producers are given terms particularly favorable that burden PPC, which is obliged, as a monopsony, to buy the power at higher-than-average cost prices. Although it is generally acknowledged that further development of renewable sources is not feasible without economic support in the new competitive environment, NTUA argues that subsidization of such investment cannot continue, for it burdens the final cost of energy and is incompatible with the free market mechanism.