ECONOMY

Deregulation of power and gas a priority; PPC to remain public

New Deputy Development Minister Giorgos Salagoudis says he is not prepared to succumb to pressure from private business interests in the energy sector, where the government has a loaded agenda for promoting deregulation on a number of fronts and for expanding the role of private enterprise. «I know I have come to a sector where the ‘frogs’ are in danger of being trampled upon by the ‘buffalos.’ But neither am I nor do I feel like a frog,» he emphasizes. The government’s top priority in the energy sector is the opening up of the electricity and natural gas markets, but this will not involve jolting the Public Power Corporation (PPC) – still virtually Greece’s sole supplier – in any way, Salagoudis insists. «We are not going to break PPC up. Our policy envisages PPC as a single and vertically integrated enterprise, and still the most important player in the deregulated market,» he told Kathimerini in an interview. PPC, however, will have to soon divest itself of its monopolistic elements. «We are committed to the government holding a 51 percent interest in PPC, but at the same time will carry out an essential accounting separation of its monopolistic activities. This is an obligatory harmonization with a European directive and a basic prerequisite for PPC’s modernization so that it can respond to the realities of a deregulated market. This separation will also solve the issue of the pricing of lignite,» Salagoudis said. PPC last week countered a European Commission warning that it maintains a dominant position in the Greek power production market, possibly in breach of competition regulations, by holding exclusive rights to the mining of lignite, which accounts for 60 percent of Greece’s power production. PPC said it has mining rights to only about 63 percent of the country’s lignite deposits, for which it paid and in which it has invested considerable sums. According to Salagoudis, private power producers will be able to compete with PPC. «The rise in demand for electric power will be sufficient to support the operation of new plants,» he said. He considers that the previous government is responsible for setting up an incomplete framework (Law 2773/99) for the sector and did not take advantage of the four-year grace period that the European Commission gave Greece. He hopes, however, that an amendment passed last summer, combined with new work by the Regulatory Authority for Energy (RAE) which will be ready by the summer, will make possible a market for electric energy. If this does not work, there will be further amendments of the framework. Natural gas Another priority is the creation of a legal framework for the natural gas market. «We have to formulate a framework for deregulating the natural gas market, which is the fastest-growing in the energy sector. We believe that with the activation of more gas supply companies in the rest of the country (apart from Attica), the natural gas sector will follow in the steps of mobile telephony and a large competitive market will emerge.» Salagoudis says the government is willing to continue negotiations with Spanish firm Gas Natural, which was the only bidder for a 35 percent stake in the Public Gas Corporation (DEPA), but also with any other firm that might want to participate in a deregulated market. «Gas Natural is a very serious energy group and has initialed an agreement with the previous government which we have to honor, provided the group is prepared to accept the deregulated market framework. When you wish to attract foreign investment, you must be very careful with serious groups such as Gas Natural.» Salagoudis is optimistic about the growth of the natural gas market and Greece’s role as an energy junction in the region. «The planned connection with the Turkish gas pipeline will give Greece access to the natural gas deposits of the east and, given the possibility for connection with Italy, the country can emerge as an energy junction. There are already proposals to DEPA for the procurement of 4 billion cubic meters of gas from Italy and 3 to 4 million more from Switzerland, which meet the capacity of the pipeline.» Prices will be the focus of the government’s policy in the petroleum products sector, says Salagoudis, but he makes it clear that it does not intend to set ceilings nor encourage «gentlemen’s agreements» with suppliers – as both types of measures have proved ineffective – but to bolster competition. Strong emphasis will be given to keeping consumers informed. Lists of the gas stations with the cheapest prices will be posted in all cities. Regarding Hellenic Petroleum, Greece’s biggest refiner, in which the government holds a 58.2 percent stake, the aim is to bolster its activities in the world market and expand its domestic ones.