ECONOMY

PPC preparing to overhaul tariffs in line with costs

The Public Power Corporation (PPC) is planning an overhaul of electricity rates in an effort to redress existing distortions and make them more reflective of actual costs, but also to face competition from foreign imports, sources say. The corporation has already received a relevant study by consultants Kantor Capital on which it plans to base its proposal to the Regulatory Authority for Energy (RAE). According to law, RAE will then have to submit a recommendation to Development Minister Dimitris Sioufas for final approval. The overhaul proposed by Kantor provides for reductions in rates for industrial users and increases in household rates over a three- to five-year period. As regards industrial rates, which are directly related to the competitiveness of enterprises, PPC seems prepared for the first time to follow the logic of «individualized tariffs» – a longstanding demand of the business world and in line with peer utilities in other developed markets. These are tariffs that provide for the possibility of discounts at off-peak hours – and reversely, surcharges at peak times – according to the specific working hours of each firm and new, realistically set peak times. Experts refer to the existence of huge distortions in the present tariffs which cause losses to PPC, consumers and the power distribution system itself, in the sense that they do not promote the optimum use of existing capacity. They argue that peak-time industrial rates are applied in hours that do not correspond to reality because the particular type of tariff is outdated and does not reflect different usage patterns that have emerged over time. Another example of distortion concerns rates for commercial users, which include a tariff based on a model set by the private company Power in 1929 and remaining intact today. Meanwhile, PPC is already facing eight competitors who have obtained licenses to supply electric energy from the country’s connections with foreign grids, totaling a capacity of 1,000 megawatts, and who can supply large industrial and commercial users. Also, the first domestic competitive producers are expected to start operating in 2005. A major issue emerging from a comprehensive overhaul is what is to be done with the various subsidies for household tariffs. To the degree that they are eliminated, there will be rate hikes for households, with a corresponding effect on consumer price inflation. The issue is bound to cause some headache to the Development Ministry, which will grant final approval. Sioufas has already made references to key changes in PPC rates in the direction of bolstering the competitiveness of enterprises. RAE, however, is said to have submitted initial objections to the Kantor report, disputing the cost data on which it is based and which it obtained from PPC itself. Greek consumers today enjoy among the lowest electricity rates in the European Union. PPC President Yiannis Palaiokrassas said recently that they are not certain to last in a more competitive power industry where PPC will have to base them on a more realistic cost structure.