Statist mentality undermines deregulation of power market

Almost every summer in recent years, we have been faced with a situation of uncertainty regarding the country’s power supply. Those of us working in the center of Athens on these hot days have learned to avoid using elevators for fear of being trapped, operate our computers on UPS units, have candles and flashlights ready, and generally are cautious to avoid unpleasant situations. At the same time, many enterprises, industries and farms are encouraged to restrict their productive activity to limit consumption. One of the basic reasons for this situation is the peak demand created by the unchecked installation and use of air conditioners, the number of which has soared in recent years. And the Public Power Corporation (PPC), due to lack of data, is unable to forecast the extra burden on the grid and make the appropriate adjustments. However, beyond the peaks in demand, which might be partly dealt with through a public awareness campaign, Greek demand for power has been steadily increasing by about 3-3.5 percent annually – one of the highest rates in Europe. The primary reason for this steady rise in demand is the proliferation of the use of electrical and electronic appliances, the rise in the number of households (country homes, immigrants). Until recently, PPC was exclusively responsible for meeting the country’s increasing power requirements and planned accordingly for new plants. This is how Greece acquired its present production capacity and achieved its electricity supply throughout (albeit at an often high cost, especially on the islands), with the large lignite-fired plants, the hydroelectric works and the natural gas-fired stations. However, this model was essentially abolished in 2003 when EU Directive 54/EC came into force, providing for a transition to a deregulated regime where power production ceases to be the monopoly of – usually – a state company. And so, responsibility for planning in the electric power market as a whole was transferred from PPC to a central system administrator (DESMHE) but remained under the supervision of the Regulatory Authority for Energy (RAE) and the tight embrace of the Development Ministry. All three, RAE, DESMHE and the ministry, were supposed to ensure a smooth transition to the deregulated and competitive market. However, PPC’s labor union fetters and a deeply rooted statist perception of the functioning of the market by both main parties annulled the process of deregulation in practice, creating a series of obstacles that discouraged any serious players from investing, constructing new plants and assuming the economic risk of participation in a market still dominated by PPC. The failure of deregulation was highlighted by DESMHE’s utterly bureaucratic and ultimately useless tender, which took place in the spring of 2006 after two years’ preparation with a view to attracting large private investments in power production. It was a complete flop, as major energy companies did not take part, while one, Terna Energy, decided to move independently and build its plant outside the terms of the tender.