ECONOMY

Greece is last and late to liberalize electricity market

Greece was the only laggard that had yet to open up its electricity market in 2000, with one single operator dominating both electricity generation and supply, data released yesterday by the European Union statistical office Eurostat showed. Analysts said the situation has changed little since the study was carried out, with the Greek electricity market continuing to be a monopoly of the Public Power Corporation (PPC) as high start-up costs and uncertainty over prices have kept the private sector at bay. Reporting on competition in the electricity market in the EU in 2000, Eurostat said member states could be divided into three groups in terms of opening up their markets. In the first grouping, five countries stood out with their fully liberalized markets, while in the second category, 10 countries reported a degree of market liberalization ranging from between 30 percent and 45 percent. Greece was in a class of its own, as it was the only country yet to deregulate the domestic electricity market. Partial market liberalization only came on February 19, 2001, with industrial consumers allowed to choose their own supplier. Household users will get the same freedom in 2005. Eurostat’s study showed PPC controlling 97 percent of the domestic market in electricity generation, while in the supply sector, it had the field all to itself. Alexandros Boulougouris, energy analyst at P&K Securities, said the monopoly is set to continue to 2005 when the private sector is expected to switch on their own generation plants. In an impressive burst of enthusiasm following partial liberalization last year, hundreds of companies submitted applications for the construction of electricity generation and transmission plants. However, low prices, uncertainty over natural gas supplies, and delay tactics by PPC mean the plants will take longer than planned to begin operations. Boulougouris said one major stumbling block is low electricity rates in Greece, the cheapest in Europe. «PPC has been able to keep prices down because of cheap lignite and because of the government’s decision to reduce rates to hold down inflation [in the runup to eurozone membership]. Low prices, however, mean no margin of profit for private sector companies,» he said. All the applications proposed to use natural gas to power their electricity generation plants. However, uncertainty over the price of natural gas and the institutional framework governing its use as well as the lack of infrastructure to facilitate its distribution have caused many companies to have second thoughts. PPC itself has not make the transition to a deregulated market any easier, said Boulougouris. «PPC was expected to list its generation, distribution and transmission costs in the first quarter of the year, which would have allowed its competitors to get an idea of the costs involved. It hasn’t done so to date,» he said.