Power and growth

The new draft bill for the deregulation of the power industry, which the Development Ministry submitted for discussion yesterday, ends the government’s procrastination about bringing Greece into line with European Union legislation. Our country should have harmonized Greek law with EU provisions for the power sector a long time ago, not just because it is legally obliged to do so but also because harmonization with EU standards is a necessary prerequisite for the modernization of its power market. Moreover, further postponing such reforms would have negative repercussions on growth and on the environment. Already the draft bill has boosted the powers of the state Regulatory Authority for Energy (RAE) and established the foundations for transparency in the power industry. Furthermore, the bill foresees the separation of production and distribution in the power sector, imposes certain public service obligations on private power producers and includes reforms for power production on the islands. The only ill-advised aspect of the bill is the brief period of time that has been allocated to discuss it. After such a long delay, the interested parties have been given just a week to declare their positions on the bill, which is too complex to be adequately assessed so swiftly. However, despite this minor «slip-up,» the draft bill fulfills a crucial need that is entirely in accordance with EU provisions. Indeed, there are unlikely to be any major disputes about the bill’s general framework. However, the bill’s legal provisions are not enough in themselves to bring about change. The real challenge for Greece is to create a broader policy for its power sector so that the legitimate deregulation of the market can benefit consumers as well as boosting growth and protecting the environment. The government needs to ensure there are no significant hikes in the price of electricity, as compared to the rates offered by the Public Power Corporation (PPC), but it also needs to improve production in order to curb environmental pollution and uphold the Kyoto protocol. Achieving these goals is no easy task. But success depends less upon the bill’s legal provisions and more on the government’s management of its introduction. Greece should not make the same mistake as other countries, where the deregulation of public service sectors provoked price hikes and compromised quality; neither should it settle for some purely nominal deregulation which prevents competition with the PPC. If either of these two eventualities transpire, deregulation will have failed.

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