By Costis Stambolis
In a bold move that took markets by surprise Development minister Mr. Dimitris Sioufas announced last week the government’s latest initiative in the energy sector. In a hastily convened press conference he unveiled the substance of four separate laws which, if implemented, will lead to major changes in the way that the energy markets operate by introducing an element of competitiveness which today is totally lacking. Although the ministry of Development did not distribute the full text of the proposed new legislation it revealed extensive
excerpts.
Pending approval from the legal consultative committee of the parliament, where the four draft laws have been submitted, their full texts will be announced next week. At the press conference Sioufas stressed the procedure involved in an effort to convince his audience that introduction of the long awaited energy legislation was now in the final stages and that the government was adamant in its pledge to move ahead despite the political cost involved. At the cornstone of the government’s latest energy initiative lies a set of new procedures which aim at regulating the electricity and natural gas markets while at the same time will enable private companies to enter the market both as producers and suppliers and hence introduce competition in an otherwise stagnant and monolithic market. Because until now the electricity and gas markets in Greece have been dominated by state monopolies, namely the Public Power Corporation (PPC) for electricity and by the Public Gas Corporatiion (DEPA) for gas.
The three new laws for electricity, gas and biofuels also aim to harmonise the Greek legal framework with EU legislation and also integrate the current European Commission directives. (i.e Directive 2003/54/EK for electricity, 2003/55/EK for natural gas and 2003/30/EK for biofuels). The fourth law introduces a much needed energy policy element in the government’s overall structure by establishing a state energy committee on energy strategy and policy.
Electricity
In addition to setting out the guidelines for the operation of the new liberalized electricity market the new law introduces a specific timetable for the licensing and introduction into the system of new electricity capacity totaling 1,300 MW by 2010. According to the new legal framework the independent grid operator, DESMIE, will
organize a bid process whereby licensed independent power producers (IPP) will participate by offering price terms for the sale of electricity over a 12 year period. The grid operator will then issue power purchase certificates to the successful bidders for the period agreed which will enable the IPP’s to raise funds and go ahead with the construction of the new power plants.
The new law clearly forbids PPC from participating in the above process for the initial 1,300 MW stations in order to enable private companies to enter the market. A move which has caused considerable disdain to PPC’s trade union GENOP-DEI, which has already announced a weeklong nationwide go slow strike as a warning to the government. According to the union’s chief Mr. Nicholas Pilalides GENOP is clearly against the new law and the opening up of the market since he believes that PPC’s role and future is undermined which means that in the long term it will lead to job losses. Pilalides also warned that the strike, already commenced, it will cause considerable problems in the operation of PPC and might soon lead to extensive power cuts.
On the other hand Development minister Dimitris Sioufas is determined to push ahead with the legislation having the full backing of the government and of prime
minister Mr.Costas Karamanlis. In an exclusive statement to Athens News he said that “ no matter what happens the government will bring to parliement the new laws for electricity and gas as we feel it is vitally important to open up the energy markets to competition in line with EU thinking and law. As far as PPC is concerned we have already given several concessions to the company as we have limited competion for the first five years. PPC is a large and well organized company, already partially privatized (49% of the shares are in private hands) and will have no problem competing in the new market “
Natural Gas
With the new law the government aims at breaking up DEPA into two companies in order to separate infrastructure ownership and transmission operations from commercial activities. This will also ensure third party access to DEPA’s extensive network of pipelines all over the country. This means that independent gas suppliers will be able to obtain access to the system, for a fee, and sell imported gas to customers. This is expected to have a positive impact since natural gas forms the prime fuel for all new and planned power stations. Already two such stations are built and in operation, namely a 150 MW plant belonging to TERNA Energy company located in Thebes, north of Athens, and a 400MW belonging to Hellenic Petroleum and located in Salonica.
However, there is a serious drawback of the law, according to independent energy experts, since it maintains DEPA gas sales monopoly to the local gas distribution companies, known as EPA, until 2016.
EPA’s are bound with strong contracts to DEPA since their inception five years ago. The government is not ready to wave DEPA’s commercial prerogative in this instance. Extension of DEPA’s monopoly for another ten years minimum will lead to serious EU competition law violation since commercial and household consumers are virtually barred from having a choise over their supplier.
The same of course applies to the electricity market where again household consumers are unlikely to be able to select their supplier by July 2007, the year when according to Commission directives the energy markets in all EU countries should be fully opened up.
Biofuels
This extra piece of legislation, quite separate from the electricity and gas markets, intends to prepare the fuels market fro the introduction at a commercial scale of biofuels. These include alternative fuels suitable for motor vehicles such as biodiesel and bioethanol already produced in some EU countries. Their use is being actively promoted by the EU and several governments since they can, in the long term, provide a serious and locally produced, alternative to oil. The proposed Greek legislation on biofuels aims at substituting 5,75% of total oil consumption by the year 2010 with alternative fuels. Market players, which normally come from the oil market sector, point out that the proposed legislation is leaning heavily in favour of biofuel imports making exceedingly difficult the local production of biofuels. Greece,still having a large agricultural sector, is in a position to provide at competitive prices the prime materials used for the production of biofuels. Already there are advanced plans for construction of two biofuel plants by two companies, by Elinoil in Volos and by Elvin in Kilkis, in northern Greece.