Greece's Development Ministry Friday approved a
series of staggered tariff increases of up to 10% for electricity
provider Public Power Corp. SA in a move to bring the
utility's prices in line with its operating costs.
The tariff increase will be effective from Dec. 1, but other
increases will be introduced at a later date and depending on the user.
From Dec. 1, tariffs for low-voltage users such as households
or farmers will rise between 0% and 8%; while high-voltage users - such
as major industrial plants - would rise 10%. From July 1 of next year,
PPC will also be able to set its own tariff increases for high-voltage
users, raising them up to a maximum 10%.
Middle-voltage users, would see a 7% increase in tariffs
from July 1. However, they will experience further tariff increases at
a later date based on a three-year schedule of increases to be set out
by PPC. Specifically, PPC will be required to identify its operating
costs associated with those users and establish a pricing plan to cover
its costs over those three years.
The ministry also announced that from the start of 2009,
there would be an automatic price adjustment mechanism that would take
into account the international price for fuel, such as oil and natural
gas.
"The decision to adjust PPC tariffs was taking with a high
level of sensitivity and with the basic intention of protecting the
interests of the citizens and consumers," Development Minister Christos
Folias said.
"Specifically, the financially weaker consumers will see
zero increases and the rest will see only measured increases. This
compels PPC to reduce its operating costs and further improve its
productivity," he added.
Earlier this month, PPC had requested a 21.7% weighted
average tariff increase - ranging between 10% and 30% depending on the
user - that it said would boost revenue by between EUR900 million and
EUR1 billion a year.
That proposal called for an average 20.67% increase for
low-voltage users, a 21.04% increase for middle-voltage users, and a
30% increase in high-voltage users.
Those increases were meant to bring PPC's income in to line
with its true operating costs and to cover years of indirect social
subsidies.
For decades, the Greek government has held down electricity
tariffs as part of a general social contract. It also requires PPC to
subsidize certain social groups, with cut-rate tariffs to farmers,
large families and island inhabitants. Those public service obligations
will cost the company about EUR437 million this year.
The Greek government, which has final say on PPC tariffs,
also controls 51% of the company. It hopes to strengthen PPC
financially in preparation for further privatization, but has also been
cautious about raising electricity prices, which would fuel Greece's
already high inflation rate.