Greek state utility PPC will dominate the country's electricity market for at least three years, given the piecemeal way the sector is set to open up under the terms of an EU/IMF bailout.
Athens must disclose by the end of 2010 how it will liberalize its inefficient and carbon-addicted electricity industry, as part of reforms to qualify for a 110-billion euro ($147.4 billion) support and avoid bankruptcy.
But necessary changes, including a hike in electricity prices, will not take full effect before 2013 as the Socialist government is loath to anger PPC's powerful labor unions or put further strain on citizens, who are struggling to cope with draconian wage cuts and tax hikes.
PPC management does not expect to lose more than 10 percent of its retail market share until 2013. "Reforms will be gradual," said Paris Mantzavras, an analyst with HSBC. "Sudden, radical changes aren't politically feasible," he added.
Regulated power prices, which are currently among the lowest in the EU because they do not fully include carbon emission costs, will rise slowly and the hikes will not affect the poor and the middle class, the government has said.
New entrants are unlikely to get the full and immediate access to coal they need to compete head-on with the incumbent anytime soon.
Some reforms might even help PPC shake off competition from independent energy traders such as Austria's Verbund, who have been nibbling at the incumbent's market share by undercutting its overpriced rates for business clients.
COMPLETELY DISTORTED
Greece's 6 billion euro power market is the EU's least competitive. State-controlled PPC has a 97 percent retail market share, owns all the country's power lines and 49 percent of grid operator DESMHE, whose employees are on the PPC payroll.
Regulated power prices and PPC's monopoly over coal, Greece's most abundant source of energy, have allowed the firm to sell cheap but polluting power, stifling competition and leading to under-investment and electricity shortages.
"The market is completely distorted, we can't survive like this," George Peristeris, chairman of PPC rival GEK Terna told Reuters.
Greece's lenders are pushing the country for structural reforms to kickstart its slumping economy to fund its debt without outside help.
Opening up electricity would bring 4 billion euros ($5.12 billion) of investments into the cash-strapped country and prevent its few independent power players from going out of business, the EU said in a report last month. But there are limits to how fast the sector can be deregulated.
The most radical measure suggested by same EU officials, forcing PPC to sell some units to rivals, would most likely attract no bidders at all. Greek energy players are too indebted to buy them and foreign firms are discouraged by the uncertain economic outlook.
"I'm not sure there would be interest from abroad to buy assets in Greece right now," Thomas Baechle, managing director at Verbund's Greek arm APT-Energa Hellas, told Reuters.
A quick licensing round for PPC rivals to build their own coal and hydro power stations within four years is the most practical way forward, according to Peristeris. "That is the easiest way and will also attract the most investment," he said.
Companies like GEK have invested 1.5 billion euros in natural-gas fired plants, on a bet that Greece's debt-fueled economic boom would continue and that electricity consumption would keep growing at about 4 percent a year.
But recession has wrong-footed them. Power use has fallen 6.9 percent in 2009 and is expected to drop further this year and next. Greece's two independent power plants run below capacity. The market will be crowded even further in the next months, when another three will join the grid.
TROUBLE WITH THE INSPECTORS
But even if they are slow in coming, changes could rationalize the power market and increase visibility to investors in the long term.
Greece's toothless energy regulator RAE will get more powers and grid operator DESMHE is set to become fully independent from PPC. Traders also expect a relaxing of rules that will boost hedging deals for power exports to Italy.
"These ideas are generally promising and some of them are necessary," Baechle said. "But the devil is in the details," he added.
Greece cannot be too soft on power liberalization. If the EU and the IMF deems reform inadequate, they could withhold a 15 billion euro aid tranche due early 2011, the biggest Athens stands to get under the 3-year bailout.
With Greece's fiscal progress also up for appraisal by its international lenders at year-end, most analysts believe the country will not be pushed too hard over energy as long as it meets its key deficit targets.
"I don't think the EU and the IMF will be very pushy on electricity reform," said Mantzavras. "In the end, they will find a modus vivendi with the government."