Greek state-controlled utility PPC continues to suffer from distortions in the power market which mean that the system marginal price (SMP) is increasingly unrepresentative of actual power costs.
PPC's total costs for power purchased in January-September rose by 37.7pc on the year while the SMP was only 10pc higher, “evidencing the significant divergence between market signal and actual cost”.
The divergence was particularly marked at the end of the third quarter, the utility said. September power demand was 19.5pc lower than in August while the SMP price was on average 21pc lower, but the total cost of energy purchases from the system was juts 3.6pc lower, PPC said.
Total power purchase costs were €100.90/MWh in August and €97.20/MWh in September. But the SMP averaged €64.06/MWh in August and €50.60/MWh in September, suggesting additional market charges beyond the SMP added some €46.60/MWh to the price of electricity, nearly doubling the total cost. The effective cost of power purchased from the SMP averaged €100.50/MWh in the third quarter, PPC said.
“The drop of the SMP due to the decline in demand was counterbalanced by the increase of the compensation for IPPs [independent power plants] from the variable cost recovery mechanism,” PPC said.
Greece operates a mandatory day-ahead pool which sets the SMP on a day-ahead basis. But participants buying from the pool must also pay after-market charges to the grid operator, which include costs related to Greece's variable cost recovery mechanism for independent power plants. The mechanism was designed to ensure the viability of new power plants by guaranteeing them their costs plus 10pc when running at their technical minimums and ensuring that they are dispatched ahead of cheaper units for this part of their output.
The cost of paying for the variable cost recovery mechanism to privately owned generators was €211.6mn ($273.8mn) in the first nine months of this year, PPC said, up from €88.7mn a year earlier.
“This shows that the existence of such inefficiencies and distortions, along with the dispatching model of generation units, leads to a sub-optimal operation of the electricity market and utilisation of the available resources, putting an unnecessary burden on the national economy, as domestic fuels are substituted by imported natural gas,” PCC chairman and chief executive Arthouros Zervos said. “Furthermore, they lead to higher energy costs, which does not only negatively impact PPC's financial results but impairs the opening up of the market.”
PPC supports plans to reorganise the electricity market
and said the model chosen should be transparent, provide long-term visibility for investments, reduce the negative trade balance in the country and ensure security of supply. Greece's natural energy resources are largely limited to lignite, hydro and renewable generation, the first two of which make up the majority of PPC's generation.
PPC's bad debts have risen this year as customers continue to struggle to pay bills. Bad debts totalled €229mn in the first nine months of the year, 140pc higher on the year. The utility's net profits were €118mn, up by 30pc on the year, while revenues rose by 8.7pc to €4.56bn. Profits were boosted by a one-off settlement with state-controlled gas-firm Depa.