The country's Development Ministry Tuesday approved tariff increases of up to 9.5% for electricity utility Public Power Corporation SA (PPC.AT), in an effort to bring the company's prices in line with its operating costs and to help offset the impact of rising oil prices.
The move follows a previous increase that took effect Dec. 1 last year.
PPC, 51% owned by the state, will be allowed to raise tariffs by 8% for household and commercial, mid-voltage use and by up to 9.5% for industrial, high-voltage use, effective July 1, the ministry said in a statement.
The ministry also approved additional increases of between 5.85% and 6.9% for low and mid-voltage use, primarily by households.
The prices PPC can charge consumers are tightly controlled by the Greek government. Late last year, the government announced a three-stage increase in PPC's tariff structure. The increases were partly aimed at covering the rise in PPC's fuel costs but fell short of the company's own demands. The company will also have an automated tariff adjustment mechanism from Jan. 1 next year, whereby tariffs will be pegged to fuel prices.
Effective from Jan. 1, PPC will incorporate into tariffs part of fuel cost fluctuation on a quarterly basis. According to some analyst estimates, this would result in about a further 6% tariff hike, assuming oil prices remain at current levels. At the same time, part of the fuel cost changes and the inflation rate will be incorporated into the company's public service obligations on an annual basis and will be passed on to consumers.
PPC has seen profits shrink since 2005. The main reason is that it has been facing sharply higher costs for fuel, natural gas and energy purchases from third-party power producers -the so-called electricity pool.
Separately, PPC said Monday its fuel bill for oil and natural gas could reach EUR2 billion this year, a 40% increase over 2007 levels.
As of the first four months of the year, PPC said that 49% of its income went to covering its fuel costs, electricity purchases from independent power producers, and CO2 emissions credits. That's up from 41% a year earlier