Electricity purchase: New tariffs from August 1 without the adjustment clause

New electricity tariffs will be announced by next Sunday, July 10 by all suppliers, which will not include the readjustment clause and will be effective from August 1.

The government aspires with the combination of measures implemented in the wholesale and retail market, to absorb more than 70% of the price increase and to “land” the cost of the kilowatt hour close to the level of last autumn.

On the other hand, developments in the international market regarding the price of natural gas are not favorable and market sources express reservations about the effect of the interventions, however the government assures that if necessary, the budget expenditure on energy subsidies will increase.

With the data so far, the developments in the electricity market are prescribed as follows:

-From Friday, July 1st, the new electricity market operating mechanism came into effect, through which a ceiling is set on the income of power producers, different depending on the technology (lignite, natural gas, renewable sources, etc.) The difference between the ceiling and the price formed daily on the Energy Exchange, in which suppliers will continue to buy energy, will be transferred to the Energy Transition Fund to finance subsidies to the cost of energy. For example, if the maximum price is 100 euros per megawatt hour and the price on the Stock Exchange is 240 euros, the difference of 140 euros will be transferred to the Energy Transition Fund.

-From August 1st, the adjustment clause in fluctuating electricity tariffs is abolished. The prices applied by the suppliers will be uniform (that is, there will not be, as now, a basic low price and separately the adjustment clause). The prices that will apply from August 1st will be announced by the suppliers until next Sunday, July 10th, while at the end of each month the prices of the following month will be announced (e.g. on July 31st, September’s invoices will be announced, etc. .). The nominal prices per kilowatt-hour according to market estimates will be significantly increased, however what is of interest is the final price that will be formed after the subsidy set by the State.

An important difference that arises in relation to the current regime is that all subsidies will be distributed by decision of the State. Until now each energy company used the increased revenue from electricity generation to finance subsidies to its customers in the supply. From now on the revenue will be collected and distributed by the state.

The total fund for subsidizing electricity and natural gas bills in 2022 may exceed 6 billion euros, of which 2.4 billion euros were given in the first half and 3.6 billion euros are budgeted for the second half of the year. Funding sources for the subsidies are revenues from the market (difference between the market price and compensation prices of power producers), from the auctions of carbon dioxide emission rights, from the taxation of the additional revenue of power producers at a rate of 90% and from the state budget.

According to the estimates of the Ministry of the Interior, institutional interventions in the electricity market will absorb:

– To vulnerable consumers entitled to the Social Household Tariff (about 500,000 households) 100% of the increase.

– On all household tariffs up to 85% of the increase.

– In 1.25 million small and medium enterprises 82% of the increase.

– To farmers and rural tariffs up to 90% of the increase.

The Association of Energy Suppliers expressed reservations about the effect of the measures arguing that “it is impossible to correctly forecast the prices of the wholesale electricity market, and indeed for a period of one month, at least one month before the start of the period, with the result that the application of proposed amendment to dramatically increase the risks assumed by suppliers and threaten the smooth operation of the market”. Suppliers also raise issues of practical application in relation to, for example, the right of consumers being established to change supplier without “penalty” and warning and the ability of DEDDIE to respond to a possible mass movement of consumers.

Regarding the current developments and pendings in the market:

-The decision on the June energy subsidies was published on Friday, which are specified as follows: For household tariffs, a subsidy of 185 euros per megawatt hour for consumption up to 150 kilowatt hours, 140 euros from 151-300 kilowatt hours and 100 euros over 300 kilowatt hours. For secondary residences 100 euros per megawatt hour. For the Social Household Tariff and the Solidarity Services Tariff, 195 euros per megawatt hour. For professional tariffs 100 euros per megawatt hour. For bakeries and businesses with supply power up to 35 kva, 150 euros per megawatt hour.

-Subsidies will be determined for July, a month in which the old market operation system is still valid. It is noted that the average wholesale price for electricity in June was 240.49 euros per megawatt hour compared to 225.07 euros in May. It is also noted that the international price of natural gas exceeded 140 euros per megawatt hour at the end of last week, while at the beginning of June it had fallen to the level of 80 euros.