How the government’s energy package ‘lands’ electricity prices

By Harry Floudopoulos

The government seeks to bring energy costs back to sustainable levels close to pre-crisis levels through the national plan for household and business relief announced by the prime minister on Thursday and presented in more detail yesterday by the co-chairs. and Energy. The government interventions, designed and finalized in recent days, seek to neutralize the time bomb of current increases, which triggers a chain reaction in the economy and unrest in society and business.

The aim of the measures is to achieve the best possible consumer protection, by absorbing the increases that have occurred in the electricity due to the adjustment clause, at the lowest possible budgetary cost. With the measures, the government aims to cover a percentage of 70% to 80% of the burden of the adjustment clause. To achieve this goal, four parallel actions are used, which are used in combination: the return of the additional charges retroactively from December to May, the continuation of the subsidies with the expansion of the beneficiaries, the imposition of the tax on the energy companies for the extraordinary profits. in the midst of the crisis, the imposition of a ceiling on the wholesale price of electricity and the strengthening of subsidies aimed at saving energy.

The enforcement of the ceiling is expected to take effect in July, as the measure must first be approved by the Community authorities. In terms of subsidies, the limit of 300 kilowatt hours ceases to apply, as well as the restriction of the main residence, in order to support all consumers, even those who until now remained unprotected.

More specifically, with the new package the government seeks to achieve the best possible price of electricity for all consumers, even those who today, due to higher consumption of 300 kilowatt hours per month or due to non-fulfillment of other criteria (main residence) ), are not included in the grants. That is, the new subsidy will cover horizontally every consumer and every property.

Before the crisis

Through the interventions, the final price that will result for the consumers is to be close to the price of the electricity before the crisis, at the level of 13 to 15 cents per kilowatt hour. It is noted that in May and June, the subsidies that will be given, will cover by 50% any increase in consumption, and beyond 300 kilowatt hours, which means that now will cover about 1.5 million households that were not covered until today. .

In addition, for the increases that consumers have already paid, the return of 60% of the additional charges is foreseen retrospectively from December to May, with a limit of 600 euros and for incomes up to 45,000 euros.

Ceiling

In parallel with the subsidies, since July, the government has been launching a system that disconnects international gas increases from the country’s electricity bills. The scheme will last for one year and will involve a double intervention in both the wholesale and the retail market with the imposition of an indirect ceiling, in order to formulate the final prices for consumers at pre-crisis levels. Information wants the ceiling to be set at levels of 30% to 50% above the average wholesale price of electricity before the crisis, ie in May 2021, when it was at the level of 63 euros / MWh. The ceiling will be accompanied by simultaneous compensation of the generators up to the amount of their variable costs per technology, plus a reasonable profit. In this way, as suppliers buy electricity cheaply at ceiling levels, they will pass on low prices to retail as well. In effect, the adjustment clause will cease to exist or will be much more limited and consumers will be charged lower prices.

The steps for the application

It should be noted that the ceiling measure should get the green light from Brussels. Given the time required by the Commission authorities for such approvals, it is clear that the government is only marginally able to implement any solution within July, and not earlier, as was initially the case.

In terms of financing the measures, the government is utilizing a number of tools at its disposal in order to reduce as much as possible the imprint of the measures for the Budget and at the same time the measures to be efficient and effective. It is worth noting that at the moment the amount of measures in force is estimated on an annual basis at 5 billion euros. They are financed by the Energy Transition Fund, which directs the revenues from the auctions of the pollutants, the returns of the excessive remuneration of the RES and the surplus of the Utilities. To this money should be added an amount of about 1 billion euros that has been secured from the funds of the Recovery Fund, while the margins that the financial staff has is to give an additional 1 billion from the Budget.

In addition, the amounts that will result from the taxation of 90% of the “skyrocketing profits” should be added, for which, however, the expectations are low. In any case, as announced, any profits found by the audit of the Energy Regulatory Authority will be taxed at a rate of 90%.

Finally, in terms of energy savings, in the coming weeks the “Recycle – change appliance” program will begin for the removal of old energy-intensive air conditioners and refrigerators, while from the autumn, in addition to the “Save” program, the houses will proceed. “Saving” for businesses.