IPTO is held informally

By Harry Floudopoulos

IPTO has been in conditions of financial and regulatory uncertainty for a long time, at a time when the electrical system is facing serious problems that require immediate treatment by the operator. Thus, at the same time that IPTO is called to accelerate the investment program of 5 billion by 2030, the decision of the Energy Regulatory Authority for the revenue of the period 2022-2025 has not yet been issued. Not only that, but there is also a risk that the conditions for the calculation of the WACC will not be taken into account, but also that the operating costs suggested by IPTO will be reduced instead of increasing, as required by the company’s development.

Such an eventuality would further test the resilience of the Administrator, who has been operating for months without knowing the amount of his regulated income and approved expenditures for the coming years, and with the real risk of cutting costs he has already incurred.

It is noted that the income received by IPTO to date has not been properly adjusted by RAE so that the Administrator can receive the provisions, both for the projects he has already completed and electrified, as well as for his increased operating costs.

According to the manager’s sources, there is a great need to maintain the reasonable income of IPTO for the period 2022 – 2025. IPTO has suggested to RAE that the wacc amount to 7.5%, a percentage that according to some estimates of the manager should be further increase to fully respond to the rapid change in macroeconomic conditions, as its level is largely determined by factors such as the evolution of interest rates and government and corporate bonds.

It should be noted that while the amount of the WACC is critical to the financial viability of the Administrator, the impact on the final consumer’s account is minimal. It is typical that 1% lower WACC of IPTO translates into an annual benefit of only 1.70 euros for a household consumer, ie 0.2% to 0.3% of the annual bill, depending on the prices of the wholesale electricity market.

Administrator sources emphasize the need for a stable and predictable regulatory environment and make it clear that a possible WACC decision lower than the proposed one would raise questions about the functioning of the regulatory framework and would be detrimental to trying to create a favorable investment climate in the country.

There is no room for reduction

In any case, as pointed out by the Manager’s sources, the financial environment is such that it leaves no room for a reduction in IPTO operating costs. The surge in the cost of money is leading, among other things, to an increasingly unfavorable credit environment, and price increases in raw materials are now a daily occurrence, with all that this may entail for the implementation of critical energy projects, which are absolutely necessary for security of supply and energy shielding of the country in the long run.

At the same time, at a time when there is an increased demand for executives to proceed with the large energy investments launched by the Manager, there are increasing trends of “flight” of trained staff mainly to the Renewable Energy sector, but also to other companies in the energy sector that offer satisfactory benefits and career development prospects.

As pointed out by competent sources, the creation of new attractive jobs that will allow the Administrator to attract highly trained scientific and technical staff, in order to effectively run his ambitious investment program but also to ensure the smooth operation and maintenance of the Electrical System. in high priority for the coming years. After all, the Energy Regulatory Authority is aware of the problem first hand as it deals with similar situations with its own staff and has submitted a request to the State to increase its own operating costs.

With these data it is clear, according to the same sources of the Administrator, that it is necessary to increase the Operating Expenses of the Administrator for the period 2022-2025, depending on the growth rate of its activities, projects and needs, as suggested.

It is noted that in the detailed proposal submitted by the Administrator to RAE -already in October 2021- regarding the projected operating expenses for the period 2022-2025, the most important expense arises from the urgent need for staffing.

During the last decade, the human resources of the Manager were lower than the necessary levels, due to the implementation of memorandum commitments, which imposed a specific ratio of departures – recruitments. Today, however, point out the manager’s sources, it is absolutely necessary to make recruitments, in order to strengthen the existing human resources with staff of younger age and high prospects of professional development, who will be employed in large energy projects throughout Greece.

At the same time, the new staff will cover jobs with the main responsibilities of ensuring the uninterrupted electricity supply of the country, and the maintenance of the equipment and facilities of the network in order to reduce the chances of breakdowns and interruptions, and to face the increased challenges of climate change. In case the staffing of the Administrator due to cuts is not satisfactory, it is a given that the level of quality of electricity supply will be lower in the future.

Finally, the Administrator, as already proposed to RAE, could reduce his salary costs subject to the approval by the Authority of extended voluntary retirement programs, in proportion to the practices of similar programs implemented in large companies of various sectors, so that the programs be considered attractive and ultimately achieve the desired results.