The electricity market is on a tightrope

By Haris Fludopoulos

The electricity market is on a tightrope as the energy crisis and the jump in wholesale prices have sharply increased the costs of supply companies, but also the outstanding debts of customers, causing an acute liquidity problem to the extent that even the viability of businesses is threatened. In the past days, the problem was highlighted by two important interventions, the letters sent to the government by both the head of the Energy Regulatory Authority Th. Dagoumas and the two main market associations, ESAI (independent electricity companies) and ESPEN (energy suppliers) ). In both letters it is made clear that the market situation is critical and the government needs to take concrete initiatives and take measures.

Uncollectible debts

According to what Mr. Dagoumas states in his letter to the political leadership of the Ministry of Environment and Energy, the overdue debts of consumers to suppliers now exceed 1 billion euros. In the same letter it is emphasized that not all businesses are affected to the same extent. The vertically integrated groups (PPC, Protergia, IRON, Elpedison) derive liquidity from electricity production, which limits the adverse effects of negative market conditions. However, the problem is acute for non-vertically integrated companies in the supply sector, which are facing acute liquidity issues and are on red alert.

However, as specified in the letter, the outstanding 1 billion also includes historic debts that pre-existed the energy crisis market. According to RAE, overdue dates include the facilities widely provided by suppliers to their customers to deal with the energy crisis, as well as the rapid increase in settlements of amounts owed and their payment in installments, mainly without interest.

Thus, despite substantial subsidization of electricity bills by the energy transition fund, debts continue to rise as Greek consumers are highly sensitive to any price fluctuation, the letter states.

According to RAE, suppliers are facing a suffocating liquidity issue, due to a combination of factors, such as the soaring costs of wholesale purchases, the shift in the time of collection of bills from consumers and the increased risk from the volume of overdue debts. For this reason, the Regulator points out, initiatives must be taken to strengthen suppliers’ liquidity through the provision of state guarantees to facilitate their short-term borrowing from financial institutions.

SOS companies

A package of measures to deal with four problems of the electricity supply market that have arisen with the energy crisis and the government’s emergency measures, both providers and power producers are asking.

ESAI and ESPEN sent a joint letter on August 5 to the Minister of Environment and Energy Kostas Skrekas and Deputy Minister of Finance Theodoros Skylakakis proposing a package of measures for:

– The movement of customers who have overdue debts

– The advance payment to the suppliers of TEM subsidy amounts

– The provision of state guarantees and

– The settlement of debts of regulated charges to the Administrators.

ESAI and ESPEN, in their letter, describe the difficult financial situation faced by the companies in the sector due to the high energy prices, the extraordinary measures of the government and the difficulty of their customers to pay their electricity bills on time: “The accumulation of overdue consumer debts and the increase in uncertainties has now become an absolutely critical problem for the sector, directly threatening the viability of the business activity related to the supply of energy”, they emphasize characteristically referring to the issue of the impact of the unhindered movement of their customers from provider to provider.

“Extremely critical conditions prevail in the energy market” emphasize ESAH and ESPEN asking “for immediate measures to be taken by the government in order to deal with the problems that have arisen as far as possible”.

The letter focuses on the issue of arrears pointing out that the accumulation of consumer arrears and the increase in bad debts has now become an absolutely critical problem for the industry, directly threatening the viability of business related to the supply of energy, the letter says.

In addition, the two associations requesting an increase in the advance payment of the TEM subsidies characteristically note that “it is necessary to issue the relevant Ministerial Decision immediately in order to strengthen the liquidity of the companies even in the month of August, a month in which we see high prices being maintained in the international PV market obviously affecting the Greek electricity and natural gas market”.

The proposals

The two associations request the completion of the institutional framework for supplier changes by consumers, underlining the legislative gap and the lack of adaptation of the existing framework to the data of the SC decision in 2021.

They urge the co-competent ministries to issue the joint decision on the granting of advances by requesting every month 75% of the subsidies they are going to grant on behalf of TEM to their clients.

The associations also call on the government to take advantage of the EU’s flexible institutional framework. for state aid by granting energy companies state guarantees for their transactions with the energy exchange and ADMIE.

Finally, they ask the ministries to establish a framework of arrangements for the payment of the regulated fees to the Administrators corresponding to the period of the corona virus.