The nightmare of arrears in the electricity market is returning

By Haris Fludopoulos

In black colors, sources in the electricity supply sector describe the situation prevailing in the market recently as a result of the energy crisis and the surge in electricity prices. The market is recording a rapid increase in overdue debts and bad debts, at the same time as the liquidity of the companies in the sector is constantly deteriorating. Consumers are finding it increasingly difficult to pay their electricity bills month after month and outstanding debts to providers are increasing significantly. Companies in the supply sector are sounding the alarm, underlining that the period of high prices in natural gas and consequent electricity prices will be maintained for a long time. From increases in natural gas prices and greenhouse gas allowances alone, the imported, real cost of the energy industry has already tripled, and this increase cannot be countered by recycling money circulating within the energy market, the same sources say.

In this environment of continuous deterioration of liquidity and rapid increase in non-performing loans for the procurement activity, the need to adopt measures to deal with the particularly adverse conditions is now becoming imperative.

The problems

According to market sources, the problems currently presented in the supply sector are as follows:

First, there is an accumulation of overdue consumer debts and a rapid increase in bad debts. This situation has now become an absolutely critical problem for the sector, directly threatening the viability of business related to energy supply, market sources say. According to the same information, during the last period the suppliers are faced with:

(a) Huge increase in settlement requests

(b) Huge increase in customers terminating their contractual relationship with a supplier leaving a large amount of overdue debts

(c) Challenging the end consumer’s obligation to pay the readjustment clause

(d) Huge increase in consumers switching to Universal Service.

Secondly, the sector’s financial liquidity has been under unbearable pressure since the beginning of the energy crisis, due to the excessive and now unmanageable sums of money it needs to advance to markets and managers. The amounts required to cover the cost of energy amount to several billion euros, many times more than what the supply sector is able to manage in terms of liquidity (but also in terms of bad debts). At the same time, the regulatory framework, in order to avoid the creation of deficits both in the markets and in the Special Accounts (ELAPE, YKO, XXD, XXS) managed by the administrators through the collection of the regulated charges, has expanded the obligations of the suppliers in relation to the provision guarantees and has been tightened in relation to the timely payment of regulated charges.

Thirdly, the lack of a comprehensive framework for the issues related to the change of supplier, which also directly affects the Universal Service regime that has ended up as a haven for defaulters, exacerbates the particularly unfavorable conditions that have developed in the market and the emerging risks for the sector.

Meters

The market speaks of an urgent need to take immediate concrete measures to address the particularly unfavorable conditions that have been created, which should focus on supporting market liquidity and fair distribution of the financial burden to participants:

1. Possibility of settlement of the payment of the regulated charges to the administrators through a re-recognition by the RAE of the expediency of adopting measures of an extraordinary nature.

2. Clear inclusion in the context of the energy market of any financial support measures for consumers to deal with increases in natural gas and electricity prices. The measure of subsidizing accounts through the Energy Transition Fund, in contrast to the “one-off” granting of financial support outside the framework of the energy market, has an indirect but particularly positive effect in terms of curbing the growth of overdue debts and related uncertainties.

3. Advance payment, at least at a rate of 75%, of the estimated amount of electricity and natural gas subsidies for each month of application of the measure (e.g. by the 5th day of each month for the consumption subsidy of the same month).

4. Providing liquidity through the provision of government guarantees for short-term borrowing by financial institutions for suppliers, for as long as the crisis lasts.

5. Clear regulation of the framework regarding the change of energy supplier and the claim by the suppliers of the overdue debts of their (former) customers, in parallel with the adoption of the new measures on 7/1/2022. Otherwise, any interventions in the electricity market will not bring about the desired results in terms of stopping the accumulation of arrears.

Lockout risk

According to the same market sources, it is clear that if immediate measures are not taken to strengthen the liquidity of the supply sector, suppliers will find themselves unable to meet their financial obligations and either withdraw from the market or literally fail application of the provisions of the existing legislation, and in particular the ministerial decisions concerning the payments of subsidies to consumers. The result will be the complete destabilization of the Greek supply market and the failure of all the systematic and worthy efforts of the State to manage the unprecedented energy crisis, the same sources conclude.