Cyprus Mail

Auditor-general to look at EAC’s fuel cost formula

THE auditor-general has been instructed to look into how the electricity utility calculates its fuel cost formula – a key component of the price of electricity.

The President has asked the official to scrutinise the EAC’s formula as part of an independent assessment of an ongoing tender for the procurement of natural gas, the government spokesman confirmed yesterday.

The matter came to the fore after the Natural Gas Public Company DEFA – which invited the tenders – decided to end talks with preferred bidder Itera.

DEFA, in conjunction with the Electricity Authority of Cyprus (EAC), had found that Itera’s offer would not lower the price of electricity – the stated aim of the natural gas tender.

DEFA said on Monday it would continue the process by inviting second-ranked bidder, Vitol, to submit a revised offer.

But amid a flurry of media reports that Itera’s offer was in fact beneficial, the President decided that an independent evaluation by the auditor-general was in order.

The auditor-general is empowered to scrutinize public tenders. In this case, however, it’s understood that her office cannot dissect the DEFA tender per se, because DEFA, though a state-owned enterprise, is governed by private law.

The official will therefore more likely be looking at the data furnished by the EAC in supporting its view that Itera’s bid was not profitable.

Even though natural gas is less expensive than heavy fuel oil and diesel, state energy operators – DEFA, the EAC and the energy regulatory authority CERA – all agreed that Itera’s offer was not cost-effective.

Last year the EAC spent some €645m on liquid fuels to fire its power plants.

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