By Angelos Anastasiou
MISLEADING and populist arguments by the Electricity Authority’s (EAC) employee unions, aiming at creating false impressions, were reported yesterday by the Association of Businesses for a Freely Competitive Energy Market in Cyprus (SEEAAEK).
The association criticised unwarranted attacks by the unions aimed at discrediting it, including the circulation of a leaflet seeking to absolve the EAC of any responsibility for the extremely high cost of electricity.
SEEAAEK said that the high cost of electricity was owed to the EAC’s fuel mix, which is completely based on liquid fuel instead of including solar energy – Cyprus’s strategic advantage – a decision made solely by the EAC.
The association also claimed that the reason the state’s natural gas company (DEFA) has been unable to import natural gas to date, which would result in lower costs of electricity production, is that the EAC rejects any ‘intermediate solutions’ (i.e. importing natural gas pending the extraction of Cyprus-owned reserves) by citing some obscure “secret formulas” that suggest that imported natural gas will prove costlier than oil.
Countering the argument that many private companies have been licensed but failed to invest thus far, the association argued that the private sector was ready to invest in the field of power production immediately, and listed the reasons why this has not yet been done.
According to the SEEAAEK, the EAC’s ‘secret formulas’ do not allow for natural gas to be imported to Cyprus.
Also, the market rules have been under review for years, so investors do not know the environment they would be investing in.
Applications for large renewable energy source (RES) facilities that could compete with the EAC are not examined by the state’s energy regulatory authority (RAEK), the association said.
In addition, applications for new power-generation facilities have not been accepted by RAEK for the last two years.
While three construction permits for conventional fuel power plants have been granted, not only have they not been licensed to provide electricity but even their applications are not accepted, meaning they are allowed to build the plants but do not even accept their application to sell to consumers.
Lastly, the pro-competition lobby group argued that the EAC does not provide clear information and policies as to the cost of using the distribution network, which it is allowed to monopolise in contravention of every rule of competition.
SEEAAEK also noted that the EAC, under pressure from its employees’ unions, has purposefully pushed implementation of its restructuring plan back, close to the Troika-set date of sale, and argued that this would lead to a lower selling price. The unions, it said, must push for the restructuring to be implemented within 2014, so that the organisation can have four years of smooth operation under its belt and avoid valuation losses.
Rebuffing another point in the employee unions’ brochure, the association said that the price of electricity in Cyprus is the highest in Europe before VAT. The unions had claimed that one of the reasons for the high price of electricity was that a 19 per cent mark-up is levied on the price as VAT, whereas most European countries allow a reduced 5.0 per cent mark-up.
Lastly, the association argues that while the EAC’s distribution network must remain under government control for a few years following privatisation, and regardless of whether it ends up privatised or state-owned, it must be detached from the rest of the EAC so that the public interest is best served.