By George Psyllides
OVERALL electricity sales dropped 10.7 per cent year-on-year in 2013 because of the economic crisis, the chairman of the state company EAC said on Tuesday.
Othon Theodooulou said revenues fell €169.7 million or 17.6 per cent as demand fell, and prices were cut by the regulator.
He was speaking during the presentation of the EAC’s annual report where Energy Minister Giorgos Lakkotrypis announced that consumers should expect a reduction in electricity bills in the coming months. He did not elaborate.
Reporters at the news conference heard that the EAC’s surplus for 2013 fell by 5.8 per cent, from €77.5 million to €73 million.
“The amount of €73.0 million is a very small return on the capital employed. At the same time, this amount is not available for other purposes, given that the financial statements… take into account revenue (including “uncollected income”) and operating expenses for the year, depreciation of assets, interest on loans and tax but they do not include an organisation’s finance and investment transactions,” said Theodoolou. In 2013, the EAC’s loan repayments amounted to €46 million.
During 2013, households recorded the biggest reduction in electricity consumption with 14.1 per cent, followed by businesses, 9.9 per cent, and industry, 7.9 per cent, though the number of consumers showed a slight increase of 0.2 per cent from 548,500 to 549,400. The EAC’s fuel cost fell by 24.7 per cent year-on-year in 2013 as a result of a reduction in the price of liquid fuels, lower electricity generation, and a fall in the amount of fuel consumed.
Of EAC’s total expenses of €797.9 million, some €525 million, or 65.9 per cent, was spent on fuel and energy purchases.
“This shows that dependence on oil is EAC’s biggest problem,” the chairman said.
According to the EAC’s General Manager Stelios Stylianou said the cost of fuel for the year represented more than 60 per cent of EAC’s total expenses.
“This percentage reflects, on one hand, the Authority’s and the country’s long-term dependence on international oil prices and, on the other, the necessity of finding an alternative cheaper fuel for electricity generation and, at the same time, of cultivating energy awareness,” he said.
Theodoulou said that following the onset of the crisis in March 2013, the number of unpaid electricity bills had increased “significantly and to a worrying degree”.
In June 2014, in an effort to deal with the problem, EAC adopted a new debt management policy, based on which arrangements are made to facilitate the settlement of accumulated unpaid bills in instalments on which annual interest of 4.5 per cent is payable. The arrangements for vulnerable groups is not subject to any interest, he said. Unpaid bills were this year said to be close to €50 million.
In addition to immediate actions taken to address its financial problem, the EAC was trying to streamline its organisational structure with the aim of achieving a substantial reduction in personnel cost, Theodoulou said.
The organisation has drafted a voluntary exit scheme, based on an actuarial study, which will reduce the number of personnel to the requirements of the new organisational structure.
Through targeted measures, the authority managed to cut expenses by 15 per cent in 2013 and keep it going through 2014.
In response to instructions from the finance ministry, the EAC cut all allowances by 15 per cent on April 1, 2013 and reduced them further in October following an agreement with the unions,
“In certain instances, the agreement provides for the abolition or postponement or restrictions to those eligible for allowances,” the chairman said. The reductions also apply to 2014.
Lakkotrypis commended the EAC for succeeding to cut operational costs by 26.4 per cent and personnel by 4.5 per cent with a further departure of 109 staff on the cards as part of the voluntary exit scheme.
“Despite this, the effort for further structural reforms must continue,” Lakkotrypis said, also referring to the privatisation of the EAC, which is a condition of the island’s bailout terms. He assured EAC staff that “despite widespread scaremongering” the existing legal framework enshrined their rights and benefits.
“It is clear that in order to bring about a reduction in the cost of electricity, we need to take action at multiple levels,” said the minister.
Competition, he said, would attract new participants to the market, giving significant momentum in the economy by creating new jobs, introducing innovative ideas and technologies in the field of energy and enabling the provision of new services and products to the consumer.
“The introduction of natural gas at attractive prices will diversify our energy mix, reducing the overall cost and contributing positively to the achievement of environmental goals,” Lakkotrypis said.
Another factor which would contribute, under certain conditions, to reducing the price of electricity was the promotion of electricity from Renewable Energy Sources (RES) and especially photovoltaic systems.
He said his ministry in cooperation with the EAC had commissioned a from the International Renewable Energy Agency IRENA on the optimal penetration of RES in the energy marker in Cyprus.
The results of the study were expected later this month, Lakkotrypis said, and would feed a more detailed study regarding the technical capabilities of the network for further penetration of RES. This would be done in collaboration with the European Commission’s Joint Research Centre.
“These two studies will contribute to a long term energy policy in Cyprus by 2030 and the revision of the National Action Plan for RES,” he said.