Cyprus Mail

Further proposal to keep RES fund afloat

The government on Tuesday unveiled its latest proposal for keeping the distressed Renewable Energy Sources (RES) Fund afloat.

To date, the RES fund has been solely funded through a special fee on all electricity bills, fixed at €0.005 per kWh.

The power utility pays RES producers the total amount owed and subsequently files for compensation from the fund.

But the fund is currently in the red to the tune of €25 million.

Reduced electricity consumption and falling fuel prices (lower production costs) have contributed to the growing deficit.

At the House commerce and energy committee, government officials presented their proposal for jacking up the green charge from €0.005 per kWh currently to €0.0135 per kWh.

The new rate would apply for the period September 2016 to December 2017.

Once again, the proposal met with the familiar objections from MPs, the main one being that consumers should not be burdened with the extra cost.

A suggestion was re-floated to tap the carbon emissions fund – managed by the ministry of agriculture’s department of environment.

But MPs were told that the revenues of the carbon emissions fund for this year had been grossly overestimated. Instead of the €12 million initially forecast, the carbon emissions fund will only collect half of that.

Ruling DISY suggested that RES producers chip in with consumers for the proposed RES rate hike, and that vulnerable households be exempt from the higher rate.

Another idea would be for the government to subsidise the RES fund, but it’s understood that the finance ministry is opposed to this.

Given the absence of consensus, energy ministry officials said they would be coming back with a final proposal.

Giorgos Papadopoulos, MP with the Solidarity Movement, complained that the government has been taken “hostage” by unfavourable contracts struck with RES producers and has no way out other than shifting the burden to consumers.

He was referring to the fact that the RES fund has prior financing obligations for RES projects (wind farms, photovoltaic parks) and as the electricity utility’s cost of production drops, the financing burden shifts to the RES fund.

As things stand, the difference has to be paid by consumers, because the other side of the equation – RES producers and operators – is inflexible.

The government – and ultimately consumers – are stuck with the old contracts awarded to wind farms and photovoltaic parks.

The contracts were struck when the production cost was much higher.

These long-term contracts did not include a tariff renegotiation clause, so the government still has to pay the agreed price despite electricity production costs going down since.

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