Our View: High rates EAC has had to pay for energy from private companies must be tackled

On the face of it, the auditor-general Odysseas Michaelides has a point in criticising energy regulator Cera for its decision not to grant the Electricity Authority of Cyprus (EAC) any more licences for photovoltaic parks. Acting like the attorney-general, he also asked whether Cera had the authority to stop the EAC developing renewable energy sources. The question has become more pertinent in the current situation in which oil prices have soared and so has the price of electricity. Michaelides pointed out that the regulator’s decision would mean households would carry on paying high electricity prices.

Nothing is as straightforward as it seems. In its decision, the regulator informed the EAC that it could use the licences for renewables it already had and that no more licences would be issued to it, until the electricity market was liberalised. This liberalisation should have happened five or six years ago, but the EAC unions, in collaboration with the management have been delaying it by any means possible including the threat of strikes. There were also reports that it was edging out applications for renewables by private entities during this time by using its financial muscle. So, if there are not enough PV parks, the EAC may have also played a role.

One point raised by Michaelides in his letter to Cera, in need of investigation, was the very high price at which private companies were selling energy to the EAC. He said the EAC was buying energy from these companies at 19 cents per KW-hour, which was the unit price for power production by oil; the cost to the PV company was 5 or 6 cents per KW-hour, giving it a huge margin. Only recently had Cera issued a preliminary decision proposing the lowering of the price to 11 cents per KW hour, but no final decision has been taken yet. Michaelides also hinted that the companies benefiting from the high rates had political connections.

It is the very high rates the EAC has had to pay for energy from private companies that should be tackled, even though we doubt the consumer would have seen any benefit in terms of electricity prices from a lower rate. The output of PV parks may be too low to have an impact on the prices paid by households, although this does not mean the electricity authority should be buying power at such high rates. How were these agreements made and by what logic? And how is the competition that Cera, supposedly wants to promote, served when private producers are paid rates four times their production costs?