CONSUMERS should brace for “more than a few” increases in the price of electricity, Energy Regulator Costas Ioannou warned yesterday.
The head of the Cyprus Energy Regulatory Authority (RAEK) was among those invited to attend yesterday’s emergency House Commerce Committee meeting, which discussed a demand by the Electricity Authority of Cyprus (EAC) to increase its electricity charges by 6.1 per cent.
The aim, according to EAC spokesman Moisis Stavrou, is to increase the authority’s operational profits from 2.2 per cent to eight per cent so it can deal with future investments and development costs.
“For a company such as ours to deal with future investments, we need bigger surpluses,” said Stavrou, adding that in other countries these surpluses could even reach 30 per cent.
He explained that the EAC’s clear profit in 2007 was £21,348,000. “This is not satisfactory to keep the EAC alive; it shows that we need to increase our tariffs,” said Stavrou.
“All the factors that shape the electricity tariff are moving negatively,” RAEK’s Ioannou told the committee. These factors include “the delays in importing liquid natural gas, complete lack of progress in the sector of renewable energy sources, the height of the EAC’s expenses, the high taxation imposed on the authority by the state and the lack of competition in the energy sector”.
Committee Chairman Lefteris Christoforou of DISY expressed his strong opposition to the EAC’s plans to increase prices.
The EAC has to pay 25 per cent in taxes plus three per cent of its surpluses to the state, adding up to £110 million for the past five years, and he claimed the EAC was now effectively trying to cover for this percentage by imposing more increases on consumers.
“We believe it is illogical that the EAC has to pay 28 per cent of its profits in taxes, when private companies are taxed 10 per cent,” said Christoforou.
“The Cypriot consumer cannot handle such high tariffs for electricity and is certainly not responsible for the factors that contribute to the increase in the price of electricity,” he added. The DISY deputy pointed out that new Finance Minister and former EAC Chairman Charilaos Stavrakis had on many occasions expressed his disagreement over the state’s policy to claim such high taxes from the authority.
AKEL deputy Stavros Evagorou said consumers were right to stress over the ever-increasing price of electricity, “which has rocketed”, but added that the increases were mainly due to international increases in oil prices.
“We have called on the EAC to try and economise in other areas while reducing its operational costs in a way where we can avoid such steep price increases,” said Evagorou.
But the fact that the EAC has to deposit part of its surplus to the state has nothing to do with electricity prices, he added, an opinion echoed by EAC spokesman Moisis Stavrou during the meeting.
“Our basic condition is for semi-government organisations to realise their strategic and investment plans,” said Evagorou. “If this condition is satisfied, then the state can transfer the reserves to another sector that is in need of support.”
He admitted, however, that the level of taxation should be re-examined. “Semi-government organisations were wronged during the 2002 tax reform, with their tax coefficient being much higher than that of the private sector.”
DIKO deputy Angelos Votsis said the Commerce Committee’s main concern was to avoid any increases at the expense of consumers. “From the moment that there are surpluses that are transferred from the EAC to the state, we could use these surpluses to avoid possible increases for consumers.”
The EAC submitted a memo justifying its request for an increase in electricity prices. According to the data submitted, the EAC’s operational profits were reduced from £43 million in 2002 to £39 million in 2007, while the authority’s treasury reserves were reduced from £115 million in 2002 to £29 million in 2007. EAC loans increased by £21 million during the same period.
