THE ELECTRICITY Authority of Cyprus (EAC) insisted yesterday it had no choice but to pass the greenhouse emissions “fine” onto consumers—but shed little light on little else.
“We were always two steps ahead of everyone else, preparing for the advent of natural gas,” said a defensive Harris Thrasou, chairman of the EAC board.
Starting this month, the price of electricity gets bumped up by three per cent, after the EAC paid a “fine” of some €10 million for exceeding EU quotas on CO2 emissions. The authority will now be collecting from consumers.
Strictly speaking, it’s not a fine. What has happened is that the EAC has bought out the rights to exceeding its emissions quota by participating in the EU’s Emissions Trading Scheme. Cyprus, like any other EU country, as a whole has a cap, or limit, on how much carbon dioxide it can emit; the cap is divided up between all the participating companies within the country.
The companies can then use this cap, or allowance, to offset their own CO2 emissions, sell excess carbon credits which their emissions output does not require or buy more credits to account for their emissions release over the allowance.
Because of the current excess of carbon credits – most likely the result of falling consumption linked to the global financial crisis – their price on the trading market has dropped. Over the past couple of months, the EAC has been able to buy these credits at relatively low prices. It could have been a lot worse.
That’s little consolation for consumers, left wondering what fault of theirs it is if the electricity authority has found itself in hot water.
It’s a question that came up repeatedly yesterday at a news conference called by Thrasou and Commerce Minister Antonis Paschalides “to clear up the air once and for all.”
Instead, the explanations offered did nothing if not to further muddy the waters.
“People say that we [the government] don’t have an energy policy. But that’s both a wrong and immoral claim,” Paschalides said.
He then mounted the classic defence: “I guess that exaggerations are normal during an election campaign.”
Paschalides said the government has actively pursued a programme in Renewable Energy Sources (RESs), but the response from punters has been lacking given the high cost of RES technologies.
“Everyone wants RES, but no one is willing to take the plunge,” he added.
Solon Kassinis, chief energy policy maker, said that during the last year the government had accepted 18,000 applications for RES programmes, and had given out €18 million in grants despite making an income of just €10 million.
Thrasou dismissed the notion that the price of electricity in Cyprus was among the highest in Europe, but in the same breath conceded that it was not cheap, either.
The island’s total reliance on heavy fuel oil to fire its power plants is the main reason for the high cost of electricity, as international crude prices and shipping costs determine the name of the game.
And the fact that Cyprus had yet to switch to the cleaner natural gas was no fault of its own, added Thrasou, bringing the discussion full-circle.
“The EAC made all the preparations for the switch…we have planned for it, invested by buying combined-cycle generators [which work with both heavy fuel oil and natural gas].
“We were making moves when others were still arguing about whether the deliquefaction plant should be mobile or on land,” he added, perhaps forgetting that the EAC (or its trade unions) had played a prominent part in the dispute.
Energy regulator Costas Ioannou told newsmen that EAC’s request for a rate hike was deemed to be justified.
He then cited the four major reasons for approving the electricity provider’s demand: the cost of emissions is an integral part of the production process; the EAC cannot be held responsible for delays in switching to natural gas; and rejecting their request would have put the EAC in “dire financial straits” and even possibly jeopardise its very survival.
Last but not least, Ioannou said, it was not possible for the government to pay the “fine” instead (as many have suggested) because that would constitute subsidization and intervention in the free market, which would “create market distortions.”
On paper, a large chunk of the energy market is open to private business, in line with EU regulations—in practical terms, the EAC has a monopoly on the industry.
