THE FINANCIAL outlook for the Electricity Authority of Cyprus was not very rosy admitted the Chairman Haris Thrasou in presenting the annual report for 2009. Although profits were up in 2009, compared to the previous year, at €45 million they were pretty low for an organisation with a very big capital base; the return was 3.4 per cent. The Authority has also increased its borrowing in 2010 by 50 per cent, taking it to €645 million, while its bank overdrafts totalled just under €100 million.
This does not provide a sound basis for future investments planned by EAC, which include the Vassiliko power plant (€200m) and the liquefied natural gas terminal (€600m). It may have difficulty raising such big funds – a point made by Thrasou several months ago – given its already high borrowing and low profitability. The only way it would be able to secure such loans would be through government guarantees.
It is quite an achievement, for an absolute monopoly, selling an essential utility to the entire population of the country and guaranteed a surplus on its charges by law to be performing so poorly. Not only this but the electricity rates Cyprus households and businesses pay are among the highest in the EU. The reason is that it is a grossly inefficient state-owned company that seems to exist exclusively for the benefit of its ultra-privileged workers, who enjoy princely salaries, an array of unheard of benefits, huge retirement bonuses and unjustifiably high pensions.
The truth is that EAC has been run like a workers’ co-operative, its employees plundering its funds, securing big annual pay rises and end-of-year bonuses every year without increasing productivity or improving efficiency. The average number of days of sick leave taken by EAC staff is 12, at annual cost of €5 million. Staff unions even have arranged scholarships for university study to be given by the EAC to the children of employees. We pay among the highest electricity rates in the EU so as to maintain the lifestyle of the members of the Authority’s workers’ co-operative.
With operational costs rising every year and no incentive for the board to keep them under control, electricity bills have kept rising, pushing up prices. From January 1 there will be a 1.5 per cent hike on the electricity rates of all households while for small manufacturing units and workshops the increase would be 3.5 per cent. There will be a small reduction for big industrial units such as desalination plants as well as hotels and the airports, probably because of political pressure.
The outlook is so grim that even the Authority’s general manager, Stelios Stylianou spoke about the need for radical reform of the structure as well as the way the organisation operated. There would be a focus on increasing productivity, a review of all the benefits enjoyed by staff and a reduction of operational costs he said in his speech on Tuesday, in an admission that the once mighty monopoly was in trouble. It is some kind of progress that the top brass have finally realised that cost-cutting is an imperative, but the fact is the unions have not yet been consulted.
If the unions reject the management’s proposals, the consumer would end up paying constantly rising bills in order to keep EAC afloat, but we still refuse to see that state-owned corporations serve only the interests of their pampered employees. The rest of us just pay extortionate prices for the service provided. Yet our political parties, instead of learning something from this, set up the natural gas monopoly as well. DEFA (Public Company for Natural Gas) owned by the state and the EAC, at the insistence of the Authority’s unions, was given the monopoly of importing and selling liquefied natural gas.
DEFA will set up a gas terminal at huge cost when it could have contracted a company to supply the LNG directly to power stations without the need of investing hundreds of millions in a terminal. Given the way state projects go over-budget it is criminally irresponsible to undertake one such as this. The most probable result would be that we will pay the highest price in Europe for LNG as well, having created another inefficient and costly state monopoly.
It seems that our politicians are happy for households and businesses to be faced with constantly rising electricity bills rather than have to deal with the workers’ co-operative that incompetently runs the Electricity Authority. In fact now we have given them DEFA to turn into a high-cost operation as well.
