Our View: Electricity prices will remain high as long as there is no competition

SUCCESSIVE governments have been promising to import natural gas to power the Electricity Authority’s (EAC) power generators, for more than 10 years now, but nothing ever happens. The Clerides government, which stepped down 10 years ago, had first made plans for the project, but these were never implemented. The Papadopoulos government also embraced the idea but abandoned the plan for an offshore terminal, after it was revealed that the company that would set it up was represented by the late president’s law office.
It was a pity that this project fell through because natural gas would have been available long before now and the penalties the EAC would be paying for carbon emissions would have been significantly reduced. Under the current government, the EAC was on the verge of signing a contract with a multi-national but this initiative was thwarted by strong opposition from the political parties which felt that the duration of the deal was too long. We would have our own supply of natural gas long before the expiry of the contract, it was argued.
So we could only view the latest initiative, undertaken by the Natural Gas Public Company (DEFA) with a level of scepticism. The initiative may have the blessing of the current government and expressions of interest were received from a significant number of companies. DEFA short-listed 14 companies and sent them tender documents which must be submitted by early February.
There are strong grounds to believe the latest initiative would be successful, said Commerce minister Neoclis Sylikiotis. He said the procedure would not be affected by the presidential elections, as negotiations would be conducted by DEFA and the EAC, the latter having an incentive for the speedy conclusion of an agreement. Electricity production with natural gas, by 2015 is a condition for the Authority receiving a €130 million loan for the European Investment Bank.
Sylikiotis’ admission that the use of natural gas – it has not yet been decided if it would arrive in liquefied or compressed form –would not dramatically cut the price of electricity was a disappointment, but not unexpected. The supply contract would only be for three to four years, until September 2018 when Cyprus expects to have the infrastructure to process its own gas reserves. In short, the supplier would have a relatively short period of time to recoup the investment and this would be reflected in a higher unit price.
The truth is that electricity rates, the highest in the EU, will remain high for as long as there is no competition in power production and the EAC price-setting monopoly has no incentive to cut the extortionate wages it pays its workers. Our power stations might finally be fuelled by natural gas in 2015, but it will not make much difference to consumers’ pockets. 
 

The Cyprus Mail is the only English-language daily newspaper published in Cyprus. It was established in 1945 and today, with its popular and widely-read website, the Cyprus Mail is among the most trusted news sites in Cyprus. The newspaper is not affiliated with any political parties and has always striven to maintain its independence. Over the past 70-plus years, the Cyprus Mail, with a small dedicated team, has covered momentous events in Cyprus’ modern history, chronicling the last gasps of British colonial rule, Cyprus’ truncated independence, the coup and Turkish invasion, and the decades of negotiations to stitch the divided island back together, plus a myriad of scandals, murders, and human interests stories that capture the island and its -people. Observers describe it as politically conservative.