The past few months have seen much discussion of the issue of the deficit in the Hellenic Transmission System Operator's (HTSO) renewable energy sources (RES) special account. While it is true that the special account faces a deficit, this deficit does not belong to the HTSO. Although there is a mistaken impression that the HTSO owns the special account, in fact it is simply tasked with the duty of managing this account. This update sets out the function of the account, clarifies why the HTSO itself does not have this deficit and discusses the latest developments relating to the special account.
Under Greek law, the feed-in tariff paid to RES producers which have a signed power purchase agreement is fully refunded to the HTSO and the Public Power Corporation (PPC) through a special account managed by the HTSO. This account is exclusively intended to cover the cost difference between the more expensive RES feed-in tariff paid to RES producers and the system marginal price paid to the HTSO (and which is based on the prices arising from power production using conventional fuel). This means that the receivables of the special account must equal the total RES costs that the HTSO must pay to all RES producers for the total amount of energy generated by their RES and co-generation power plants for high-efficiency heat and energy in Greece (mainland and non-interconnected islands) at the feed-in tariff which applies under their power purchase agreement.
The sources of funding of the special account have been introduced through a sequence of legislative acts and include:
- imbalance payments;
- the PPC exclusivity fee;
- the profits from the auctioning of undistributed carbon dioxide emission rights;
- warranties or penalties provided for in network connection agreements;
- a public television licence fee; and
- the special RES duty.
All of these sources of funding, with the exception of the special RES duty, are not susceptible to changes in their levels in response to increases or decreases of the RES costs; rather, such levels are set through ministerial decisions or other administrative acts or formulae, and any change is effected through an ad hoc decision.
Thus, only the special RES duty can cover the remaining balance of the RES special account, which is also why the special RES duty is adjusted annually. As the levels of the RES costs on the one hand, and the imbalance payments and PPC exclusivity fee on the other, do not remain constant, and as the other sources are subject to ministerial decisions or the failure of producers to meet their deadlines (which means they are also not constant), the special RES duty must be adjusted each year in response to these variations.
The main role of the HTSO in the Hellenic energy market is to facilitate the sale and purchase of electrical energy and the financial transactions that arise from such activity. As the role of the HTSO in such transactions is that of a payments facilitator, the levels of the system marginal price for electricity should be economically indifferent to the HTSO. In general, it shall buy electricity from producers and sell that electricity to wholesale customers (ie, power suppliers) at the same system marginal price, with no direct profit from this activity.
However, since the HTSO buys electricity from RES producers at a level that is higher than the system marginal price (due to the feed-in tariff), the special account was introduced in order to cover this difference. Again, the HTSO is tasked by the law which introduced the special account with the duty to manage it and to facilitate the payments to and from the account.
Therefore, while discussions may refer to 'the HTSO RES special account decifit' or even sometimes to the 'HTSO deficit', this should be understood to describe the deficit of the special account, and not a deficit of the HTSO as a corporate entity.
On January 5 2011 the ministerial decision setting out the exact amount of undistributed carbon dioxide emission rights to be auctioned was signed. This amount was set at 10 million units and its value was calculated (at the time) at approximately €200 million.(1) According to this ministerial decision, the profits for the auctioning of these rights are to be deposited into the Green Fund;(2) however, the Joint Ministerial Decision of March 22 2011 amended this previous decision, set out the exact structure of the auctions and provided that the vast majority of these profits (95%) shall go directly into the special account, with only 5% going to the Green Fund. This is expected to cover a large part of the special account deficit.
Further to these positive developments for the RES market, within the framework for the annual adjustment of the special RES duty the Ministry of Environment, Energy and Climate Change issued such adjustment for 2011. In addition, a detailed breakdown of the groups of electricity consumers, their participation in the RES special account through the RES special duty and other related formulae were introduced for the first time. The relevant calculations included in the ministerial decision provide that the income expected from the special RES duty for 2011 is approximately €100 million.
According to projections made by the Energy Regulatory Authority, the deficit faced by the RES special account will be dealt with sufficiently through the actions set out above.These decisions show the government's intentions and the effort made to ensure that this issue is resolved. Further, they provide investors with some comfort on issues relating to the fulfilment of the state's obligations through the feed-in tariff.
For further information on this topic please contact Gus J Papamichalopoulos at Kyriakides Georgopoulos & Daniolos Issaias by telephone (+30 210 8171 500), fax (+30 210 6856 6578) or email ([email protected]).
(1) The actual value of the carbon dioxide emission rights depends on the market value of such rights at the time when they are auctioned.
(2) The Green Fund is the new name of the former Special Fund for Regulatory and Urban Planning, which was introduced in Law 1262/1972. However, the new (and current) rights and responsibilities of the Green Fund are laid out in Law 3889/2010 and relate to the financing of environmentally friendly programmes and initiatives.