Nicosia, Cyprus. The launch of Cyprus’ competitive electricity market is an important modernisation step, but stronger regulatory safeguards are needed to prevent distortions and protect consumers, energy expert Andreas Poullikkas said. He said the transition to competition alone cannot guarantee fair pricing or smooth market operation.
Call for targeted regulation in an emerging market
Poullikkas, a professor of energy systems at Frederick University and former chairman of the Cyprus Energy Regulatory Authority (CERA), said targeted regulatory rules are needed in an emerging electricity market such as Cyprus, where there is a dominant producer, to avoid creating new distortions instead of strengthening competition.
Existing regulatory framework and its goals
He said CERA has established a broader framework, formally known as the “Statement of Regulatory Practice and Electricity Pricing Methodology.” According to Poullikkas, it aims to prevent cross-subsidisation and regulate cost recovery mechanisms by ensuring tariffs and charges reflect the actual cost of providing services, while protecting consumers and safeguarding competition.
Need for clearer rules on day-ahead bids and must-run units
Poullikkas said further clarification and more detailed implementation rules are needed on prices declared by the dominant producer in the day-ahead electricity market and on the handling of must-run generation units.
He said one key issue is the prices declared by the dominant producer in the day-ahead market, adding that as long as the Electricity Authority of Cyprus (EAC) generation activity remains dominant, its bids should not be treated as if they come from a fully competitive and mature market.
Cost-based declarations and cost transfer concerns
Poullikkas said that during the third trial period a clear methodology for cost-based declarations should have been established so that the dominant producer’s day-ahead prices reflect actual variable costs, technical constraints and reasonable cost recovery needs. He added that the system should not allow costs to be transferred from the forward market, namely from the regulated wholesale tariff structure.
What additional regulatory measures do you think would best protect consumers as Cyprus expands competition in electricity?