EDP needs competition to lower electricity prices.jpg

EDP needs competition to lower electricity prices

By: CHRIS GRAEME

Email: chrisgraeme@sapo.pt

THE GOVERNMENT has agreed to allow Portuguese electricity monopoly EDP to increase its prices by six per cent in 2007.

However, despite the price hikes, the costs levied by the national electricity operator are still too low to encourage new electricity operators to enter and compete in the Portuguese market, according to consumer watchdog, Deco.

Without direct competition, EDP will remain free to impose the electricity charges it wants on the captive Portuguese consumer.

In 2007, as was reported by The Resident in the October 27 edition, around six million Portuguese will, on average, pay another six per cent on top of their electricity bills.

The blame for high energy prices in Portugal has been laid squarely at the door of a lack of competition: four months after the government and EU gave the green light for the liberalisation of the sector EDP still stands alone as the only electricity supplier in Portugal.

Increases

EDP for its part says that the government would have to allow prices to increase by around 16-17 per cent (reflecting the true non-subsidised price for producing electrical energy) before competitors could enter the market.

Even ERSE the countries energy regulator said in the autumn that electricity prices in Portugal needed to be around 15.7 per cent higher than at present to make the business economically viable to stand a chance of attracting private competitors in the market.

Even the limited increases allowed by the government are likely to have adverse effects for the poor and elderly in Portugal according to the consumer watchdog Deco.

“The increases are still not sufficient to pay for Portugal’s energy production costs, which is one of the reasons why it is so difficult to attract other market competitors into the Portuguese sector.

Choice

“That’s why four months after the freeing up of the energy market in Portugal consumers have a choice between EDP … and EDP!” said a spokesperson from the consumer watchdog.

Deco recognises that there is an energy deficit in the sector worth 400 million euros – the so-called tariff deficit.

According to the watchdog, this is caused mainly because of high production and fuel costs, but also because successive governments never put in place a proper energy policy in the past decade.

“That’s why it is necessary that Portugal in line with other countries in the EU needs to adopt urgent measures within the framework of a common European Union energy policy as was outlined in Lisbon two months ago by the EU Monopolies Commissioner Neelie Kroess.

“The government needs to find ways of encouraging the reduction of production costs and see those costs in the light of the general economic interest.

“By this it means investing heavily in renewable energy sources that would make Portugal less dependent on fuel imports from other countries, putting it entirely at the mercy of market fluctuations in oil prices,” a spokesperson from Deco said.

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