Six proposals to reduce electricity costs

Statements at the Press Conference called by the General Secretary of the Central Committee of AKEL Stefanos Stefanou

14 February 2024, AKEL C.C. Press Office, Nicosia

At a time when conditions characterised by energy insecurity and crisis are dominant across the world, Cyprus is left exposed as it faces serious dangers of energy shortages and high costs being rendered permanent. The country has been left without an essential infrastructure in place to ensure energy sufficiency and security. Citizens see their electricity bills soaring, while the Christodoulides Government is permitting a small number of companies in the renewable energy sector to reap the benefits of exorbitant profits, to the detriment of society and the economy.

Due to external, but also domestic factors, Cypriot consumers are paying very high prices for electricity, while the situation would be better if the correct decisions had been taken in previous years and the proper measures had been taken, which unfortunately wasn’t the case.

Furthermore, the forecasts for the price of electricity are even gloomier since, according to the forecasts being made, the price of a kilowatt hour is expected to shoot up from 29 cents today to 45 cents soon. This development will make it even more difficult for a significant section of society to have access to energy and will further burden households and businesses.

A big share of the responsibility lies on the shoulders of the previous Anastasiades-DISY government for the difficult situation our country’s energy finds itself in. Throughout the ten years of its administration, the DISY government announced and advertised a lot costly communication fiestas, but did very little. And among that little that it did, erroneous decisions and actions were taken.

The €300 million that taxpayers paid in pollution fines in 2023 and the €500 million we are expected to pay this year are a sad legacy of the criminal incompetence of the DISY government to bring in gas for electricity production, to build infrastructures, to formulate a comprehensive plan for the penetration of renewable energy.

Proposals to reduce electricity bills

Faced with this difficult situation, the N. Christodoulides government cannot simply limit itself to identifying the problems and copying the previous government in engaging in communication games. It must move decisively in two directions:

1. To take measures that immediately reduce the cost of electricity for households and businesses
2. To implement structural measures that create the preconditions and possibilities for our state to address the energy needs and challenges.

AKEL, acting responsibly and creatively, proposes to the government six specific measures to promote specific guidelines. Three measures to reduce the cost of electricity and three measures of a structural nature of a common horizon.

To reduce electricity costs:

1. Reduction of the VAT rate on electricity from 19% to 9%. This was approved by Parliament following a bill proposal submitted by AKEL, but this was deemed unconstitutional by the Supreme Court following a referral by N. Anastasiades. We call on the Christodoulides government to bring a relevant bill to Parliament. And to address the EU and request a reduction of the rate. There is a strong case for the government to support this request, provided, of course, that it has the political will to do so and not hide behind whatever pretexts. The state has increased VAT revenues as a result of increased bills and can absorb the fiscal loss. The reduction in VAT can continue until the structural change in energy costs.

(Documentation: high rate of energy poverty, lack of alternatives to ensure access to energy, state negligence in creating infrastructures that has led to the increase in electricity costs).

2. Taxing windfall profits in the energy sector and allocating the revenues to the implementation of targeted policies to address energy poverty. Since November 2022, we have submitted a bill proposal in Parliament but unfortunately we have faced the obstructionism of the previous government and the silence of the current government. AKEL’s proposal is not only a demand of Cypriot society but now it is also the position of the competent regulatory authority, Cyprus Energy Regulatory Authority (RAEK).
3. We support the continuation of the existing energy and fuel measures. Estimates of new increases in energy prices make it imperative that these measures should continue.

Structural Measures

Recognizing that the above measures do not provide definitive solutions but temporarily reduce or contain energy prices, we propose three measures for a structural change in energy costs. These measures focus on increasing the introduction of renewable energy sources into the energy mix and creating and strengthening infrastructures to ensure the country’s energy sufficiency and security. It is of utmost importance that the semi-governmental organisation Cyprus Electricity Authority (AHK) increases its share of electricity generation from renewable energy sources.

1. The state should make use of the revenues from pollutants to address energy poverty, promote the installation of renewable energy sources and the creation of infrastructure (installation of storage systems, improvement and reinforcement of the grid). This is an EU directive that has been adopted in national legislation. (There are plenty of millions: during 2021-2022 alone, the revenues amounted to €180 million. How these revenues are managed is not sufficiently known as there is a suspicious non-transparency hovering around on the part of the responsible authorities).
2. The state should support AHK to develop its infrastructure and modernise its plants (we are talking about those in Dhekelia) in order to make an immediate transition to electricity generation with gas and Renewable Energy Sources RES. AHK constitutes the pillar of our country’s energy sector, and the guarantee of energy security and sufficiency. In the recent past, AHK was not allowed or was even prevented by the previous government from making necessary investments. The DISY government tried to undermine AHK’s viability and role through various decisions and actions. Unfortunately, mistakes and inefficiencies were also made by Boards of Directors of AHK appointed by the previous government. We hope that the new Board will be up to the challenges facing AHK.

It is of crucial importance what attitude and policy the Christodoulides government will adopt towards AHK. For us, the position that AHK must be supported so that it can play the role of representing the backbone in energy developments is non-negotiable. We call on the President of the Republic to clarify the position of his government on this matter.

3. The government must at long last proceed to hold competitive tenders for the introduction of renewable energy sources into the energy mix. We stress that in other countries such tenders have led to the production of electricity at very low cost per kilowatt-hour. Unfortunately, the previous government also showed an unacceptable lack of action on this issue, despite its public pledge to proceed with the tenders by October 2022.

I conclude with the following: The issue of energy sufficiency and security, as well as energy costs, are not limited to what we are proposing. These, as we have already mentioned, are for immediate action and for the near future.

Much more needs to be done, especially for the utilization of Cyprus’ natural gas deposits for electricity generation, for the rapid completion of infrastructure for the arrival of natural gas, for the energy connectivity of our country, for the enrichment and expansion of programmes to promote the installation of photovoltaic systems in homes and businesses. We have many times submitted our positions and proposals on all these issues and will continue to do so. I note that on energy issues we have requested and had meetings with both the previous and the current President in the presence of the relevant Ministers.