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Short-term levy imposed for viability of renewables

Published

July 9, 2015

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Published:

July 9, 2015

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The parliament approved a ‘temporary green tax’, deemed necessary by the government to ensure the viability of the Renewable Energy Sources Fund, local media said. The fee charged to all electricity consumers was raised to 0.65 euro cents per kWh from 0.5 euro cents per kWh. The increase applies until the end of the year. The government’s initial intention was to raise the fee to 0.75 cents, but members of parliament accepted an amendment by the Greens’ George Perdikis. Producers are also going to contribute to the fund, which has run into difficulties due to falling fuel prices.

Cyprus Energy Regulatory Authority (CERA) Chairman George Siammas said on July 5 a 2% increase on electricity bills was anticipated for July due to a rise in the international price of fuel. “Everyone knows the price of electricity was reduced by close to 40% over the past two years, this month is seems there will be a 2% increase,” he added, as quoted by In-cyprus.com. He said no one could predict international oil prices but the general assumption was there would not be any significant divergences before the end of the year. Siammas also said changes to the international price of oil automatically resulted in a change to the amounts paid by consumers.

Also, as reported by Phileleftheros, CERA has announced a 5% increase to the coefficient of fuel adjustment, raising it from 0.00119 cents to 0.00125 cents. The per unit (kWh) charges are automatically adjusted to cover any increase or decrease in the cost of fuel per metric ton. The charge is calculated on the basis of the current and basic fuel price. The price of KWh charged shall be increased or decreased every two months by the value of the coefficient of fuel adjustment currently in force for every 5 cents increase or decrease in the basic price of EUR 300 per metric ton of fuel. Also, fuel price jumped 4.2% from June.

The Renewable Energy Sources Fund covers the difference between the price at which the Electricity Authority of Cyprus (EAC) buys energy from producers from renewables according to avoidance costs and the producers’ overall production costs, which is a stable tariff set out in their contracts. The power utility pays producers the total amount owed and subsequently files for compensation from the fund. In order for the fund to be viable, the avoidance cost – essentially the cost of fuel – must be 11 cents per kWh. But due to the global drop in crude prices, the avoidance cost currently stands at 7.44 cents per kWh. Operators of renewable energy signed long-term contracts with the government, at fixed tariffs, and are unwilling to be taxed. The new measure is expected to result in an additional revenue of about EUR 3.5 million.

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