Greece’s Independent Power Transmission Operator (IPTO) has filed an objection with Cyprus’s energy regulator against a July 2024 decision, seeking €251 million in cost recovery instead of the agreed €25 million annual payment, threatening to overturn the Framework Agreement between the Cypriot and Greek governments and potentially transform the electricity interconnection project into a major legal confrontation.
Phileleftheros has learnt that the project implementation entity submitted an objection to the Cyprus Energy Regulatory Authority against the regulator’s 31 July 2024 decision approving cost recovery of €82 million, with collection rights of only €25 million for the period January to December 2025.
Information indicates IPTO is seeking recognition of cost recovery rights totalling €251 million for expenses incurred to date, before the project’s completion.
Through the objection, IPTO is requesting cancellation of the July decision—for which it had pressed intensively for an extended period—and its replacement with another decision that would approve recovery of all its cable expenses as they occur and are justified through CERA with invoices.
IPTO seeks to overturn July 2024 Framework Agreement between Cyprus and Greece governments
In essence, IPTO is attempting to overturn the Framework Agreement signed by the governments of Cyprus and Greece in July 2024, which stipulates that Cyprus will not pay all expenses incurred during the project’s construction phase (something Greece will do), but only €25 million annually for the period 2025-2029.
All remaining expenses will be paid gradually by electricity consumers in Cyprus (in a 63-37 ratio) after the electricity interconnection becomes operational.
Most importantly, however, the implementation entity is challenging and attempting to overturn the regulatory framework approved by CERA and the Regulatory Authority for Energy of Greece in July 2024, after they first incorporated the governments’ Framework Agreement for the €125 million from Cyprus by 2029.
IPTO considers—after a lapse of 14 months—the regulatory practice chosen by CERA (the two governments, in fact) to be erroneous or even illegal, namely to pay only a small percentage of its total expenses with the remainder to be collected after the interconnection becomes operational.
However, this practice (repaying regulated projects after their operation) is applied by CERA (and by regulatory authorities in other EU member states) to all projects executed by the Electricity Authority of Cyprus. The decision to provide IPTO with €25 million annually until 2029, before the interconnection operates, constitutes a deviation by CERA (following the Framework Agreement of the two governments) from its usual practice.
Whilst the Cypriot government acknowledges the €25 million debt for 2025 expenses but reserves payment “after IPTO’s commitments are also satisfied” (which refers to conducting marine surveys between Crete and Cyprus), it is considered certain that neither CERA nor the Cypriot government will accept IPTO’s request to overturn the July decision and begin paying the Greek organisation with substantially larger amounts as cable construction work progresses, thereby abolishing the agreement for payment of only €25 million annually within a five-year period.
Dispute risks transforming flagship project into major legal confrontation between states
However, according to legislation, if IPTO’s objection is rejected, the implementation entity acquires the right to file an appeal with the Administrative Court of Cyprus, requesting cancellation of the July regulatory decision. This would probably mark the third time IPTO has resorted to legal action against CERA decisions, with the now-visible risk that the widely publicised electricity interconnection project could evolve into a massive legal confrontation between the two states, given that the Hellenic Republic maintains the majority shareholding in IPTO.
This possibility might enable IPTO to present CERA and the Republic of Cyprus as exclusively responsible for the project’s failure, citing “regulatory gaps” or “poor regulatory practices by CERA” or both regulators, whilst downplaying the greater problem: Turkey’s abusive claims in the maritime area southeast of Crete and the continuous postponements by the Greek government to issue a navtex for conducting necessary bathymetric surveys so that cable laying manufactured by Nexans in Norway can proceed.
Sources monitoring developments estimate that the IPTO letter-attack constitutes the formalisation of the organisation’s decision—possibly also the Greek government’s—to present Cyprus as obstructing the project’s implementation, loading it with responsibility for compensation issues that will arise if the project is indeed cancelled.
The seriousness of the situation clearly requires joint management by CERA, the government, and the Law Office.
