Despite the Ministry of Finance’s ongoing reservations about the electricity interconnection project, the Government, through statements made yesterday by the Minister of Energy, appears to be subtly joining the chorus of pressures on the Cyprus Energy Regulatory Authority (CERA) to reverse its controversial decision. The final cost-benefit analysis, due from IPTO on July 11, and its subsequent evaluation by the Cypriot side, are still pending.
In its decision, CERA rejected four significant requests from the project’s implementing entity, primarily the request for project financing through electricity bills starting 1/1/2025.
Energy Minister Giorgos Papanastasiou, in his statements, expressed confidence in the benefits of the Great Sea Interconnector for both Cypriot consumers and the electricity system, including ending isolation, increasing renewable energy penetration, reducing green energy curtailments, and ensuring supply security.
Given this certainty, the Minister implied his belief in the need for CERA to reconsider its stance and revise its decision to ‘save the project’, as warned by the European Commission and IPTO.
However, when questioned about the Government’s position on participating financially in the project and the implementing entity, the Minister replied that such a decision would only be made after receiving and evaluating IPTO’s study.
Essentially, the Government considers that a potential shift in CERA’s stance and approval of cost recovery from consumers at this stage would render the project viable and secure its future benefits for the country.
Yet, simultaneously, the Government wants to assess the study before committing, should it deem the project viable and beneficial for Cyprus to participate in the equity capital of the Great Sea Interconnector.
It was confirmed that IPTO will file an objection to CERA’s decision and request a reconsideration of its requests. To succeed, IPTO is said to have committed to providing evidence that the project is not viable without revenue from the levy to be paid by consumers from 1/1/2025.
IPTO’s latest move validates CERA’s position that the existing regulatory framework does not mandate the approval of levy collection during the construction phase. CERA insists that Article 3 of the relevant decision provides for the reimbursement of investment expenses to the implementing entity during construction, but the timing of this reimbursement is subject to CERA’s approval.
IPTO invokes Article 23.9 of the regulatory decision, which states that during the construction phase, the initial and allowed owner’s revenue is calculated, and the return on the RAP (algebraic sum of WACC and Additional Return) of each year is paid during this period.
The Cypriot side points out that Article 23.9 should not be interpreted in isolation but in conjunction with Article 3.6, which reserves the final decision on cost recovery to CERA. They emphasise that Article 23.9 outlines how cost recovery is to be carried out during construction, provided CERA’s approval is obtained, as per Article 3.6.
Even with Article 23.9, there is no mention of cost recovery by the implementing entity beginning with construction, as requested by IPTO. CERA retains the discretion to permit cost recovery even shortly before the interconnector’s commercial operation, should it amend its decision.
