Electricity power cap on the table

With energy prices through the roof, the government is reportedly examining the implications of imposing a cap on wholesale electricity in order to reduce the burden on consumers.

To this end, it is considering various scenarios, including the Spanish model, which was submitted to Brussels for approval last week. 

Even though the sums that would be required to implement such a measure are alarming and prohibitive, so is the dread in equal measure caused by the exhaustion of the resilience of households and businesses. 

Moreover, given that the war in Ukraine and Europe’s plan to rapidly become independent from Russian gas mean that high energy prices are set to continue for the long haul, this could also lead to a possible disruption of social cohesion.

The government’s inclination toward an intervention at the national level if there is no central European intervention, was reflected in the remarks by the Prime Minister Kyriakos Mitsotakis himself at the Delphi Economic Forum.

“We cannot tolerate high energy prices for a long time,” he said, noting that European measures were needed.

“If that does not happen, then we will act alone at the national level,” he stressed. 

“We must not lose the support of our people for economic reasons,” he said, noting the risk of populism rising in Europe and the possibility of using the 230 billion euros of loans available from the Recovery Fund to deal with the energy crisis.

In light of these developments, the government’s financial staff is reconsidering the scenario of imposing a ceiling on the price of electricity, given the window left open by the EU to member-states for the temporary imposition of a maximum price in a way that will not affect the operation of the market. 

With this in mind, Finance Ministry staff will by Easter have completed the assessment of the budgetary implications of the various alternative proposals for the implementation of the measure.

According to government sources, the model under consideration is similar to the one submitted by Spain for approval in Brussels, which sets a maximum gas price that will be taken into account by producers in formulating their bids.