Cypriot households and businesses should brace themselves for another wave of increases on their electricity bills, warns energy specialist Charles Ellinas.
Talking to Astra Radio on Thursday, Ellinas said that electricity bills on the island would be further inflated.
The high cost of purchasing emission allowances (EUAs) on the EU’s carbon market, the Emissions Trading Scheme (ETS), and the high cost of petrol have pushed the Electricity Authority of Cyprus prices upward.
According to EAC’s data in November, Cypriots had to dig deep into their pockets to pay the month’s electricity bills.
The energy cost has been at its highest since 2012, wiping out a 10% discount given out earlier by the authority.
The year-on-year increase on November bills will exceed 90%, with the EAC blaming the hike in fuel costs and the increase in the cost of purchasing greenhouse gas emission rights.
According to Ellinas, Cypriots should be prepared for further increases, as the cost of emission allowances has continued to skyrocket since the beginning of the year.
“Since January this year, the cost of EUAs have increased by 170%.
“Just in November, the cost increased by 50%, going from €60 a tonne to €90,” said Ellinas.
The energy expert does not expect the cost of EUAs to be coming down any time soon.
“On the contrary, we should expect it to break the €100 barrier very soon if it has not already done so today”.
Ellinas said there is not much EAC can do to alleviate the burden on households and businesses, as the authority is obliged to roll down the cost to consumers.
He that only the government could intervene in that direction.
“The government could indeed reduce the VAT, but it could also lift a double taxation, as the VAT is also placed on the cost of EUAs, which are in themselves a form of tax.”
Last month, the government said it would lower the VAT on household electricity bills from 19% to 9% for the next three months.
The decision was announced by Finance Minister Constantinos Petrides, who said the move comes in response to the calls made by the Parliament to support households amid an electricity price hike.
Petrides noted that reducing VAT to 9% is over and above a recent decision by the Electricity Authority of Cyprus (EAC) to cut bills by 10% across the board until February and reduce VAT on bills to vulnerable groups to 5% for six months.
Ellinas said the European Union allows governments to intervene to support lower-income groups by handing out aid in various forms to alleviate the cost of energy.
“This year, the government has essentially collected some €220 mln from the sale of EUAs.
“So even if the cost of EUAs drops to €80 next year, that would still mean the government will have some €400 mln at its disposal.”
The EAC pays the EU the “penalty” for buying EUAs, which is then returned to local governments with instructions to support low-income groups and support the development of Renewable Energy Sources.