The first European mandate for the deregulation of the energy market dates back to 1992. Back then Brussels called upon all European countries to make preparations to privatize 30% of their domestic energy trade within the next 5-6 years, in order to streamline production and reduce prices.
Up until then DEI was a State monopoly, managed and lead by the Minister of Industry. That first mandate set in motion discussion for restructuring it in order to adapt to the new competitive European environment.
However inherent problems did not allow this adaptation. DEI’s special insurance regime was considered insurmountable. The company insured its employees on its own, it covered its insurance contributions on it own.
Furthermore, DEI carried out various investments in Greece that were not entirely basd on business decisions, but by the State. The construction, for example, of hydroelectric dams that irrigated vast agricultural areas and cover the water needs of large and small cities all over the country, was decided centrally by the State.
Additionally DEI had the obligation to provide electricity all over the country, irrespective of cost. That is how the islands in the Aegean were electrified in the previous decades. In other words, the company also served the social needs of the Greek State.
All of this could not be evaluated and separated at that point, so in 1997 a transitional grace period was requested from the European Union. Two years later, in 1999, the first phase of deregulation was introduced for big clients and provision were made for large industrial units to self-produce energy.
The end of the monopoly
Later, in 2001, when the country entered the Eurozone, DEI became an S.A., it entered the Athens Stock Market Exchange and adopted principles of corporate management. At that point DEI got its first professional management, which changed the rules of the game for five years.
The restructuring of the company was impressive, its profits were unique and its operation was setting high enough standards that were capable of facing off any deregulation. In 2003 the supply of energy for medium voltage clients was deregulated. The monopoly has ended since then and consumers had the freedom of choice amongst energy providers.
That is when the first licenses were issued to clients such as Alumion, Hellenic Petroleum, Motor Oil, Ellakotr, Kopelouzons and host of others, who at first did not take advantage of the situation because they were claiming incentives and better prices from DEI, the low cost of which they could not compete against. This was due to the advantage DEI had from the long-term expoloitation of the lignite mines in Western Macedonia. The investment had long been recouped, meaning that DEI was producing energy at zero cost. That was the main reason that deregulation was mostly ineffective.
In the meanwhile, as the years went by, DEI constantly grew bigger. In 2004 its profits before taxes was 1.6 billion euros and its net profits were a record-breaking 560 million euros. It had also reduced its borrowing from 5.2 billion euros to 3.6 billion euros and its future appeared bright.
In January 2005 however the Karamanlis government changed its professional management and installed Yannis Paleokrasas, who literally uprooted it. The advantage of the previous years was lost, its organization collapsed, its profits reduced and then in 2007, it suffered a critical blow.
Under those circumstances for DEI, the third wave of deregulation was implemented and all clients now had the freedom to chose their energy supplier. At the same time the production of energy from renewable sources was deregulated and there were “insane” subsidies offered to those investing in photovoltaics and wind turbines. The cost of the subsidies was passed on almost entirely to DEI and a few years later, in 2009, Mrs. Tina Birbili increased it by 10%, who in the midst of the financial crisis was promoting Mr. G. Papandreou’s failed “green growth” vision.
DEI lost over 250,000 clients from the violent invasion of 7-8 aggressive energy providers. That experiment quickly failed though, as they offered discounts up to 10% without any guarantees or provisions and the most aggressive new energy providers were financially ruined and ended up in prison.
Since then DEI has reclaimed the energy trade and handles 99.5% of energy provided to businesses and households.
Managerial inefficiency
In other words, the energy market is not suffering from deregulation. The trade is completely deregulated. Private producers own 27% of thermal power units, while renewables provide 10% to 12% of energy to the grid.
Furthermore, those who have bee following the production of energy will know that under the current financial circumstances, the market is saturated. Currently energy production amounts to 17,500 megawatts, when demand during peak season does not exceed 9,000 megawatts!
The biggest problem is the managerial inefficiency of those in charge at DEI and the problematic stance of the intermediary system managers, who are courted by private producers.
At present DEI is managed by political divs, who are not excising any meaningful management. The revenue lost amounts to 1.5 billion euros and the cost of production, despite the wage cuts, is increasing.
The business is surviving thanks to the efforts of directors from within its administrative structure, who lose their minds from what they hear from the installed “deaf” managers. That is how most of the company’s directors call the president and his three deputy managing consultants who have no clue.
Unfortunately, after 2005, DEI fell in the clutches of politics and has been impaired.
Step into the void
Now the “mini DEI” affair has emerged, the relevant legislation was passed through in Parliament, but it will never materialize. In order to establish it, a special management must first be established in DEI to appoint assets and personnel. After that, the insurance status of those employees must be addressed, evaluated and separated from the sector. A new business must emerge, which will inherit 2 million customers and then be sold to private investors.
The fact that 2 million customers will not have a choice and will be offered up without their consent to the new company pretty much ensures that the privatization effort will fail.
It simply violates the principle of freedom of trade, which the bureaucrats in Brussels celebrate.
And the question that logically arises is why, when everyone knows about the problems of the domestic energy production, are they forcing Greece, the government, the parties and the people to suffer this insanity?
Antonis Karakousis
Originally published in the Sunday print edition
