www.cera.org.cy ANNUAL REPORT OF CYPRUS ENERGY REGULATORY AUTHORITY
2021 ANNUAL REPORT OF CYPRUS ENERGY REGULATORY AUTHORITY
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3 Annual Report 2021 Προς την Αυτού Εξοχότητα Κύριο Νίκο Αναστασιάδη Πρόεδρο Κυπριακής Δημοκρατίας Λευκωσία 29 Ιουλίου 2022 Εξοχότατε, Έχουμε την τιμή να σας υποβάλουμε την 18η Ετήσια Έκθεση και τους Λογαριασμούς της ΡΥΘΜΙΣΤΙΚΗΣ ΑΡΧΗΣ ΕΝΕΡΓΕΙΑΣ ΚΥΠΡΟΥ, για τον χρόνο που τελείωσε στις 31 Δεκεμβρίου 2021 που περιλαμβάνει και την Έκθεση της Ελεγκτικής Υπηρεσίας της Δημοκρατίας. Η Έκθεση αυτή και οι Λογαριασμοί υποβάλλονται σε σας σύμφωνα με το άρθρο 15 του περί Σύστασης και Λειτουργίας της Ρυθμιστικής Αρχής Ενέργειας Κύπρου Νόμου του 2021 και το άρθρο 7(1)(ιη) των Περί Ρύθμισης της Αγοράς Φυσικού Αερίου Νόμων του 2004 μέχρι το 2021. Με τιμή, Δρ. Ανδρέας Πουλλικκάς Πρόεδρος Φίλιππος (Άλκης) Φιλίππου Αντιπρόεδρος Νεόφυτος Χατζηγεωργίου Μέλος
4 Cyprus Energy Regulatory Authority INTRODUCTORY NOTE OF THE CHAIRMAN, VICE CHAIRMAN AND MEMBER OF CERA 1. INTRODUCTION Electricity - Responsibilities and Powers of CERA Natural Gas - Responsibilities and Powers of CERA Actions to address the repercussions of the COVID-19 virus on the energy sector 2. LEGISLATIVE REGULATIONS AND CERA DECISIONS National Legislative Regulations Laws and Regulations Code of Public Governance Regulatory Decisions, Draft Regulatory Decisions and important CERA Decisions in 2021 Actions taken in relation to previous Regulatory Decisions Trading and Settlement Rules Transmission and Distribution Rules 3. ENERGY POLICY, INTERNATIONAL AND LOCAL ACTIVITIES European Legislative Regulations Projects of Common Interest (PCI) International Activities Other International Activities Local Activities Research and Development Co-financed and other projects in which CERA participates 11 13 15 16 17 25 25 25 27 28 41 43 44 45 45 51 53 62 62 62 62 TABLE OF CONTENTS
5 Annual Report 2021 4. ELECTRICITY MARKET Introduction Measure of Market Concentration - Herfindahl - Hirschman Index Granting of a License, General License, and Exemption Electricity supply license to final customers License for the construction and operation of power production plants for commercial use License for the construction and operation of power plants for self-consumption Exemption from a power production plant construction and operation license for commercial use Exemption from Licenses for the construction and operation of self-consumption power production plants Electricity Generation Data during 2021 Environmental Indicators in relation to total annual conventional electricity generation Approved Maximum Total Capacity (MW) and Total Generated Electricity (GWh) Forecast for the decade 2021 - 2030 Adequacy of Electricity Supply Electricity prices 5. NATURAL GAS MARKET Legislative framework for the Natural Gas Market Organization and development of the natural gas market Applications submitted to CERA Tender Procedures 6. PROTECTION OF CONSUMERS AND RESOLUTION OF COMPLAINTS Protection of Consumers and Resolution of Complaints Performance Indicators Complaints submitted to CERA 7. REPORT AND FINANCIAL STATEMENTS OF CERA 68 68 68 72 73 74 77 77 77 81 84 86 87 88 98 98 99 100 101 102 102 102 106 107
6 Cyprus Energy Regulatory Authority LIST OF FIGURES 18 23 70 70 71 72 74 75 75 76 76 78 79 80 81 82 83 83 84 85 86 86 87 88 88 89 Figure 1 Indicative electricity prices for household consumers in Europe in 2021 Figure 2 CERA Office staff Training 2021 Figure 3 Concentration of electricity market (wholesale market) Figure 4 Concentration of electricity market (retail market) Figure 5 Herfindahl-Hirschman Index (HHI) of the household electricity consumer market in Member States in the period 2018 - 2020 Figure 6 Herfindahl-Hirschman Index (HHI) of the non-household electricity consumer market in Member States in the period 2018 - 2020 Figure7 Descriptive presentation and geographical distribution of installed conventional plants for commercial use until 2021 Figure 8 Licenses for the construction of conventional plants for the generation of electricity granted between 2004 and 2021 Figure 9 Licenses for the operation of conventional plants for the generation of electricity granted between 2004 and 2021 Figure 10 Licenses for the construction of RES plants granted between 2004 to 2021 Figure 11 Licenses for the operation of RES plants granted between 2004 and 2020 Figure 12 Capacity (MW) of exemptions from a RES construction license for the period 2004 - 2021 Figure 13 Capacity (MW) of exemptions from RES operation licenses for the period 2004 - 2021 Figure 14 Number of installed photovoltaic systems and installed capacity (kW) net-metering systems for the period 2013 - 2021 Figure 15 Descriptive presentation and geographical distribution of installed RES plants with capacity of more than 20kWp, until 2021 Figure 16 Sankey diagram for the total generation of electricity (GWh) in 2021 Figure 17 Annually installed capacity (kW) of RES systems Figure 18 Annual generation (GWh) of RES systems Figure 19 Annual variation of the environmental indicator of carbon dioxide (CO2) emissions from conventional large-scale electricity generation plants (g/kWh) Figure 20 Annual variation of the environmental indicators of AP, SO2, NOx emissions from conventional large-scale electricity generation plants (g/kWh) (logarithmic scale) Figure 21 Approved Total Generated Energy (GWh) Forecast 2021 - 2030 Figure 22 Approved Maximum Total Capacity (MW) Forecast 2021 - 2030 Figure 23 Adequacy of Electricity Supply Figure 24 Network usage fees for consumers connected to low voltage, 2016-2021 Figure 25 The allowed revenue of EAC per unit sold, 2016-2021 Figure 26 Average price of basic wholesale tariff
7 Annual Report 2021 Table 1 Allowed Revenues and Regulated Electricity Tariffs for 2021 Table 2 Fee for registration to the electronic registry for guarantee of origin for RES and HECHP producers Table 3 Fuel Clause Coefficients and Basic Purchase Prices of RES-generated energy Table 4 Fuel Clause Coefficients and Basic Purchase Prices of RES-generated energy Table 5 Performance Indicators of ODS (EAC) Table 6 Performance Indicators of EAC Supply 32 34 37 39 104 105 LIST OF TABLES 89 90 91 91 92 92 93 93 94 94 95 95 96 104 105 106 Figure 27 Analysis of the cost of fuel adjustment, Low Voltage (€¢/kWh) Figure 28 WACG of EAC Generation (only fuel, including CO2 cost) Figure 29 Fuel mix for EAC electricity generation (consumption %) Figure 30 Total cost of CO2 emission allowances by EAC Generation, average cost per allowance Figure 31 Number of CO2 allowances that were purchased by EAC Generation Figure 32 Average tariff for household use (code 01) Figure 33 PSO, VAT and RES analysis for Tariff 01 Figure 34 Average Commercial and Industrial Use Tariff (code 10) Figure 35 Average Monthly Low Voltage Seasonal Two-Rate Commercial and Industrial Use Tariff (code 30) Figure 36 Monthly Medium Voltage Seasonal Two-Rate Commercial and Industrial Use Tariff (Code 40) Figure 37 Monthly High Voltage Seasonal Two-Rate Commercial and Industrial Use Tariff (code 50) Figure 38 Cost of purchasing energy from RES (Low Voltage) - in €c/kWh Figure 39 Analysis of electricity bill for a typical household consumer with bi-monthly consumption of 600 kWh (% on the final bill), December 2021 Figure 40 Performance Indicators of ODS (EAC) Figure 41 Performance Indicators of EAC supplier Figure 42 Complaints submitted to CERA in 2021
8 Cyprus Energy Regulatory Authority ACER Agency for the Cooperation of Energy Regulators ADN Active Distribution Network AMI Advanced Metering Infrastructure CdT Translation Center for the Bodies of the European Union CEER Council of European Energy Regulators CERA Cyprus Energy Regulatory Authority COSMOS Cyprus Organization for Storage and Management of Oil Stocks DEFA Natural Gas Public Company DSO Distribution System Operator EAC Electricity Authority of Cyprus EC Energy Conservation ECG Electricity Coordination Group ENTSO European Network of Transmission System Operators ETS Emissions Trading Scheme ETYFA Natural Gas Infrastructure Company EU European Union HECHP High Efficiency Cogeneration of Heat and Power HHI Herfindahl-Hirschman Index ICT Information and Communications Technology KDP Regulatory Administrative Act LNG Liquified Natural Gas LNG System Operator Liquefied Natural Gas System Operator LNGS Owner Liquefied Natural Gas System Owner MECI Ministry of Energy, Commerce and Industry MEDREG Mediterranean Energy Regulators NECP National Energy and Climate Plan NRAs National Regulatory Authorities ODS Owner of Distribution System OTS Owner of Transmission System PCI Project of Common Interest PP Power Plant PPA Power Purchase Agreements PSO Public Service Obligations RES Renewable Energy Sources RES-E RES Electricity Generation Systems RIF Research and Innovation Foundation SPV Special Purpose Vehicle SSO Storage System Operator Abbreviations
9 Annual Report 2021 SSOw Storage System Owner TDR Transmission and Distribution Rules TSOC Transmission System Operator - Cyprus TSR Trading and Settlement Rules TYNDP Ten-Year Network Development Plan VAT Value Added Tax WACF Weighted Average Cost of Fuel
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11 Annual Report 2021 Climate change is one of the biggest challenges that the world faces today, making the need for coordinated and decisive action a matter of urgency. The energy sector, which is unquestionably one of the drivers behind the global economy, is at the epicenter of this task. Following the negative impact of the pandemic, Europe is battling a record-breaking surge in energy prices that threatens to derail the post-pandemic economic recovery, strain household incomes and even tarnish the nascent green transition. A series of market, geographic and political factors have merged into a perfect storm that shows no signs of abetting. Nevertheless, the biggest challenges in the energy sector started with the pandemic-induced recession reminding us that the world's energy map needs to be reshaped starting from energy production, distribution and use. The year 2021 was undoubtedly a year of drastic changes for national energy activity. The national electricity market was given a taste of the future, with a higher penetration of renewable energy sources and concerns about security of supply. At the same time, after bouncing back from the pandemic and the returning to normalcy, emission allowances have seen an unprecedented rapid increase due to the European policies on Green Energy. The lack of natural gas, a major long-term disadvantage of the Cypriot economy, has now been converted into a stroke of luck, given that the natural gas prices in the rest of Europe have multiplied over recent months and, in combination with constantly record-high emission allowances, have led to an unprecedented energy crisis. The introduction of natural gas to the island is not expected to suffice in lowering the electricity prices for Cypriot consumers and industry on its own. This could be feasible with the large-scale implementation of renewable energy sources in combination with storage and/or in combination with Cyprus being interconnected to the Continental European Network. With the EU determined to increase the cost of emissions, Cyprus will ultimately need to follow suit. The switch to renewable energy sources and higher energy efficiency levels is now a matter of urgency. Renewable energy sources hold the key for the switch to low-carbon energy forms and the creation of a sustainable energy system. Cyprus is going through an era of unprecedented changes and challenges that stem from the opening of the competitive electricity market, as well as the relentless efforts that are being made for the island to cease being "electrically isolated" from the rest of Europe. At the forefront of the developments, CERA took action and will continue to do so driven by the creation of new sustainable and peoplecentered regulations that will always focus on the consumer, the environment, but also national economy. Special thanks are expressed to the CERA Office staff for their valuable contribution, productivity and readiness that they demonstrated in dealing with the challenges that arose throughout the year. INTRODUCTORY NOTE OF THE CHAIRMAN, VICE CHAIRMAN AND MEMBER OF CERA
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13 Annual Report 2021 The Cyprus Energy Regulatory Authority (CERA) was established by Law in 2003 in accordance with European Union Directives. CERA is an independent authority governed by public law and its main purpose is to regulate and monitor the internal electricity and natural gas markets. In addition, CERA aims to ensure a competitive, secure and environmentally sustainable energy market with its main concern being to protect the rights of the consumers. At the same time, CERA is responsible for advising the Minister for Energy, Commerce and Industry on all issues related to the energy market. Based on the Law Regulating the Electricity Market of 2021 (L.131(l)/2021), by the end of June each year, CERA submits an Annual Report of its activities to the President of the Republic of Cyprus and files a copy of the Annual Report to the Council of Ministers and the House of Representatives. This Annual Activity Report of CERA covers the year 2021 and is the eighteenth (18th) to be issued. During the year under review, CERA issued 2 regulatory decisions: • Regulatory Decision 01/2021 (KDP 359/2021), regarding the Statement of Regulatory Practice and Electricity Tariffs Methodology. • Regulatory Decision 02/2021 (KDP 523/2021) regarding the Regulatory Framework for the Granting of General License. At the same time, CERA issued a series of Decisions; the most important of these being: • Decision 12/2021 - Approval of Calculation Methodology and Prices of Monthly Capacity Factors (CFg) of the Transitory Regulation of the Electricity Market for 2021 • Decision 15/2021 - Allowed Revenues and Regulated Electricity Tariffs for 2021 • Decision 26/2021 - Electricity Tariff Plans for 2021 • Decision 33/2021 - Parameters set by the DSO for the Transitory Regulations of the Electricity Market Rules for 2021 • Decision 42/2021 - Draft Regulatory Decision on the "Statement of Regulatory Practice and Electricity Tariffs Methodology" • Decision 43/2021 - Changes to the Transitory Regulations of the Electricity Market - Version 1.6 • Decision 48/2021 - Calculation Methodology of the Preventive Increase of Security Covers of Producers and RES Producers • Decision 73/2021 - Guidelines on conducting an estimate of natural gas demand in the Natural Gas Transmission System by the Natural Gas Transmission System Operator INTRODUCTION
14 Cyprus Energy Regulatory Authority and the conclusion of interconnection agreements • Decision 74/2021 - Guidelines on preparing the Natural Gas Transmission System development plan • Decision 82/2021 - Draft regarding the Regulations Regulating the Natural Gas Market (Natural Gas Quality Requirements) • Decision 87/2021 - CERA Code of Public Governance • Decision 88/2021 - CERA Risk Report • Decision 93/2021 - Electronic Registry for Guarantees of Origin Fees • Decision 103/2021 - Approval of Ten-Year Transmission System Development Plan 2021 - 2030 • Decision 115/2021 - Draft Regulating the Natural Gas Market (Natural Gas Quality Requirements) Regulations • Decision 136/2021 - Update of the Cross-Border Cost Allocation of the PCI No 3.10.2 Interconnection Between Kofinou (CY) and Korakia, Crete (EL) • Decision 163/2021 - Long-Term Annual Forecast of Maximum Total Electricity Capacity and Total Generated Electricity for the Decade 2021 - 2030 • Decision 165/2021 - Regulation 2019/941 - Establishment of a Risk-Preparedness Plan in the Electricity Sector • Decision 166/2021 - Call for Expression of Interest for the selection of a Supplier of Last Resort in the Cypriot Electricity Market for a two-year period • Decision 178/2021 - Submission of Allowed Revenue and Regulated Electricity Tariffs for 2022 • Decision 232/2021 - Fuel Clause Coefficients for the Adjustment of the Wholesale Tariff (T-W), Fuel Clause Coefficients and Basic Prices for the purchase of RES-generated energy for the period July - December 2021 • Decision 250/2021 - Regulatory Decision No. 01/2021 Statement of Regulatory Practice and Electricity Tariffs Methodology • Decision 278/2021 - Changes to the Transitory Regulations of the Electricity Market - Version 1.7 • Decision 294/2021 - Discount to Regulated Use of Transmission System and Electricity Distribution Tariffs for 2021 • Decision 295/2021 - Appointment of members of the Licensing Agency of Authorized Independent Producers and Consumers • Decision 301/2021 - Approval of amending version of the Ten-Year Transmission System Develop- ment Plan 2021 - 2030 • Decision 325/2021 - Approval of amending version of the Ten-Year Transmission System Develop- ment Plan 2021 - 2030 • Decision 326/2021 - Request by Paramount Energy Corporation Ltd for exemption from the provisions of the transmission and distribution rules • Decision 334/2021 - Approval of proposed amendments to the trading and settlement rules by the Transmission System Operator - Cyprus - Version 2.0.3 • Decision 365/2021 - Fuel Clause Coefficients for the Adjustment of the Wholesale Tariff (T-W), Fuel Clause Coefficients and Basic Tariffs for the purchase of RES-generated energy for the period January - June 2022 • Decision 373/2021 - Forms and Standard Terms of Exemption to holding a license
15 Annual Report 2021 • Decision 374/2021 - Approval of Transitory Regulation parameters for the Security Covers of the Electricity Market, Version 1.7 for 2022 • Decision 375/2021 - Approval of Transitory Regulation Parameters of the Electricity Market Version 1.7 for 2022 • Decision 376/2021 - Parameters set by the DSO for the Transitory Regulation of the Electricity Market for 2022 • Decision 383/2021 - CERA Reserve Fund Policy • Decision 386/2021 - Approval of Amendments proposed to the Transmission and Distribution Rules by the Transmission System Operator - Cyprus - Version 5.3.0 Electricity - Responsibilities and Powers of CERA • Ensures genuine competition in the Electricity Market, avoiding adverse discrimination and ultimately aiming at price reductions. • Protects the interests of the consumers. • Promotes the development of an economically viable and efficient electricity market. • Ensures adequacy in electricity supply for the satisfaction of all reasonable needs and demands for electricity. • Safeguards the continuity, quality, reliability and security of electricity supply. • Encourages the efficient use and generation of electricity. • Issues, controls, enforces, amends, and revokes licenses or grants exemptions from licenses. • It is a single point of contact for informing consumers. • Sets the rules or the procedures under which complaints are examined which relate to services offered by the licensees, including, where appropriate, the carrying out of investigations and decision-making for such complaints. • Carries out investigations either following the submission of a complaint or initiated by CERA ex officio. • Ensures that licensees operate efficiently and are in a position to finance the business activities for which the license has been issued. • Determines, publishes and imposes quality standards with which licensees have to comply. • Regulates tariffs, charges and other terms and conditions to be applied by licensees for any services provided pursuant to the terms of their licenses. • Promotes the development of regional markets within the Community so that they can operate competitively and properly in order to achieve security of supply. • Promotes the elimination of electricity trade restrictions among Member States, including developing appropriate cross-border transmission capacities to meet demand and enhances the integration of national markets. • Ensures that the Regulations governing the operation of electricity networks and the electricity market (Transmission and Distribution Rules and Trading and Settlement Rules) are prepared and approved in accordance with the Law.
16 Cyprus Energy Regulatory Authority • Imposes administrative fines in the event of violation of laws or regulations. • Ensures the implementation of the provisions of Regulation (EU) No. 1227/2011 of the European Parliament and of the Council of 25th October 2011 on wholesale energy market integrity and transparency. • Promotes Renewable Energy Sources (RES). • Promotes research and development in the energy sector. • Prepares and implements long-term planning regarding capacity for generation, transmission and distribution on a long-term basis, in order to meet the demand for electricity in the system and to secure supplies to customers which include security of supply, energy efficiency/demand-side management and achievement of environmental objectives and targets for energy from renewable sources. Natural Gas - Responsibilities and Powers of CERA • Promotes the development of an economically robust and efficient natural gas market. • Ensures the safety, continuity of supply, quality and efficiency in the supply of natural gas. • Monitors security of supply issues, and especially the balance of market supply/demand, the level of the expected future demand and the availability of supply, as well as the level of competition in the market. • Announces the measures that may be put into effect in case of an unforeseeable crisis in the energy market, or when the security of people, works, installations or the integrity of the networks are threatened. • Prepares and publishes Technical Rules determining the minimum standards of technical design and operation for the connection to the network of installations of Liquefied Natural Gas (LNG), storage installations, other transmission or distribution networks and direct natural gas pipes. • Takes appropriate and effective measures for control and transparency to avoid possible misuse of dominant position, especially to the detriment of consumers. • Protects the interests of end consumers. • Promotes the development of regional markets within the Union so that they can operate competitively and properly to achieve security of supply. • Promotes the elimination of natural gas trade restrictions among Member States, including the development of appropriate cross-border transmission capacities to meet demand and enhance the integration of national markets. • As the competent authority, it ensures the implementation of the measures safeguarding security of gas supply. • Resolves disputes on access to in-front-of pipeline networks, in connection with negotiations for access to the network. • It is a single point of contact for informing consumers. • Carries out investigations either following the submission of a complaint or initiated by CERA ex officio. • Imposes administrative fines in the event of violation of laws or regulations.
17 Annual Report 2021 • Sets the rules for the operation and distribution of the interconnection capacity, in consultation with the appropriate authorities of interconnected Member States. • Prepares and implements long-term planning regarding the planning of supply and transmission capacity of natural gas undertakings over the long term so as to satisfy the demand of the system for natural gas, achieve the diversification of sources, and ensure supply to the customers. Longterm planning includes the security of supply, energy efficiency/demand-side management and the achievement of energy-related environmental goals and targets from renewable sources. In addition to these specific responsibilities and powers, during the execution of its duties and the exercise of its responsibilities and powers, CERA can: • Take decisions in accordance with the provisions of the Law and the Regulations issued thereunder. • Take regulatory decisions to determine how it will regulate the electricity market and which licensees will be bound by such a regulatory decision. • Issue Regulations based on the Law. Actions to address the repercussions of the COVID-19 virus on the energy sector The COVID-19 pandemic triggered the change to the global medium-and long-term economies, given that it affects an ever-growing number of sectors. The way in which organizations and people use energy has already changed significantly due to the socio-economic impacts of the pandemic. The decommissioning of the economy resulted from the restrictive lockdowns that were implemented to stop the spread of the pandemic. Many European countries imposed lockdowns throughout 2021, while most countries implemented restrictive measures rather than total lockdowns. Restrictive measures usually resulted in the closing of stores, businesses, workplaces and schools and in many cases national restrictions of freedom of movement during the day. The Government of the Republic of Cyprus imposed a partial lockdown in 2021 which ran from 26 April to 9 May 2021. The pandemic-induced reduction in social and economic activity has affected all aspects of life, including the electricity sector. As expected, the gradual shift to remote working and learning resulted in lower electricity consumption in the commercial and public sector and an increase in the electricity consumption of households. The sudden and major decline in demand affected all the energy markets resulting in a drop in prices. Global data have drastically changed in 2021. The rapid increase that was observed is attributed to the easing of the pandemic restrictions, but mainly to the increase in the prices of natural gas and greenhouse gas emissions allowances (mainly CO2). The last two factors are also the main drivers of the continuous and unprecedented price surges that Europe faced until the end of 2021. In an effort to prevent the surge in electricity prices due to the increase in the prices of greenhouse gas emission allowances, Cyprus took a number of measures which positioned the electricity price for household consumers among the lowest prices in major European countries.
18 Cyprus Energy Regulatory Authority Figure 1 - Indicative electricity prices for household consumers in Europe in 20211 In June 2020, the Council of European Energy Regulators (CEER) created an Ad Hoc Working Group (COV WG) to assess the effects of the pandemic on the energy sector. In particular, the Working Group focuses on issues pertaining to the impact of the pandemic on consumption, electricity and natural gas prices, the effects on energy consumers, suppliers and network operators as well as the measures that were taken by governments, regulatory authorities and other stakeholders to contain the pandemic and address its effects. CERA had an active role in the Working Group as it closely monitors the developments and reactions of the other Member States in relation to the impact of the pandemic, but also assists in the provision of information on the effects of the pandemic at national level and the relevant actions and measures taken by CERA throughout 2021. As part of the work carried out by the COV WG Working Group in 2021, a report was prepared with all the national findings at European level and is based on data that was collected from 24 Member States in the period from 1 January 2020 to 30 June 20212. Furthermore, on 17 September 2021, a series of compensatory measures were announced by the Minister of Energy, Commerce and Industry (MECI) of Cyprus, which emerged from a consultation between the Ministries of Energy and Finance, CERA and the Electricity Authority of Cyprus (EAC). These measures include: • Absorption of part of the basic tariffs of electricity network charges by the EAC and a 10% reduction in consumer bills, for the bi-monthly periods of November - December 2021 and January - February 2022. 1 Source: https://ec.europa.eu/eurostat/databrowser/view/nrg_pc_204/default/bar?lang=en 2 https://www.ceer.eu/documents/104400/-/-/4c242433-bbba-cb27-ca23-74e6d60be22a
19 Annual Report 2021 • Differentiation of the Grant Scheme for the installation of photovoltaic systems by household consumers, including the virtual net-metering category, for consumers that are unable, due to technical constraints and/or limited space, to install photovoltaic systems on the rooftops of their buildings. This will allow both household consumers and agricultural holdings/activities to install photovoltaic systems on rooftops of other buildings or on the ground, whose electricity production will be offset against the consumption of that particular household. • The existing Scheme to encourage the use of renewable energy sources and energy savings in residences (for ceiling insulations, installation of photovoltaics or a combination of both), which expired on 20 December 2021, will be re-announced immediately following the approval of the budget of the RES and Energy Conservation Fund and will have a retroactive effect. • Immediate preparation of a Grant Scheme which will provide vulnerable consumers with a subsidy for the replacement of energy-intensive appliances with new, energy efficient products, in particular, air conditioners and refrigerators. In addition, vulnerable household consumers will be subsidized for replacing old type bulbs with LED bulbs. • Announcement of a special Support Scheme, in collaboration with the Ministries of Energy and Agriculture, Rural Development and Environment, for the use of RES in the agricultural sector. The main objective of the Scheme is to reduce the cost of pumping irrigation water. The Scheme will be announced in 2022. • Announcement of Grant Scheme and tender for new commercial RES systems and for energy storage, which can help reduce the price of electricity due to the lower operating cost of electricity generation than the corresponding production with conventional fuels. The Scheme is scheduled to be launched in 2022, subject to approval by the European Union. • Conduct an energy efficiency awareness campaign.
20 Cyprus Energy Regulatory Authority REGULATION OF THE ELECTRICITY & NATURAL GAS MARKETS LICENSING OF ACTIVITIES CERA Cyprus Energy Regulatory Authority Natural Gas Market (under configuration) Electricity Market Independent Supplier I Independent Supplier II Independent Supplier ... Supply - EAC Independent Producer I Independent Producer II Independent Producer ... GenerationFAC DSO-EAC OTS-EAC ODS-EAC TSO DSO LNGSO SSO TSO ODS OINGS OSS OTS Monopolistic Activities Independent Producers Independent Suppliers Competitive Activities Monopolistic Activities Supplier Potential Competitive Activity - Monopolistic during the period of validity of the derogations Licenced market participants from CERA Supervisory Body TSO Transmission System Operator DSO Distribution System Operator OTS Owner of Transmission Systems ODS Owner of Distribution System LNG Operator Liquefied Natural Gas System Operator SSO Storage System Operator LNG Owner Liquefied Natural Gas System Owner SS Owner Storage System Owner
21 Annual Report 2021 ADMINISTRATIVE ORGANIZATION CONSULTANTS LEGAL CONSULTANT Orphanides, Christofides & Co LLC Stelios Americanos & Co LLC ACCOUNTANTS Alliot Partellas Kiliaris Limited MEMBERS OF CERA CHAIRMAN Dr. Andreas Poullikkas Mechanical Engineer VICE-CHAIRMAN Philippos (Alkis) Philippou Business Administration MEMBER Neophytos (Akis) Hadjigeorgiou Electrical Engineer CONTACT INFORMATION CYPRUS ENERGY REGULATORY AUTHORITY 20 Agias Paraskevis Street 2002, Strovolos Nicosia P.O. Box. 24936 1305 Nicosia Telephone: +357 22 66 63 63 Fax: + 357 22 66 77 63 E-mail: regulator.cy@cera.org.cy Website: www.cera.org.cy
22 Cyprus Energy Regulatory Authority Energy Engineer Energy Engineer ORGANIZATION STRUCTURE OF CERA VICE CHAIRMAN CHAIRMAN MEMBER CERA Office Manager Internal Auditor • Total number of positions in CERA Office: 33 Positions Lawyer Financial Services Electricity Natural Gas International Relations and Energy Policy Legal Services Managerial Support Officer A' Financial Services Energy Engineer A' Energy Engineer A' Energy Engineer A' Senior Secretariat Officer Accountant Assistant Accounting Officer Energy Officer - I.T. Economist Administrative Officer Energy Engineer Energy Engineer Energy Engineer Energy Engineer Energy Engineer Energy Engineer Energy Engineer Energy Engineer Energy Engineer Lawyer Lawyer Secretariat Officer Assistant Secretariat Officer Assistant Secretariat Officer Assistant Secretariat Officer Assistant Secretariat Officer Office Assistant Office Assistant
23 Annual Report 2021 CERA OFFICE At the beginning of 2021, the CERA Office had 19 staff members which grew to 31 by the end of the year. On 1st March 2021, CERA filled 7 first-appointment positions (5 Energy Engineer positions, 1 Legal Advisor position, 1 Accountant position) after completing the candidate selection procedure which had started with the announcement of these positions on 6 September 2019. On 1st September 2021, CERA filled another 6 first-appointment positions (3 Energy Engineer positions, 1 Internal Auditor position and 2 Secretariat Officer positions). On 4 October 2021, 1 Administrative Officer position was filled. The above 7 positions were filled after completion of the candidate selection procedure which had started with the announcement of these positions on 22 May 2020. The delay in filling the above positions is due to the measures that had been taken to restrict the spread of the COVID-19 virus. In CERA's Budget for 2021 1 Economist position was approved, who will be responsible for the tariffs. CERA's Top Management is pending approval of its requests for the unfreezing of this position so that it can move forward with its announcement. Until the Economist position is filled, CERA will proceed with consulting services contracts to perform its duties in accordance with the relevant legislation and the protection of consumers. In order to fulfill its legal duties and responsibilities as an independent authority, pursuant to the obligations that are imposed by national and European legislation, under the supervision of the electricity and natural gas markets, and the protection of consumers, CERA will request the approval of new positions in its coming Budgets. TRAINING Figure 2 shows the training of the CERA Office staff by field of activity during 2021. Due to the measures taken to contain the spread of the COVID-19 virus, participation in educational programs in 2021 was significantly reduced compared to previous years. All training was conducted online. Figure 2 - CERA Office staff Training 2021 NATURAL GAS MARKET 32% ELECTRICITY MARKET 32% ADMINISTRATION 36%
24 Cyprus Energy Regulatory Authority
25 Annual Report 2021 National Legislative Regulations The following section presents the Laws and Regulations that have been amended, the bills that are under discussion, CERA's most important Regulatory Decisions and Decisions as well as the developments in the Trading and Settlement Rules and the Transmission and Distribution Rules. Laws and Regulations Law Regulating the Electricity Market of 2021 L.130(l)/2021 On 7 October 2021, the House of Representatives passed the Law Regulating the Electricity Market of 2021 L.130(l)/2021 which repeals the Laws Regulating the Electricity Market of 2003 to 2018. The Electricity Law was passed for the purposes of harmonization with Directive (EU) 2019/944 on common rules for the internal market in electricity, partial harmonization with Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources, and Directive 2012/27/EU on energy efficiency, effective implementation of Regulation (EU) No. 1227/2011 on wholesale market integrity and transparency, and more effective implementation of Regulation (EU) No. 347/2013 on guidelines for trans-European energy infrastructure, Regulation (EU) No. 2019/943 on the internal market for electricity, and Regulation (EU) No. 2017/1485, on the establishment of guidelines on electricity transmission system operation. The Electricity Law provides for the regulation of the electricity market in the Republic of Cyprus, by establishing common rules concerning the generation, transmission, distribution, storage and supply of electricity, as well as the protection of consumers, with a view to creating truly integrated, competitive, consumer-focused, flexible, fair and transparent electricity markets in the EU. By taking advantage of the benefits of an integrated market, among other things, it aims to ensure affordable, transparent prices and energy costs for consumers, a high degree of security of supply and a smooth transition to a lower-carbon energy emission system. It lays down basic rules for the organization and operation of the electricity sector, in particular position strengthening and consumer protection rules, for open access to the integrated market and for third party access to transmission and distribution infrastructure. Lastly, it ensures that electricity companies operate aimed at achieving a competitive, secure, and environmentally sustainable electricity market, without being discriminated in terms of their rights or obligations. LEGISLATIVE REGULATIONS AND CERA DECISIONS
26 Cyprus Energy Regulatory Authority The Electricity Law provides, among other things, for: • the introduction of a new licensing regime for production, transmission, distribution, supply, and storage of electricity as well as the operation of the market and the interconnection with electricity systems, • the establishment of the Transmission System Operator - Cyprus (TSOC), • the establishment of a framework for arrangements between the Owner of Transmission System and TSOC, • the establishment of a framework for arrangements between TSOC and the Distribution System Operator (DSO), • the regulation of a framework for arrangements between the Interconnector Owner and TSOC; between the Interconnector Owner and the Interconnector Operator; between the Interconnector Operator and TSOC; between the Interconnector Operator and neighboring Transmission System Operators, and between TSOC and neighboring Transmission System Operators, • the regulation of access to the transmission system and to the distribution system, • the introduction of Public Service Obligations, • the regulation of issues pertaining to the protection of the consumer in relation to the electricity market, and • the regulation of issues related to the protection of vulnerable customers and energy poverty. Laws Regulating the Natural Gas Market of 2004 to 2021 Laws Regulating the Natural Gas Market of 2004 to 2021 were passed for harmonization with Directive 2003/55/EC concerning common rules for the internal market in natural gas. On 7 October 2021, the House of Representatives passed the (Amending) Law Regulating the Natural Gas Market of 2021. The Laws Regulating the Natural Gas Market of 2004 to 2021 provide for the regulation of the natural gas market in the Republic and among other things establishes the rules pertaining to the transmission, distribution, supply, and storage of natural gas and determines the rules regarding the organization and operation of the natural gas sector, access to the market, the operation of the networks, and the criteria and procedures for the granting of licenses for the transmission, distribution, supply, and storage of natural gas. The rules that are established with the Laws Regulating the Natural Gas Market of 2004 to 2021 for natural gas, including LNG, shall also apply in a non-discriminatory way to biogas and gas from biomass or other types of gas in so far as such gases can technically and safely be injected into, and transported through, the natural gas system. Law for the Establishment and Operation of the Cyprus Energy Regulatory Authority of 2021 On 7 October 2021, the House of Representatives passed the Law for the Establishment and Operation of the Cyprus Energy Regulatory Authority of 2021, L.129(I)/2021, for harmonization with Article 57 of Directive (EU) 2019/944 on common rules for the internal market for electricity and Article 39 of Directive 2009/73/EC concerning common rules for the internal market in natural gas. The Law for the Establishment and Operation of the Cyprus Energy Regulatory Authority of 2021 provides for the establishment and operation of the regulatory authority at national level, pursuant to the provisions of Directive (EU) 2019/944 and Directive (EU) 2009/73/EC, with the ability to decide on
27 Annual Report 2021 any relevant regulatory issue in order for the internal electricity and natural gas markets to operate properly in accordance with the above Directives and to be fully independent from any other public or private interest. Draft bill entitled "Law on the Promotion and Encouragement of the Use of Renewable Energy Sources of 2021" The preliminary draft bill was prepared for the partial harmonization of national legislation with "Directive (EU) 2018/2001 of the European Parliament and of the Council of 11th December 2018 on the promotion of the use of energy from renewable sources". The proposed Law will replace the "Laws on the Promotion and Encouragement of the Use of Renewable Energy Sources of 2013 to 2018". From 10 February 2021 until 10 March 2021, the MECI conducted a public consultation on the draft bill entitled "Law on the Promotion and Encouragement of the Use of Renewable Energy Sources of 2021" and its results have been announced. Code of Public Governance CERA has adopted the Code of Public Governance as this had been approved by the Council of Ministers, under Decision no. 87,869 dated 25 July 2019, for implementation by Government Organizations and Government Enterprises. CERA has also issued a Guide on the implementation of the Code of Public Governance, which shows how CERA conforms with the Code of Public Governance. With the adoption of the Code of Public Governance, CERA has defined a clear set of values regarding the way in which it conducts its activities. CERA's Top Management and office staff, represent these values and operate on their basis when carrying out their activities and during their contact the various stakeholders. The members of the Top Management of CERA support the implementation of the Code of Public Governance and evaluate its effective implementation since it is a useful tool for controlling the effectiveness of governance and encourages the achievement of better results via accountability and transparency. In addition, CERA has defined and published its Mission, Vision and Values on its website, as follows: Mission CERA's mission concerns the regulation of the electricity market in the Republic, the establishment of rules concerning the generation, transmission, distribution, storage and supply of electricity, as well as the creation of integrated, competitive, consumer-focused, flexible, fair and transparent electricity markets in Cyprus to ensure affordable and transparent prices as well as energy cost for the purpose of protecting consumers. In addition, CERA's mission concerns the regulation of the natural gas market in the Republic, the establishment of rules pertaining to the transmission, distribution, supply, and storage of natural gas and the determination of rules regarding the organization and operation of the natural gas sector, access to the market, the operation of the networks, and the criteria and procedures for the granting of licenses for the transmission, distribution, supply, and storage of natural gas.
28 Cyprus Energy Regulatory Authority In particular, the Law Regulating the Electricity Market of 2021 (L.130(l)/2021) and the Laws Regulating the Natural Gas Market of 2004 to 2021 (L.183(Ι) 2004), set the framework of rules and principles for achieving the mission of CERA, whose main objective is to ensure the smooth operation of the energy market in Cyprus, the protection of consumers, and the protection of the environment. Vision CERA's vision is to regulate the electricity and natural gas markets in the Republic, to ensure a high degree of security, quality, and supply of electricity and natural gas, to protect the interests of consumers, to contribute to environmental protection and to promote research and development in the energy sector. Values During the performance of their duties, CERA's Top Management and office staff adopt values based on the General Principles of the Administrative Law of 1999, L.158(I)/1999 as follows: • Transparency • Impartiality • Protection against conflicts of interest • Ensuring equality and fairness • Protection of the right to be heard • Proportionality principle (all measures taken must be proportionate to the purpose they serve) • Principle of good faith • Reasonability for the decisions taken • Perform duties and responsibilities within a reasonable period of time Regulatory Decisions, Draft Regulatory Decisions and important CERA Decisions in 2021 During 2021, CERA took Regulatory Decisions and other Decisions of which the most important are the following: REGULATORY DECISIONS AND DRAFT REGULATORY DECISIONS Regulatory Decision 01/2021 (KDP 359/2021), regarding the Statement of Regulatory Practice and Electricity Tariffs Methodology By Regulatory Decision 01/2021, CERA estimated that with the implementation the Trading and Settlement Rules, Version 2.0.0 and the new electricity market, a Statement of Regulatory Practice and Electricity Tariffs Methodology needs to be in force which will fall in line with the new Trading and Settlement Rules, and after assessing all the comments from the Public Consultation, it issued Regulatory Decision No. 01/2021 "Statement of Regulatory Practice and Electricity Tariffs Methodology" (KDP 359/2021). Regulatory Decision 01/2021 was published in the Official Government Gazette on 13 August 2021.
29 Annual Report 2021 Regulatory Decision 02/2021 (KDP 523/2021) regarding the Regulatory Framework for the Granting of General License By Regulatory Decision 02/2021 (KDP 523/2021), CERA determined the regulatory framework for the granting of a General License, the General License Notification Form, the DSO terms of mandate for connection to the distribution network following mere notification, the General License terms, the notification fees and annual fees, the Details Change Form and the General License termination form Regulatory Decision 02/2021 was published in the Official Government Gazette on 17 December 2021. Draft Regulatory Decision "Determination of general principles and guidelines for connection charges to the transmission and distribution systems" On 13 August 2021, CERA announced that it published the Draft Regulatory Decision entitled "Determination of general principles and guidelines for connection charges to the transmission and distribution systems" in the Official Gazette of the Republic of Cyprus and notified licensees, license applicants or other interested parties that they can submit their written comments, objections and/or presentation of the draft Regulatory Decision to CERA. The draft Regulatory Decision concerns the determination of General Principles and Guidelines for connection charges to the Transmission and Distribution Systems to the competent Transmission System and Distribution System Operators, for preparation of the charge policy for connection to the Transmission System and Distribution System. The general principles and guidelines for the preparation of the charge policy which are determined in the draft Regulatory Decision take into account that the charge policy for connection to the transmission and distribution systems depend on various parameters and are determined according to the connection's voltage level, the type of network user (e.g., consumer, producer or self-producer) or even the user category (e.g. household, commercial or industrial consumer, etc.), particularly for the Distribution system, by following the growth potential of the system and the market while resolving any new issues that arise. CERA has published the General Table which includes fifty-six (56) comments. The comments regarding the draft Regulatory Decision during the public consultation are being processed and the results will be published early 2022. Draft Regulatory Decision "Provision of guidance for the preparation of the Transmission System and Distribution System connection process" On 13 August 2021, CERA announced that it published the Draft Regulatory Decision entitled "Provision of guidance for the preparation of the Transmission System and Distribution System connection process" in the Official Gazette of the Republic of Cyprus and notified licensees, license applicants or other interested parties that they can submit their written comments, objections and/or presentation of the draft Regulatory Decision to CERA. The draft Regulatory Decision concerns the provision of guidance for the preparation of the transmission system and distribution system connection process by the competent Operators. Pursuant to the draft Regulatory Decision, CERA decided to set guidelines for the preparation: • of the "Distribution System Connection Process" by the DSO, and • the "Transmission System Connection Process" by the TSOC,
30 Cyprus Energy Regulatory Authority which sets out the necessary procedures, the submitted applications, the necessary information, and every detail regarding the connection of a new user to the Transmission/Distribution System or the amending connection of an existing user, as well as other relevant details and information for the preparation of the relevant Connection and Use Contract, and such contract templates for every user type. CERA has published the General Table which include thirty-nine (39) comments. The comments regarding the draft Regulatory Decision during the public consultation are being processed and the results will be published early 2022. Draft Regulatory Decision "on the Establishment of Basic Principles for the Formulation of the Ten-Year Distribution System Development Plan" On 23 December 2021, CERA published the Draft Regulatory Decision entitled "on the Establishment of Basic Principles for the Formulation of the Ten-Year Distribution System Development Plan" in the Official Gazette of the Republic of Cyprus and notified licensees, license applicants or other interested parties that they can submit their written comments, objections and/or presentation of the draft Regulatory Decision to CERA. Pursuant to the draft Regulatory Decision, CERA decided to set basic principles for the formulation of the Ten-Year Distribution System Development Plan. For the continuous updating of all licensees, license applicants, and any other interested parties, in the context of complete transparency in view of the imminent operation of the competitive electricity market in Cyprus, the draft Regulatory Decisions provides for the inclusion of the following criteria in addition to the provisions of the Law: • The distinction of projects that are included in the Ten-Year Distribution System Development Plan into support and expansion projects aimed at separating the projects that are deemed necessary for improving the operation of the Distribution System (support projects) and projects that are required for the connection of users to the system (Producers, Medium and Low Voltage Customers). • The inclusion of Distribution system modernization projects • The inclusion of projects that aim at improving energy quality and reducing Distribution System energy losses. • The inclusion of projects that aim at better serving Distribution System Users. • The total estimated cash flows of all distribution projects. • Detailed time schedule for the implementation of the distribution projects. The draft Regulatory Decision also determines that within six months prior to the end of each twoyear period (starting by December 2022 at the latest), the DSO shall submit the proposed Ten-Year Distribution System Development Plan for the decade starting in January of the coming year to CERA for approval. The validity of the Ten-Year Distribution System Development Plan starts from the date it receives approval from CERA. Upon completion of the public consultation in January 2022, CERA will publish the General Table with all the comments that have been submitted and will then process the comments and the results will be published. Draft Regulatory Decision "on the Establishment of Basic Principles for the Formulation of the Ten-Year Transmission System Development Plan" On 23 December 2021, CERA published the Draft Regulatory Decision entitled "on the Establishment of Basic Principles for the Formulation of the Ten-Year Transmission System Development Plan" in
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