EF

 
The Electricity Law

The Electricity Law, first enacted in 1941 (Cap. 170) and the Electricity Development Law, first enacted in 1952 (Cap. 171) govern the electricity sector.
The Electricity Law of Cyprus provides that the Council of Ministers has the power to grant orders to any municipality, company or person to supply or generate, transform, transmit, distribute or sell electricity for public and private purposes within a defined area.
The Electricity Development Law of Cyprus (art. 3) provides for:
 

• the establishment of the Electricity Authority of Cyprus (EAC),

• the generation supply and distribution of electricity,
   

• the acquisition by this Authority of electricity undertakings, and

• the regulation of the supply of electricity throughout Cyprus, excluding any area of supply within which another authorised undertaker is operating (art. 13, par. 1)

EAC is an independent, non-profit making semi-government corporation. This definition is used in Cyprus for corporations which are independent and which were established in accordance with the relevant Law, in order to render services in the public utility field. The Government, through the Minister of Commerce, Industry and Tourism, is empowered to give to the Authority directions on policy issues appertaining to the general interest of Cyprus. The Authority advises the Government through the Minister of Commerce, Industry and Tourism, on all matters connected with the generation, transmission, distribution and use of electric energy. EAC is governed by a Board of Directors of 9 persons appointed by the Council of Ministers (N. 149/88).
Although under existing legislation it is possible for other enterprises to be granted licenses for the generation, transmission and distribution of electricity, EAC is the sole operator in the sector.
According to article 44 of the Electricity Development Law, EAC may, with the approval of the Council of Ministers make regulations concerning electricity tariffs. Tariff rates have to be approved by the House of Representatives. There are appropriate tariffs for domestic, commercial, industrial, water pumping and street lighting consumers. At present tariffs are re-examined in order to introduce marginal costing principles and bring them in line with EU Directives.
In conformity with the provisions of the EU Directive 96/92 on the Internal Electricity Market, at least 33% of the electricity market tin Cyprus shall be opened for competition by the date of accession to the European Union. For this purpose, eligible customers shall be designated on a consumption basis, including auto-production. These customers will be the largest in terms of total annual consumption of energy. For the previously mentioned market opening of 33%, the initial size threshold is likely to be annual consumption (on per site or per meter basis) of 500 MWh, which equals to around 440 customers currently. In the longer term changes (i.e. reductions) in the minimum size for eligibility may be considered.
At the moment, there are no plans to privatise EAC.
According to article 12 of the Electricity Development Law the general functions of EAC include:

• Generate electricity and maintain any Authority installation

• Secure the supply of electricity at reasonable prices

• Promote and encourage the use of electricity

• Promote and encourage the development of the natural resources of Cyprus in connection with the generation of electricity

• Make regulations in accordance with the provisions of the Electricity Development Law

• Advise the Minister on all matters relating to the generation, transmission, distribution and use of electricity, and the future expansion of the electricity system of the Republic

• Planning for the future development of the power system of the country. The plan must have the approval of the Minister of Commerce, Industry and Tourism
   

On the other hand the Government, through the Minister of Commerce, Industry and Tourism, is empowered to give directives to the EAC on matters pertaining to the general interest of the Republic.
Self-generation and generation of electricity from renewable energy, to cover part or all of the own consumption and subsequent sale of surplus to the EAC grids is possible for interested parties. The Minister will grand the orders, with the consent of EAC in this case. No permission is given to sell power to other parties.
In an attempt to attract foreign investments, the Government has further relaxed the rules and regulations applicable to inward investment. In the majority of cases administrative procedures have been simplified and foreign participation of up to 100 percent is allowed.
Since January 2000, the Central Bank of Cyprus has abolished all exchange control restrictions applicable to direct and portfolio investments in Cyprus by natural or legal persons for the EU member states, except banking.
In case of Energy Services, foreign participation of up to 100% may be permitted. Applications are assessed and approved by the Central bank and the permits are notified to the competent Ministry. Applications concerning the provision of public utility services covered by specific legislation such as the generation and distribution of electricity are rejected outright by the Central bank.

Energy market liberalization

New investment opportunities are expected to be created as a result of the liberalization of the electricity market in accordance of the EU Directive 96/92. The establishment of the internal market in electricity is expected to increase efficiency in the generation (as well as in transmission and distribution of electricity) in the country.
Cyprus will implement the Directive on the internal electricity market by the date of accession. The model to be adopted for implementing the acquis will have the following characteristics:
Cyprus will designate an Independent regulator who will be responsible for the monitoring of the proper functioning of the market according to the principles of competition. It is noted that the regulator will not be a Government Department nor will be related to the Electricity Authority of Cyprus.
For the construction of new generating capacity the authorization procedure will be adopted in accordance with objective, transparent and non-discriminatory criteria.
In view of the small size and isolated nature of its electricity sector and having regard to considerations of efficiency and economic balance, Cyprus intends to designate a common system operator for both the transmission and distribution systems.
The Transmission / Distribution System Operator will be independent, at least in management terms, from the activities of generation and supply.