(Commonwealth_Europe) The Greek energy regulatory authority, RAE, is reportedly set to approve, on its own, the full €48.8 million cost recovery claim put forward by the grid operator IPTO for the EuroAsia Interconnector project. This decision comes despite a prior joint agreement with Cyprus’s energy regulator, CERA, which had rejected €36 million of the total claim. If RAE proceeds with this unilateral approval, it could signal a departure from the long-standing tradition of collaboration between the two regulators on cross-border cost allocations (CBCA), especially given the high degree of coordination typically required for decisions involving multinational energy projects.
The energy sector is taking notice of this move due to its potential to significantly alter the regulatory landscape. CERA had rejected the €36 million amount in question because it covered costs not directly related to the current EuroAsia Interconnector project, specifically expenses tied to the Cyprus-Israel and Crete-Athens sections, which are not part of the project’s current phase. It also included IPTO’s premium payment for acquiring the project and the €657 million European Union (EU) grant that was used for project financing. CERA’s stance was that these costs were not directly associated with the implementation of the interconnector itself, raising concerns about their eligibility for reimbursement under the CBCA framework.
Should RAE approve the entire claim, Greek consumers may have to bear the full €36.8 million portion that CERA rejected, unless the Cypriot regulator reconsiders its stance in response to pressure. The dispute highlights the intricate nature of international energy projects, where multiple stakeholders and national regulators must carefully negotiate the allocation of costs and benefits.
Another key point of contention revolves around the EuroAsia Interconnector’s financing and the role of Cyprus in securing funding. IPTO has raised concerns regarding Cyprus’s reluctance to invest in the Great Sea Interconnector, a crucial component of the project, prior to the completion of a due diligence review by a U.S. firm. IPTO fears it will struggle to secure additional investors without Cyprus’s participation, potentially relying on high-interest loans from Greek and foreign financial institutions to cover the project’s costs. If the European Investment Bank (EIB) delays approving a €500 million low-interest loan crucial to the project’s financing, it could further exacerbate the situation.
In a further development, IPTO has filed appeals with both Greece’s Council of State and Cyprus’s courts, challenging a specific provision of the CBCA. IPTO or its contractors must pay compensation if the project fails due to their fault. The grid operator has raised objections to the compensation clause, particularly regarding the undefined potential benefits that consumers could lose if the project failed due to the company’s fault. IPTO argues that the terms of this provision are too vague and could impose disproportionate financial burdens on the operator, especially in a situation where failure might not be directly within their control.
The situation is increasingly fraught with tension, as both regulatory and financial challenges threaten the progress of the EuroAsia Interconnector project, which is a key component of Europe’s energy strategy to enhance electricity transmission between Greece, Cyprus, Israel, and beyond. The outcome of the ongoing disputes between RAE, CERA, and IPTO could have significant implications for the future of the project, as well as for broader energy policy and investment strategies in the region. Unresolved regulatory differences and uncertain financing could delay or even derail a project considered essential for energy security and regional cooperation in the Eastern Mediterranean.
