10-12-2012

Electricity In Cyprus

Authors

  • Andrew Demetriou, Attorney at law
    Partner at Ioannides Demetriou LLC

Cyprus is in the course of transposing the provisions of the 3rd Energy Package into Cyprus Law by way of a series of amendments in the prevailing legislation. As at the time of writing (November 2012) these are in the course of passing through the House of Representatives. The primary legislative provisions in the electricity sector are the following:

CAP. 170 – The Electricity Law

The Electricity Law, Cap. 170 of the Laws of Cyprus, lays down a basic framework for owners of electricity undertakings in Cyprus. Currently, there is in reality only one electricity undertaking in Cyprus. This is the Electricity Authority of Cyprus (EAC) which is the incumbent electricity generator.

CAP. 171 – The Electricity Development Law

The EAC was established in 1952 and is a public law corporation. It was established by the Electricity Development Law, Cap. 171 of the Laws of Cyprus. The EAC has legal personality and can sue and be sued in its own name. It is run by a 9-person board which is known as the Authority and its Chief Executive Officer is the General Manager. The EAC is wholly owned by the state and is deemed to be an administrative organisation for the purposes of administrative law. Therefore, its decisions are subject to administrative recourse before the Supreme Court of Cyprus. The Authority is appointed by the Council of Ministers of Cyprus and the General Manages, although selected and appointed by the Authority, is only formally appointed after his appointment has been approved by the Council of Ministers. Cap. 171 regulates the relationship between the EAC, the state and the consumers and is the second major piece of legislation governing the electricity sector in Cyprus.

The Regulation of the Electricity Market Law – Law 122(I)/2003

The key piece of legislation in the electricity sector is, however, the Regulation of the Electricity market Law, Law 122(I)/2003. This legislative provision brought the Cyprus electricity market into line with the prevailing EU legislation in time for the accession of the Republic of Cyprus into the EU, which took place on 1.1.2004. Law 122(I)/2003 has established significant authorities and procedures in the electricity market of Cyprus.

The Cyprus Electricity Regulatory Authority (CERA)

The key introduction brought about by law 122(I)/2003 is the introduction of CERA. Under the law 122(I)/2003, CERA has the responsibility for the sufficiency, quality and safety of electricity in Cyprus. CERA is responsible for the licencing of all generators of power, irrespective of the source or the type of generation. In addition to the above general obligations of CERA, CERA has specific responsibility for the following:

  • fixing of tariffs;
  • monitoring generators of electricity;
  • monitoring the electricity market to ensure free access, transparency and consumer protection;
  • approving network and market codes;
  • issuing directives, advice to the Minister (Minister of Commerce, Industry and Tourism) and secondary legislation;
  • handling complaints of infringements;
  • reporting on the state of the Cyprus electricity market to the European Commission;
  • approving the establishment of the TSO and the transmission and distribution codes as prepared by the TSO (see below);
  • regulating public service obligations;
  • the encouragement of the use of renewable energy sources;

CERA is a three-man authority appointed by the Council of Ministers with legal personality to sue and be sued in its own name. Law 122(I)/2003 provides that CERA is an independent authority and is not under the control of any Ministry.

Transmission Systems Operator (TSO)

Under the same Law 122(I)/2003, a TSO was also established. The TSO regulates the following matters:

  • the codes for transmission and distribution;
  • access to the Cyprus electricity grid;
  • maintenance and development of the grid.

It should be noted that Cyprus has the characteristics of a small and isolated market in terms of transmission and distribution with no interconnections with the grids of any other country. The TSO is an independent authority which operates within the EAC in so far as all the staff of the TSO is provided to the TSO by EAC. The transmission and distribution grid is owned by the EAC. However, the methodology of connection and access to the grid is now within the authority of the TSO. The TSO also directs EAC in connection with the development and maintenance of the grid.

The licencing Procedure for the Operation of Power Generation Facilities

Under Section 34 of Law 122(I)/2003, CERA is responsible for the licencing of all power generation facilities as well as for the licencing of the supply of electricity to both select and non-select customers. Under section 35 of the Law, CERA is authorized to grant exemptions from the licencing procedures for certain generation activities, namely:

  • self-generation of electricity;
  • the supply of electricity up to 0.02MW;
  • the production of electricity from Renewable Energy Sources (RES) of up to 0.5MW per station.

It should also be noted that the granting of any of the above licences and exemptions by CERA does not relieve a power generator from the obligations of acquiring licences or permits as required under the provisions of other Laws such as construction and building licences, grid connection permit granted by the TSO and, in the case of RES, the requirement to apply and be approved for the subsidy.

Renewable Energy

Cyprus is committed to meeting the EU target of 13% of electricity from RES by 2020 and hopes to exceed the target by three percentage points, i.e. 16% of final energy consumption to be derived from RES. It has therefore embarked on an active programme for the encouragement of the use of RES. The relevant legislation is the Law for the Promotion and Encouragement of the Use of Renewable Energy Sources, Law 33(I)/2003. This law provides for the provision of a subsidy for encouragement of power generation from RES from a subsidy fund which is guaranteed by the Republic of Cyprus. The renewable energy sources recognized by the said Law are:

  • wind;
  • solar;
  • geothermal;
  • wave energy;
  • tidal energy;
  • hydraulic energy;
  • biomass
  • biogas.

The Cyprus RES legislation is compliant with Directive 2001/77/EC.

Third Party Access

The Regulation of the Electricity Market Law, Law 122(I)/2003, provides for the granting of full third party access to the Transmission and Distribution System which is the property of the EAC but is regulated and administered in terms of access by the TSO. Under the above Law, EAC, as the owner of the transmission and distribution system, is obligated to develop and maintain the system in accordance with the programme set by the TSO.

Public Service Obligations

Law 122(I)/2003 provides that EAC has a public service obligation as follows:

  • the securing of the provision of electricity;
  • the regularity of the quality and price of the supply of electricity;
  • the protection of the environment;
  • the use of local sources of energy.
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