The cost of electricity affects the entire economy, while the Electricity Authority of Cyprus (EAC) still buys the most expensive crude oil on the market – Mazut, according to the Auditor General’s latest report.
The auditor-general’s office carried out an exhaustive survey of the authority’s purchasing practices, and found that it could be much more efficient when it comes to ordering and tendering for international oil contracts. The main points made by Odysseas Michaelides is that there is a lot to be desired in the EAC’s practices. In addition, the authority should be investing in more renewable energy sources.
The oil contracts are ordered via un-named intermediaries which buy fuel on the EAC’s behalf, according to the report. The EAC is supplied by international companies like Royal Dutch Shell, BP and ENI, but the authority doesn’t have the specialised financial know-how to carry out hedging practices on their contracts, says the auditor-general. This exposes the authority to unexpected price fluctuations which are passed onto unsuspecting consumers, many of whom actually have to go into debt to cover the EAC’s mistakes and lack of foresight.
The auditor-general’s report is unexpectedly mild, it encourages thoughtful consideration and adjustment of practices that have been entrenched for many years, while shedding a lot of light on purchasing practices. Unfortunately it doesn’t go far enough to criticise the authority for failing to switch to cheaper and cleaner natural gas. This is understandable given the fact that revenues from the EAC help immeasurably to keep the state system in the money. But you can’t break consumers’ budgets with high electricity bills and then expect spending in other areas of the economy like retail, housing, jobs, investment and so forth.