The Law on the Regulation of the Electricity Market 2003 (Law no. 122(I)/2003 - hereinafter “the Law”), lays down the applicable legal framework for the regulation of the Electricity Market in Cyprus. The legislation has recently undergone reform via the amending law no. 211(I)/2012 resulting to certain modifications, especially on the front of enhanced consumer protection and striking a fair balance for the vulnerable fractions of society.
The Law establishes the Cyprus Energy Regulatory Authority (“C.E.R.A.”) as the supervisory body for the smooth implementation of the Law and the regulation of the market. The Law also provides for the creation of a Transmission System Operator (TSO), the introduction of obligations of public utility, it shall regulate matters relevant to the protection of consumers and must ensure the production of sufficient energy for the satisfaction of all reasonable needs for electricity while safeguarding the stability and security of the system. This Law harmonizes local legislation with EU Directive 96/92/EC.
The Republic of Cyprus, an EU Member State, is a small isolated energy system with no interconnection links to other countries. Cyprus operates on a system that is largely dependent on heavy fuel for most of its energy consumption. In 2011, Cyprus confirmed significant offshore reserves of approximately seven trillion cubic feet of natural gas. These reserves found in Cyprus’s Exclusive Economic Zone (EEZ) gave rise to an ambitious energy strategy but also brought to a halt the plans for importation of liquefied natural gas (LNG) in Cyprus via a re-gasification unit set in the Vassiliko area. A dominant outlook at present is for Cyprus to export natural gas to Europe via an offshore subsea pipeline passing from Crete to the rest of Greece, connecting Cyprus’ natural gas to the rest of the existing pipelines. Interestingly, the prevailing options for storage of natural gas in Cyprus are: the installation of a Floating Storage and Re-gasification Unit (FSRU); natural gas pipeline installation for transporting Israel’s natural gas; importation of natural gas in the form of Compressed Natural Gas (CNG) and the construction of a small scale re-gasification unit. It remains to be seen which of the above, if any, will materialize with respect to Cyprus. At the moment none of Cyprus’s energy requirements are met using natural gas. Current energy requirements of the country regarding electricity generation and final energy consumption are met primarily by using heavy fuel. It is expected that the introduction of the Cypriot natural gas in the local market will minimize or eliminate heavy fuel imports for energy consumption. The proposed export plans of natural gas from Cyprus primarily relate to LNG. Due to the unsustainable morphology surrounding the Eastern Mediterranean the feasibility of a project involving the development of an offshore natural gas pipeline is an aspect that must be taken into full account, particularly in light of the complexities involved. The proposed plan for exporting LNG is the onshore transport of gas via a small pipeline based on the Vassilikos LNG facilities, which upon liquidation shall be exported via LNG tankers.
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:
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.