The Audit Office of Cyprus is proceeding with an in-depth investigation into the factors that led to the increased cost of electricity, examining cumulatively regulatory decisions, administrative omissions, and the operation of the transitional electricity market. At the centre of the probe are the Cyprus Energy Regulatory Authority (CERA), the Electricity Authority of Cyprus (EAC), as well as the role of private producers and suppliers.

According to Brief, the Audit Office is initially focusing on the period 2011–2020, which is described as a “lost decade” for Renewable Energy Sources (RES). During this time, the EAC failed to implement the national target for the installation of 130MW from RES, resulting in the energy system remaining dependent on oil and conventional power generation units.

The investigation is expected to document CERA’s restrictive policy on EAC participation in large-scale RES projects between 2013 and 2019, justified primarily on the grounds of protecting competition. These decisions were aligned with the government policy direction of the time and EU directives on market liberalisation. The Audit Office is also examining whether this approach was applied without sufficient consideration of the specific characteristics of the Cypriot market, which for a prolonged period did not operate under full competitive conditions.

Decisions that suspended or delayed the approval of large photovoltaic projects by the EAC are also under scrutiny, particularly where they were not accompanied by an alternative fast-track RES development plan, thereby keeping the country dependent on high-cost fuels.

At the same time, the Audit Office is examining the internal decisions of the EAC, assessing evidence suggesting that mature and well-documented proposals for large RES projects were not submitted in a timely manner, delays occurred in licensing procedures and land acquisition, a coherent green transition strategy was not developed, and reliance continued on outdated generation units, such as those at Dhekelia.

The Audit Office is also investigating decisions taken by Boards of Directors and senior management, to determine whether there was inaction or misjudgement of the future impact of emissions-related costs.

A key element of the investigation concerns the cost of carbon dioxide emission allowances. According to data included in the Audit Office’s file, more than €570 million was paid for emissions rights during the five-year period 2018–2022. This cost was incorporated into electricity tariffs, placing an additional burden on households and businesses.

The Audit Office is examining whether the insufficient penetration of renewable energy made this burden unavoidable and whether it could have been mitigated through timely investments.

Particular emphasis is being placed on the operation of the transitional electricity market. The investigation is exploring whether delays by the EAC in RES development, combined with the absence of a fully competitive market, created conditions that benefited a limited number of private producers.

According to available information, indications of coordinated behaviour among private interests are being examined, aimed at maintaining prices at elevated levels. The Audit Office does not rule out the possibility that an informal “cartel” emerged, using the EAC’s high production costs—stemming from oil dependency and emissions charges—as a benchmark for price-setting.

In this context, the investigation is assessing whether there was insufficient oversight of private-sector behaviour, whether the transitional regulatory framework operated in favour of specific interests, and whether supervisory gaps existed within the competent authorities.

From 2023 onwards, a shift in regulatory policy has been recorded, with CERA approving the participation of the EAC in RES projects.

The Audit Office’s report is expected to link specific decisions and omissions to the increased cost of electricity, potentially paving the way for the attribution of responsibilities at both institutional and administrative levels.