The Cyprus Electricity Authority (EAC) has submitted new rate hike proposals to the Cyprus Energy Regulatory Authority (CERA) for examination. These proposed increases are significantly lower compared to last year's request, as mentioned by Andreas Poulikkas, the President of CERA, during the discussion of CERA's 2024 budget at the Parliamentary Finance Committee.

Mr. Poulikkas reminded that last year, the EAC had submitted a request that would have resulted in a 25% increase in the final kilowatt-hour price, which was rejected by CERA. He added that currently, CERA is examining the pricing for 2024, which, as he stated, are considerably reduced compared to last year.

However, the EAC has appealed to the court over CERA's rejection of its request from last year. If EAC wins the case, consumers will bear the cost of a 25% increase on the kilowatt-hour.

Regarding the cost of greenhouse gases, which influences the rising price of electricity, Mr. Poulikkas stated that it is currently estimated between 70 and 90 euros per ton. However, he noted that this cost is expected to continually rise until 2030, depending on the need for investments in green energy. He added that there are predictions that it could reach up to 200 euros per ton and emphasized that the only way to avoid paying for pollutants is to invest in green energy.

Responding to questions from the MPs, Mr. Poulikkas advocated for the taxation of unexpected profits due to energy price increases, provided these are not reinvested in green development.

Regarding the hydrogen market, he mentioned that CERA is progressing with the regulatory framework for this market, as it has prepared for natural gas and electrical connections. However, he clarified that the state is responsible for formulating strategies in each sector.

On Renewable Energy Sources storage systems, the President of CERA highlighted their importance in making RES reliable. So far, he said, CERA has licensed storage systems for about 200 MW of RES and expressed hope for their advancement.

He also emphasized the importance of consulting services for CERA, to transfer necessary expertise to its staff, and noted that once the training of the staff is completed, these services will cease.

Additionally, in the Committee, the discussion began on the bill approved by the Council of Ministers on May 31, for tax deductions on capital expenditures by companies aimed at energy upgrading and energy saving. The expenditures will apply to the fiscal years 2023-2025.

Specifically, for improving the energy efficiency of buildings, an increased capital allowance of 7% instead of the current 3% is granted on certain capital expenditures. The representative of the Ministry of Finance explained that these would be amortized over 14 years instead of 30.

Furthermore, for investments in machinery and equipment related to RES systems and technical systems improving energy efficiency, an increased capital allowance of 20% instead of 10% is granted under the existing legal framework on capital expenditures. This includes insulation of water pipes, energy recovery systems, purchase of photovoltaic systems, and energy storage batteries. These investments will be amortized over 5 years instead of 10.

Also, for new commercial electric vehicles, as well as taxis and buses, an increased capital allowance of 25% is granted, up from the current 20%.

Additionally, expenses incurred for the energy upgrading study of businesses, or for issuing an energy-saving certificate, are deductible from taxable income.

These incentives, according to the Ministry of Finance, combined with plans from the Ministry of Energy and the Ministry of Transport, are expected to significantly contribute to reducing operational expenses of businesses in the short and long term, and also to Cyprus's green energy goals.

Interested parties suggested including electric vehicle charging stations in the deductions. There was also a proposal for the incentives to start in 2024 and end in 2026.

The fiscal impact of the measure is expected to be around 600,000 euros.