International oil prices are in a de-escalation phase, but cuts to electricity prices in Cyprus will take longer to appear, because the Electricity Authority of Cyprus (EAC) holds reserves bought at higher prices.
Brent crude is recording a fall, trading near $72 a barrel, with the decline attributed mainly to OPEC+’s decision to increase production from August, as well as improved export flow through the Strait of Hormuz, which had remained largely closed for months due to the conflict in the Middle East.
6% rise in electricity
The fall in oil has already begun creating expectations of more immediate cuts to fuel prices, but this does not apply, at least at this stage, to electricity, since the price of power in Cyprus does not follow Brent’s fluctuations, with the final charge determined through a specific and relatively complex pricing mechanism.
In effect, unlike the cut in fuel prices, Cypriot consumers are not going to see an immediate de-escalation in electricity prices, since the EAC will be burning fuel oil bought at higher prices for the period ahead. Essentially, cuts to electricity will reach Cyprus, but with a delay.
In fact, in recent times electricity prices in Cyprus have not just failed to fall, but have risen instead. Specifically, electricity prices increased by close to 6% compared with two months ago. It should be noted that today, a kilowatt-hour in Cyprus, including all taxes and fees, sells for 30 cents.
Cuts expected from August onwards
The price per kilowatt-hour charged by the EAC includes the basic electricity tariff, the fuel clause, the cost of emissions rights, charges for strategic reserves, network fees, VAT and other charges. So even when oil prices fall internationally, the reduction in the electricity bill is not automatic, nor does it occur in the same way for every consumer, unlike what happens with fuel prices, which are more immediate.
According to estimates, consumers may see reductions in their electricity bills in one to two months, that is, after August. These cuts are expected to continue increasing as long as oil prices keep falling.
In periods of sharp rises in international prices, such as during the Middle East conflict, the burden is not passed on to consumers immediately or in full. Correspondingly, when prices fall, as has been happening in recent days, it takes time for that lower cost to be reflected in the fuel clause and, subsequently, in consumers’ bills.
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