Cyprus-Forum.com

[Paphitis]

Then before MARI, Cyprus had a great system. Since MARI, there have been big shortages.

Never got a postcard telling us about any scheduled outage. Nothing in the papers or media either. It would just happen for whatever reason and they never tell you what caused it either, unless there is a heat wave but even then they could be conservative with the truth so who knows.

Either way, I don't think privatization has been bad. Quite seamless but some people say that we would be paying higher prices if electricity was not privatized.

In any case, I think you guys will find out for yourselves. One positive is that the RoC will end up with a power station very quickly that will solve the shortage.

[Tim Drayton]

Then before MARI, Cyprus had a great system. Since MARI, there have been big shortages.

Never got a postcard telling us about any scheduled outage. Nothing in the papers or media either. It would just happen for whatever reason and they never tell you what caused it either, unless there is a heat wave but even then they could be conservative with the truth so who knows.

Either way, I don't think privatization has been bad. Quite seamless but some people say that we would be paying higher prices if electricity was not privatized.

In any case, I think you guys will find out for yourselves. One positive is that the RoC will end up with a power station very quickly that will solve the shortage.

"Since MARI, there have been big shortages."

That's debatable, mate. Certainly in the immediate aftermath, there was chaos with long rolling power cuts. However, that only lasted a while and there were soon fewer and fewer outages. By now, they have more or less rebuilt all that was destroyed at Mari and, for the past year and a half supply, has been pretty normal although I would say that unscheduled outages, typically of 30-60 minutes' duration have been happening once every 2-3 months, so we are still not back to the pre-Mari halcyon days. What you have to realise is that demand for electricity has also fallen as a result of the crisis, so overall there is no real shortage. If there were, state-run electricity companies are also capable of building new power stations.

[tsukoui]

The following from a random webpage on natural monopolies: http://cs.stanford.edu/people/eroberts/cs181/projects/corporate-monopolies/benefits_natural.html

A natural monopoly exists when average costs continuously fall as the firm gets larger. An electric company is a classic example of a natural monopoly. Once the gargantuan fixed costs involved with power generation and power lines is payed, each additional unit of electricity costs very little; the more units sold, the more the fixed costs can be spread, creating a reasonable price for the consumer. Having two electric companies split electricity production, each with their own power source and power lines would lead to a near doubling of price. Clearly, competition, the flagship of the American economy, is not always the answer.

and another random webpage: http://www.progress.org/tpr/natural-monopoly-2/

A “natural monopoly” is defined in economics as an industry where the fixed cost of the capital goods is so high that it is not profitable for a second firm to enter and compete. There is a “natural” reason for this industry being a monopoly, namely that the economies of scale require one, rather than several, firms. Small-scale ownership would be less efficient.

[Paphitis]

Right there is a lot of nonsense being thrown around.

When there is privatization, there is still only one grid. Each company does not set up their own. Also, it is possible for companies to have their own generation plants. But it is carefully set out in order to meet demand. Companies also buy power from each other.

That's how it has been working in my experience so the above does not apply.

You will hear many things leading up to privatization.

[kurupetos]

Privatisations are on their way and thank god for the Troika giving us an excuse to carry them out. Governments CANNOT run businesses. The stakeholders interests are never aligned.

You would prefer a private monopoly where the owners are free to exploit their position to raise prices and under invest?

What a load a bollocks. Obviously you don't live in Cyprus. Cyprus electricity is the most expensive in the EU, and the only reason for this is the current system of monopoly EAC enjoys.

Privatization is our only option. Same goes for CYTA and CyAir. The government should only be responsible for regulating prices, and as said above not run businesses.

[Sotos]

Cyprus is too small for more than 1 Electric Company. They could just allow competition from private companies... maybe they done it already as there are many small companies that do Wind / Sun power generation... but the truth is that nobody will invest the money required to build an EAC competitor. What they want is to buy EAC for cheap and then get the massive profits. A monopoly is a bad thing but a private monopoly is worst than a public monopoly... and this is what we will end up having if they sell EAC.

[Demonax]

Cyprus is too small for more than 1 Electric Company. They could just allow competition from private companies... maybe they done it already as there are many small companies that do Wind / Sun power generation... but the truth is that nobody will invest the money required to build an EAC competitor. What they want is to buy EAC for cheap and then get the massive profits. A monopoly is a bad thing but a private monopoly is worst than a public monopoly... and this is what we will end up having if they sell EAC.

Exactly. A small country like Cyprus cannot have multiple competing power companies. All that will happen is that a private company will take over the existing monopoly and jack up the prices even further and the consumers will get screwed. In the UK, gas and electricity privatisation was supposed to lead to lower prices and increased competition. All it has done is create a cartel that makes huge profits on the back of ever-increasing prices. It's a complete scam at the expense of consumers. And there's nothing the government can do about it because these companies are a law unto themselves.

[Oceanside50]

The following from a random webpage on natural monopolies: http://cs.stanford.edu/people/eroberts/cs181/projects/corporate-monopolies/benefits_natural.html

A natural monopoly exists when average costs continuously fall as the firm gets larger. An electric company is a classic example of a natural monopoly. Once the gargantuan fixed costs involved with power generation and power lines is payed, each additional unit of electricity costs very little; the more units sold, the more the fixed costs can be spread, creating a reasonable price for the consumer. Having two electric companies split electricity production, each with their own power source and power lines would lead to a near doubling of price. Clearly, competition, the flagship of the American economy, is not always the answer.

and another random webpage: http://www.progress.org/tpr/natural-monopoly-2/

A “natural monopoly” is defined in economics as an industry where the fixed cost of the capital goods is so high that it is not profitable for a second firm to enter and compete. There is a “natural” reason for this industry being a monopoly, namely that the economies of scale require one, rather than several, firms. Small-scale ownership would be less efficient.

A natural monopoly is basically an oxymoron, they don't exist. Government regulations create these so called "natural monopolies" in these utility companies. When competition is held out of the market place and governments regulate these companies then ultimately consumers will pay higher and get bad service. A company that is mass producing a commodity would have to become very innovative to keep its costs down and services high. If you take the Cypriot electric company which is highly regulated by the government you get results of very expensive electricity and bad service. When you allow the market place to function with very vigorous competition even at high commodity outputs then naturally the price would go down and services upgraded. As for duplication (roads,wire/electric lines). Government owned (socialistic)roads and electric wires are government owned. The fact remains that in order to use these socialist roads and wires, the government needs to give its permission. Government ownership of these socialist roads/wires is a permanent act of economic intervention, which in the long run discourages any innovative private corp. investment. There have been numerous instances where bidding by private companies(water, electric, road maintenance) have proven that a private company can maintain these public utilities at a cheaper price therefore giving the consumer better prices and better service. Instead of knocking innovation and progress, knock on the heads of your politicians who want to maintain these enterprises with their inefficient controls.

[Oceanside50]

Privatisations are on their way and thank god for the Troika giving us an excuse to carry them out. Governments CANNOT run businesses. The stakeholders interests are never aligned.

You would prefer a private monopoly where the owners are free to exploit their position to raise prices and under invest?

What a load a bollocks. Obviously you don't live in Cyprus. Cyprus electricity is the most expensive in the EU, and the only reason for this is the current system of monopoly EAC enjoys.

Privatization is our only option. Same goes for CYTA and CyAir. The government should only be responsible for regulating prices, and as said above not run businesses.

The government should only be responsible for regulating prices

the government should stay out completely, regulating prices keeps out competition and leads to the mess cyprus air and all those other government controlled enterprises face today. The vigorous competition of the market place in its purest form is your only hope, otherwise a Brazilian company like Ryanair will be taking over all flights from CypAir...

[Tim Drayton]

The following from a random webpage on natural monopolies: http://cs.stanford.edu/people/eroberts/cs181/projects/corporate-monopolies/benefits_natural.html

A natural monopoly exists when average costs continuously fall as the firm gets larger. An electric company is a classic example of a natural monopoly. Once the gargantuan fixed costs involved with power generation and power lines is payed, each additional unit of electricity costs very little; the more units sold, the more the fixed costs can be spread, creating a reasonable price for the consumer. Having two electric companies split electricity production, each with their own power source and power lines would lead to a near doubling of price. Clearly, competition, the flagship of the American economy, is not always the answer.

and another random webpage: http://www.progress.org/tpr/natural-monopoly-2/

A “natural monopoly” is defined in economics as an industry where the fixed cost of the capital goods is so high that it is not profitable for a second firm to enter and compete. There is a “natural” reason for this industry being a monopoly, namely that the economies of scale require one, rather than several, firms. Small-scale ownership would be less efficient.

A natural monopoly is basically an oxymoron, they don't exist. Government regulations create these so called "natural monopolies" in these utility companies. When competition is held out of the market place and governments regulate these companies then ultimately consumers will pay higher and get bad service. A company that is mass producing a commodity would have to become very innovative to keep its costs down and services high. If you take the Cypriot electric company which is highly regulated by the government you get results of very expensive electricity and bad service. When you allow the market place to function with very vigorous competition even at high commodity outputs then naturally the price would go down and services upgraded. As for duplication (roads,wire/electric lines). Government owned (socialistic)roads and electric wires are government owned. The fact remains that in order to use these socialist roads and wires, the government needs to give its permission. Government ownership of these socialist roads/wires is a permanent act of economic intervention, which in the long run discourages any innovative private corp. investment. There have been numerous instances where bidding by private companies(water, electric, road maintenance) have proven that a private company can maintain these public utilities at a cheaper price therefore giving the consumer better prices and better service. Instead of knocking innovation and progress, knock on the heads of your politicians who want to maintain these enterprises with their inefficient controls.

Re:
If you take the Cypriot electric company which is highly regulated by the government you get results of very expensive electricity and bad service.

Can you please elaborate on what you mean by bad service? I have given precise examples above of some of the excellent service that I have received in the years that I have lived in Cyprus from the state electricity board, and another good example must be the speed with which things returned to normal following the Mari explosion; experiences that I have not have with the so-called competing privatised electricity companies in the UK when in fact the grid is a monopoly run by one company, Centrica.