The main objective of Cyprus’ energy policy is to meet energy demand at the lowest possible cost with the minimum impact on the environment, promote energy conservation, encourage the use of indigenous renewable energy sources and enhance sector competition. The Ministry of Commerce, Industry and Environment has the following priorities in the Energy Sector:

Cyprus Electricity:

• The liberalization of the electricity market, in accordance with the relevant European Union Directive. To this end, the Electricity Market Regulation Law was approved by the House of Representatives in July 2003. The new law provides for the abolition of the monopoly of the Electricity Authority of Cyprus in the production and supply of electricity and the opening up of the electricity market by granting to certain consumers the right to choose their own suppliers. As from 1 of May 2004, when the new law became fully effective, 33% of the electricity market was opened to competition in this way. On the basis of the law, an independent Energy Regulatory Authority, consisting of three members, was appointed in January 2004. The sphere of competence of the Energy Regulatory Authority covers the electricity and the natural gas sectors.

• Increase of electricity production capacity to meet the continuously increasing electricity demand from both the productive sectors of the economy and from the domestic consumers. For the attainment of this goal the 3rd and 4th electricity production units are expected to be completed at Vassiliko Power Station in 2005 and 2006, respectively.

Cyprus Oil Sector:

• Increasing oil stock holding capacity. According to the Treaty of Accession of Cyprus in the European Union, Cyprus shall ensure that its minimum level of stocks of petroleum products corresponds to at least 60 days of consumption by the day of accession and 90 days by 31 December 2007. The Petroleum Stock Holding Law of 2003 provides for the establishment of the Cyprus Oil Stockholding Agency (COSA) which is responsible for ensuring that minimum stocks of oil are maintained in accordance with the obligations of Cyprus vis-a-vis the European Union.

• Liberalization of the oil sector. Imports of petroleum products were liberalized after the termination of oil refining activities in April 2004. Furthermore, the price control system of petroleum products will be radically revised and liberalized.

• Meeting of environmental criteria of the European Union. The European Union’s specifications of petroleum products were applied as from the date of accession. Furthermore, the introduction of LNG into the energy system of Cyprus for the purposes of electricity production, partially replacing Heavy Fuel Oil, will improve air quality, as LNG is a more environmentally friendly fuel.

Promotion of Renewable Energy Sources and Rational Use of Energy:

• An Action Plan for the Promotion of Renewable Energy Sources - RES (2002-2010) has been adopted. This aims at doubling the contribution of renewable energy sources to the national energy balance from 4,5% (1997) to 9% by the year 2010 and increasing the percentage of electricity produced from renewable energy sources from the present almost zero level to 6% by the year 2010. It also provides for a number of supportive measures to facilitate investments in RES.

• A new Law for the Promotion of the Use of Renewable Energy Sources and Energy Saving was introduced in 2003. According to the Law, a Special Fund was created, to be used solely for the financing of programmes and schemes for the promotion of renewable energy sources and energy saving. The main source of revenue of the Special Fund is a levy on electricity consumption set at C£0,13 per KWh.

• A new grant scheme (2004-2006) for the promotion of rational use of energy and the encouragement of the use of renewable energy sources has been introduced.

• Harmonized legislation on energy labelling of some household appliances was introduced.

• An Action Plan for Energy Saving, in line with relevant EU directives, is under preparation. Emphasis will be given on energy saving in buildings.

The Electricity Authority of Cyprus (EAC) - The Electricity Authority of Cyprus (EAC) was established in 1952 as an independent Semi-Government Organization to exercise and perform functions relating to the Generation, Transmission and Distribution of Electric Energy in Cyprus. EAC is governed by a Board, the members of which are appointed by the Council of Ministers. The relevant legislation regarding the functions of EAC was amended on 24/11/2000 to allow the Authority to enter into new business areas, such as telecommunications, desalination and consultancy services. EAC is firmly committed to its mission, which is to provide safe and reliable electric energy wherever need, to meet the continuously increasing demand of electricity on the island, at competitive prices, paying due respect to the environment, the health and safety of its personnel and the general public, as well as to provide services of a high standard which will meet the needs and expectations of its customers. At the end of 2003, EAC served 405.109 customers and employed 2.060 employees.

Development Plan - In an effort to respond to continuously growing customer needs, EAC implements a Development Plan.

The Development Plan is based on the findings of a series of studies and its main objectives are:

• The expansion and enhancement of the services offered to consumers

• Productivity improvement in all EAC activities

• Updating of Information Technology systems which will help EAC to achieve its business objectives
  The efficient use of electricity in order to save energy and the management and control of loads, especially during peak hours

• The protection of the environment

• Apart from the projects originally covered by the EAC Development Plan, additional projects are expected to be included, since EAC is a dynamic organization. The projects planned include major expansions in the Generation, Transmission and Distribution Systems and will cover the island's needs for a period far beyond 2010.

It should be noted however that EAC is considering expanding to sectors beyond the electric power industry which have synergy with the Authority’s operations, like the telecommunications and consultancy services. One of the most important projects of the EAC Development Plan is the completion of the new Power Station at Vassilikos, which is the largest project undertaken in Cyprus since its independence in 1960. The first phase of the project has already been completed and the second phase of the project, which has now started, is expected to be completed in 2005.

Generation System - During the year 2003, the Electricity Authority of Cyprus continued the implementation of its operational and development program, which provides for the full utilization, maintenance and extension of the existing Vassilikos, Dekeleia and Moni Power Stations.

Vassilikos Power Station, with an installed capacity of 298 MW (2 x 130 MW Steam Units and one 38 MW Gas Turbine Unit) exported in 2003, 1 616 594 MWh, which corresponds to 42.29% of the total electricity exported from the Authority’s Power Stations.

Dekeleia Power Station, with an installed capacity of 360 MW (6 x 60 MW Steam Units) exported in 2003, 1 816 397 MWh which corresponds to 47.52% of the total electricity exported from the Authority’s Power Stations.

Moni Power Station, with an installed capacity of 330 MW (6 x 30 MW Steam Units and 4 x 37,5 MW Gas Turbine Units) exported in 2003, 389 404 MWh, which corresponds to 10,19% of the total electricity exported from the Authority’s Power Stations.

Generation of electric power has grown from 12 million kWh in 1952 to 4.044 million kWh in 2003, using 1.005.418 metric tones of fuel.

Transmission System Development - The transmission network, which is the backbone of the Authority's system, interconnects the Power Stations with the load centres. The rational development of the Transmission System is a safeguard for the continuous and reliable supply to the major load centres avoiding the risk of prolonged interruptions.

EAC Enters the Telecommunications Industry - The Electricity Authority of Cyprus has reached two separate agreements with two distinct Consortiums regarding the leasing of its fibre optics network. The two Consortiums can use EAC’s network in the broad Telecommunications spectrum except in the mobile.