Expert Urges Structural Reform In Cyprus’ Electricity Pricing Model

Urgency For A Pricing Overhaul

Energy systems expert and former Cyprus Energy Regulatory Authority chairman, Andreas Poullikkas, has underscored the imperative need to decouple renewable energy prices from the volatile fossil fuel market. As Cyprus positions itself to implement the European Target Model, this transformative step is poised to harmonize the nation’s energy policies with broader EU directives.

Unique Market Challenges

Cyprus faces distinct hurdles given its small market size, energy isolation, limited interconnection with the European grid, and heavy dependence on imported fossil fuels. Poullikkas emphasizes that these structural peculiarities can facilitate market power abuse and artificially drive up electricity prices, thereby undermining the stability and fairness of the market.

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Decoupling Prices: A Strategic Imperative

Highlighting vulnerabilities exposed during the dry-run phase of recent market reforms, Poullikkas advocates for segregating renewable pricing from conventional unit fluctuations. This adjustment is essential to foster transparency, mitigate systemic risks, and ultimately stabilize the electricity market.

Proven Mechanisms To Mitigate Volatility

Poullikkas proposes the introduction of two well-established mechanisms: the ex-ante market power mitigation and the price shock absorber. The ex-ante measure, widely applied in US markets such as PJM, NYISO, CAISO, and ERCOT, leverages default energy bids based on short-run marginal cost. Any deviation beyond set thresholds automatically triggers corrective actions.

Conversely, the price shock absorber mechanism, a response to the 2022 energy crisis, continuously monitors renewable energy sources. When the accumulated inframarginal rent exceeds predefined multiples of the levelised fixed cost, the system imposes a temporary cap on conventional generation pricing, thereby decoupling the impact of soaring fossil fuel prices while allowing for adequate cost recovery.

Safeguarding Long-Term Investments

These corrective mechanisms are strictly confined to the day-ahead market, preserving the integrity of long-term contracts and forward market operations. This selective intervention ensures that renewable energy producers continue to secure stable revenues through forward contracts while benefiting from improved spot market pricing.

Implementation And Regulatory Adaptations

Transitioning to these new pricing strategies in Cyprus will involve technical adaptations, including software modifications and the development of algorithms for automatic bid monitoring. Moreover, the overhaul requires regulatory amendments, aligning the national framework with Directive 2019/944 and ensuring transparent, market-driven price controls.

Economic Impact And Future Outlook

The anticipated benefits of this reform are substantial. Lower electricity costs are expected to boost business competitiveness and alleviate household expenses, a critical advancement for an energy-isolated economy reliant on imported fuels. A phased pilot approach will allow stakeholders to address potential challenges, ensuring that these mechanisms remain adaptable to evolving market conditions.

In essence, Poullikkas’ strategic recommendations aim to craft a more predictable and robust electricity market in Cyprus, setting a benchmark for effective regulatory practices and long-term economic stability.

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Cyprus Foreclosure Reform Debate Intensifies Amid Rising Non-Performing Loans

by THEFUTURE.TEAM

February 18, 2026

Political Stakes And Foreclosure Regulation

Cypriot political parties are engaging in a high-stakes debate in parliament as they deliberate changes to the legal framework governing foreclosures ahead of the May parliamentary elections. The proposed shifts are aimed at curbing the rapid escalation in the value of non-performing loans, a trend that has sparked significant public and legislative concern. Confidential data from the Central Bank of Cyprus indicates that the nation has not yet moved away from its longstanding issues related to so-called “red loans.”

Non-Performing Loans: A Mounting Financial Challenge

Recent figures show that the value of distressed loans has continued to rise, surpassing €20 billion following transfers involving banks and credit recovery companies. This level exceeds the approximately €15 billion recorded during the economic crisis period. Central Bank data indicates that after loan sales, credit recovery firms now manage portfolios totaling €19.7 billion, of which €18.5 billion are classified as non-performing. About 87% of these loans are considered terminated, while the firms acquired 141,478 loans for €3.2 billion, roughly 80% below their original value.

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Credit Recovery Companies: Overshooting Investment Returns

By June, credit recovery companies had recovered €5.7 billion through a combination of cash repayments, judicial asset auctions and property-for-debt exchanges. Cash repayments accounted for €3.6 billion, judicial recoveries contributed €619 million, and property swaps added €1.5 billion. These recoveries exceeded the original purchase cost of many loan portfolios while overall balances continued to increase due to accrued interest, a development that remains a concern for policymakers.

Bank Portfolios And The Impact On Financial Stability

Data from the State Guarantee Fund for Deposits and Loans shows that 77,561 loans valued at €7.5 billion were transferred, leaving a remaining balance of €5.7 billion by June 2025, of which €5 billion are non-performing. Within the banking sector, non-performing loans totaled €1.45 billion across 24,736 accounts as of last June. Since December 2024, these figures have improved by approximately €86 million due to repayments and asset recoveries. The reduction in problematic loans has lowered bank exposure compared with levels recorded during the 2013 crisis.

Legislative Proposals And Government Considerations

Political leaders argue that adjustments to foreclosure procedures can be introduced without undermining banking stability. Parliament’s Economic Committee is scheduled to begin discussions on March 9, with an estimated 20 to 30 legislative proposals currently pending from multiple parties. While the Ministry of Finance has not announced immediate legislative action, officials are evaluating the potential reintroduction of elements of the Rent-Versus-Rate plan for vulnerable borrowers, subject to fiscal impact assessments.

Advocacy From AKEL And Environmental Groups

Proposals supported by the AKEL party and several civil organizations focus on strengthening legal protections for borrowers. Among the suggested measures is restoring the right to seek judicial relief to delay foreclosures in cases involving disputed charges or alleged abusive contract clauses. AKEL representative Aristos Damianou criticized the pace of foreclosure proceedings and warned of risks to primary residences and small businesses.

Proposals Targeting Guarantors And Foreclosure Processes

The Democratic Rally party has introduced a proposal aimed at limiting guarantor liability during foreclosure procedures. Under the draft measure, if a property is auctioned or repossessed, the guarantor’s responsibility would be capped at the original loan amount adjusted by recovered sums. The proposal also requires that enforcement actions against guarantors be suspended until a court ruling is issued if the borrower formally disputes the debt.

Revisions Proposed By The Democratic Party of Cyprus

The Democratic Party is also preparing new legislative measures to be introduced on Thursday. Party leader Mario Karogian outlined plans to suspend the foreclosures of primary residences valued up to €350,000 until the end of the year, allowing time to address legislative gaps. Additional proposals include broadening the powers of the Financial Ombudsperson to make binding decisions on disputes up to €50,000, enforcing the Central Bank’s code of conduct, and ensuring strict adherence to refinancing guidelines for first residences.

Outlook And Strategic Implications

The range of proposals reflects an ongoing effort to balance financial system stability with stronger consumer protections. Decisions made in the coming months are expected to shape the regulatory environment for foreclosures and influence broader confidence in Cyprus’ financial sector and economic outlook.

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