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Regulatory Authority Aims for Transparent and Competitive Markets - International Law Office

International Law Office

Energy & Natural Resources - Turkey

Regulatory Authority Aims for Transparent and Competitive Markets

August 18 2003

The Electricity Market Law and the Natural Gas Market Law aim to establish transparent, competitive markets that operate in accordance with private law principles. To date, the Energy Market Regulatory Authority has passed a number of decisions to expedite the implementation process of these laws and related secondary legislation.

One of the authority's recent decisions concerns the determination of electricity retail and wholesale distribution system usage and transmission tariffs. As of April 1 2003 the transmission tariffs applied by the Turkish Electricity Transmission Company (TEIAS) comprise the transmission system's system utility fee, operation fee and additional fee. Transmission tariffs will be applied to generators and consumers separately throughout the country’s 22 districts. The additional fee will be calculated monthly by TEIAS and will be paid into the authority's account on the twentieth day of every other month. The fee has been set at 0.7% of TEIAS’s transmission tariff.

Consumption limits for eligible consumers are laid down in the Electricity Market Law. All consumers who have been directly connected to the transmission system since the law's enactment and whose electricity consumption exceeded 9 million kilowatt hours in the past year are considered to be eligible. Contracts that were entered into with consumers directly connected to the transmission system and which were later assumed by the Turkish Electricity Trading and Contracting Company will remain valid until the consumers select new suppliers.

The Energy Market Regulatory Authority has also decided that auto-producer and auto-producer group licence holders may sell 25% of the electricity generated in 2003 on the free market in 2004.

The decisions adopted by the authority in connection with the natural gas market cover a variety of issues. Decision 123, adopted on March 21 2003, introduces a system for tariffs to be applied retroactively to the natural gas market as of January 1 2003. However, sales amounts will be interpreted pursuant to existing power plant agreements (ie, based on build-operate-transfer and build-operate models) until such agreements are terminated.

If a legal entity is entitled to more than one distribution district pursuant to a distribution licence, it must incorporate a new legal entity to render services in each district. The new entities must adopt articles of association according to the relevant legislation and organize their shareholding structure so that all shareholders hold an equal amount of shares. However, there is no restriction on the share ratio of the municipality (or a subsidiary of municipality) that is also a shareholder of any of these legal entities.

The participation fee, which is payable by legal entities holding licences and/or certificates for the natural gas market, is set at 0.001% for 2003.

As permitted by the Natural Gas Market Law, the Energy Market Regulatory Authority has adopted a decision setting forth the consumption limits for eligible consumers.

Eligible consumers can enter into natural gas sale and purchase contracts with any generation, import, and distribution or wholesale company in Turkey. Consumers or consumer unions whose consumption exceeded the requisite limits either last year or this year are regarded as eligible. Consumers will be informed as to whether they are eligible for the year ahead by the distribution licence holders.

The authority will continue to draft regulations and adopt decisions in its efforts to standardize the markets and provide a steady supply of high-quality, affordable and environmentally friendly electrical and natural gas energy.

For further information on this topic please contact Ümit Hergüner at Hergüner Bilgen & Özeke by telephone (+90 212 310 1800) or by fax (+90 212 310 1899) or by email (uherguner@hbo-law.com.tr).

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