Recent development   

On August 22, 2015, the Energy Market Regulatory Authority ("EMRA") issued the Electricity Market Tariff Regulation setting the rules for the introduction of regional tariffs and a supplier of last resort tariff. The regulation will enter into effect on January 1, 2016, and govern the five-year tariff period from 2016 to 2020.

What EMRA did

Since 2006, EMRA has established base values for price caps, revenue caps and transmission pass-through costs which are then used to set end-user tariffs in five-year periods. This cost-based pricing structure has the effect of liberalizing the tariff system. While EMRA has not yet announced the tariffs for the third five-year period, it is expected to do so by the end of this year. Although most of the pricing rules and the method of implementation have not changed under the regulation, there are some significant changes:

  • Cross-subsidies in the electricity market will be abolished on December 31, 2015 in accordance with Electricity Market Law No. 6446. Therefore, national tariffs that allowed costs to be stabilized across different regions through a price equalization mechanism will be replaced by regional tariffs in line with the liberalization trend in the electricity market.  
  • A "supplier of last resort" tariff has been introduced for electricity provided by the regionally-authorized supply company to eligible customers who do not procure electricity from other suppliers. EMRA will issue a communiqué on the supplier of last resort tariff by March 31, 2016, within three months from the cross-subsidy expiration date. Until then, EMRA will apply a provisional tariff.  
  • The supplier of last resort tariff will be two-tier, differentiating between consumers with high and low electricity consumption. Consumers with high electricity consumption will be subject to a higher tariff to encourage integration into the competitive electricity supply market.  
  • The Turkish Electricity Transmission Company (Türkiye Elektrik İletim A.Ş. –TEİAŞ) will determine and charge its market operation tariff until the Energy Market Operation Company (Enerji Piyasaları İşletme Anonim Şirketi – EPİAŞ) becomes fully operational and EMRA approves its market operation tariff.

Conclusion

The EMRA continues to oversee the liberalization of the Turkish electricity market. With the end of cross-subsidies, prices between different regions in Turkey will differ. EMRA, however, is implementing safeguards to protect small-scale consumers (e.g., individuals) from the adverse effects of deregulation of the electricity market, while at the same time encouraging large-scale consumers (e.g., manufacturers) to actively seek out the most competitive prices by setting higher tariffs. Although EMRA laid out the regulatory grounds for the further liberalization of tariffs, the ultimate outcome will be determined once tariffs are set at the end of the year.