Key Amendments to the Electricity Market Law
The Law Numbered 7257 regarding the Amendments to the Electricity Market Law and Certain Laws published in the Official Gazette dated 2 December 2020 and numbered 31322 (the “Omnibus Law”) introduces broad changes to the Electricity Markey Law numbered 6446, published in the Official Gazette dated 31 March 2013 and numbered 28603 (the “EML”).
The Omnibus Law aims to reduce the financial burden on market players and expedite certain transactions, such as share transfers, by introducing significant changes to the electricity market.
Amendments to the EML
- Regulation on Permissions Regarding Changes in Shareholding and Transactions Resulting in Change of Control
The electricity market legislation aims to create a competitive environment and prevent monopolisation by monitoring the shareholders of licensees operating in the market. In this respect, the requirement to obtain prior permission from the Energy Market Regulation Authority (“EMRA”) for changes in the shareholding structure of licensees (i) by more than 5% in public companies, (ii) by more than 10% in other licensees; and (iii) any transaction that will result in a change of control, has been abolished. Such prior approval requirement will henceforth only be applicable for legal entities whose tariffs are subject to regulation (tarifesi düzenlemeye tabi tüzel kişiler). However, the shareholding structure of licensees will still be monitored by EMRA and any change in the shareholding structure will still have to be notified to EMRA following the completion of any share transfer although the shareholding structure will no longer be annexed to the licences. This aims to ease the bureaucratic procedure and allow licensees to complete share transfers efficiently and cost-free. The relevant provisions of the Electricity Market Licensing Regulation, which regulate changes in the shareholding structure and transactions that may result in a change of control, will be amended in due course.
- Sanctions Implemented by TEİAŞ
The Omnibus Law grants TEİAŞ the power to impose penalties and other sanctions pursuant to the relevant system connection agreements so that TEİAŞ may perform its duties and obligations regarding transmission activities as delegated to it under Article 8 of the EML to prevent (i) any arbitrary usage of the network posing a risk on the transmission system’s safe operation; and (ii) any breach under the relevant system usage agreement. Any relevant dispute in this respect will be resolved before the administrative courts.
Although TEİAŞ was able to impose specific penalties and sanctions under the relevant system usage agreements before the enactment of the Omnibus Law, with this amendment, the authority of TEİAŞ to impose such penalties and sanctions has now attained a statutory basis (in addition to the contractual one). Also, the uncertainty in terms of jurisdiction regarding disputes has also been clarified.
- Addition of a New Type of Power Plant as Unlicensed Activity
The EML provides a list of power plants which are exempt from the obligation to obtain a generation licence.
The Omnibus Law includes another type of power plant in such exemption list. Accordingly, legal entities that will establish a power plant based on renewable energy sources with an installed power capacity not exceeding their designated power for consumption in their connection agreements will be exempt from the licence requirements. By way of illustration, a consumer with a 20 MW consumption capacity will have the right to establish a power plant based on renewable energy with an installed power capacity of up to 20 MW without a licence. Accordingly, consumers with a high amount of electricity consumption will have the right to establish unlicensed power plants with an installed power capacity larger than the previously allowed threshold of 5 MW. Any surplus electricity generated in such power plants will still be purchased within the scope of the RES Support Scheme (YEKDEM).
This amendment was introduced because small scale electricity facilities were not found financially feasible for investment.
- Amendments Regarding the Delegation of Supervisory Authorities
Supervision and inspection of electricity market activities, except for distribution companies and entities operating without a licence, are carried out by EMRA. Supervision of distribution companies is carried out by the Ministry of Energy and Natural Resources (the “Ministry”). The Omnibus Law clarifies that the Ministry may either use such supervisory authority jointly with other State entities and organisations which are specialised in the relevant field, including but not limited to EMRA, or delegate such authority in full or part. Further, according to the Omnibus Law, any cost incurred in the supervision of such activities by such delegated State entity or organisation will be paid from the Ministry’s budget.
- Decrease in the Repayment Period for Transmission Investments
Article 8/5 of the EML allows a real or legal person licensee to request the connection of its generation or consumption facility to the system and to finance such new transmission facilities and transmission lines. TEİAŞ repays such transmission network investments following the commencement of the operation period of the relevant facility. The repayment period was ten years. To ease the financial burden on investors, the repayment period is now decreased to five years. Besides, a legal basis for the method already used in practice has been established by stipulating that the repayment will be made by deducting the investment from the transmission system usage fees.
- Rearrangement of the Expropriation Authority
Under Article 19 of the EML, EMRA used to have the authority to carry out all expropriation procedures regarding immovable property required for electricity market activities. The Omnibus Law has amended this provision to complete such expropriation procedures more efficiently. Accordingly, the amended Article 19 of the EML now regulates that EMRA will carry out the expropriation procedures for power plants whilst TEDAŞ will carry out the expropriation procedures for distribution licensees.
- Extension of the Term of the Price Equalisation Mechanism
The effective term of the price equalisation mechanism, which requires distribution companies that generate more income due to cost differences between distribution regions to transfer such excess income to distribution companies that generate less income due to such cost differences, is extended until 31 December 2025.
- Extension of the General Lighting Services Period
Any expenses incurred due to the lighting of places within the scope of general lighting services for the general use of the public and traffic signalling are paid from (i) the allowances included in the budget of the Ministry; and (ii) any tax income of municipalities and provincial directorates. Such mechanism was supposed to expire on 31 December 2020 and such general lighting expenses were supposed to be paid by distribution companies after 31 December 2020. However, the Omnibus Law extended such mechanism until 31 December 2025.
- Regulation on Termination and Amendment Rights relating to Licences and Pre-licences
Legal entities wishing to terminate their generation or auto-producer licence, pre-licence or licence applications that have been filed before 2 December 2020 or amend these by reducing the installed power capacity stipulated in their licences or applications have been given the right to have their security deposits reimbursed in full by EMRA provided that they apply to EMRA until 3 February 2021. Prior to this amendment, a termination of a licence or licence application would allow EMRA to cash in the provided security amounts. However, such one-time exemption is introduced to reduce the adverse effects of the COVID-19 pandemic as many investors are unable to pursue their existing projects in the current market conditions.
The objectives of the Omnibus Law in respect of the electricity market are as follows:
- To allow self-generation by large-scale consumers without a licence requirement;
- To achieve an expedited expropriation process;
- To remove the bureaucratic burden in respect of share transfers; and
- To ease the financial burden on investors.
Any details pertaining to these amendments will be clarified in secondary legislation. The success of the Omnibus Law and its effects on the electricity market will become apparent in the days ahead.
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 Under the Electricity Market Tariffs Regulation, such legal entities are TEİAŞ, EÜAŞ, EPİAŞ, legal entities with distribution licences and authorised supply companies.
 Electricity Market Licence Regulation, published in the Official Gazette dated 2 November 2013 and numbered 28809
 Türkiye Elektrik Dağıtım A.Ş.