Turkey: The New Electricity Market Law

The new Electricity Market Law No. 6446 (“New EML”) was enacted by the Turkish Grand National Assembly on 14 March 2013 and published in the Official Gazette numbered 28603 on 30 March 2013. Surprisingly, Electricity Market Law No. 46281 was not abrogated with the enactment of the New EML, but its title was changed to “Law on the Organization and Duties of the Energy Market Regulatory Authority” (“Previous Law” or “EMRA Law” where appropriate) and was partially amended by the new law. Accordingly, the provisions regarding the organization and duties of the Energy Market Regulatory Authority (“EMRA”) remain in effect under the EMRA Law. According to the New EML, all references in the legislation to the repealed articles of the Previous Law shall be considered as references to the related articles of the New EML.

The New EML envisages some important changes and in this article those changes will be reviewed.

Activities and Licenses

Under the New EML, the licenses and the rules to be applied are based on the types of electricity market activities. In other words, the New EML is structured around types of activities rather than types of licenses. The electricity market activities which require a license are listed under Article 4 of the New EML as generation, transmission, distribution, wholesale, retail sale, market operation, export and import. The New EML does not mention retail sale service and trade activities, as did the Previous Law. However, in the New EML market operation is introduced as a new type of activity.

Article 14 of the New EML sets forth the activities that can be conducted without a licence. Whereas under the Previous Law 500 kW was the maximum installed capacity for a renewable energy plant to operate without a license, the New EML has raised that maximum to 1 mW. In addition, the Council of Ministers is authorised to increase the maximum installed capacity for a renewable energy plant to operate without a license to 5 mW.

The draft of the New EML previously announced by EMRA initially stipulated that transactions such as share transfer and change of control, which result in a change in ownership or usufruct rights, could be conducted without requiring the approval of, but by simply notifying EMRA. However, this change is not included in the New EML, and similar to the Previous Law, those transactions are still subject to EMRA’s prior approval under the New Law.

EPIAS and the Activity of “Market Operation”

The New EML defines a new activity called “market operation” as the operation of organized wholesale electricity markets and financial settlement of activities conducted in such markets, along with other related financial transactions.

Currently electricity market operation activities are conducted by the Market Financial Reconciliation Center (“MFRC”), organized under the Turkish Electricity Transmission Joint Stock Company (“TEIAS”). The New EML establishes a new company to assume the role of the MFRC, the Energy Market Operation Joint Stock Company (“EPIAS”). The permanent officials and equipment of the MFRC will be transferred to EPIAS, which will be a private legal entity acting under an EMRA issued market operation license. Pursuant to the New EML, EPIAS is to be incorporated and initiate its activities, and the relevant regulations will be enacted within six months from the date the New EML enters into force.

Preliminary License for Generation

As per Article 6 of the New EML, a preliminary license is required for commencement of generation activities. EMRA will issue a preliminary license for a specified term to the legal entities who apply to conduct electricity generation activities, during which period they must obtain the necessary permits, approvals and licenses, as well as acquire ownership or usufruct rights to the land where the generation facility is to be located. The term of the preliminary license cannot be more than twenty-four months excluding the occurrence of force majeure events. EMRA is entitled to increase the preliminary license term by half, for a maximum of thirty-six months, based on the energy source type and the facility’s installed capacity.

The New EML stipulates that legal entities that could not obtain the above-mentioned documents, certify the acquisition of the property or usufruct rights, or fulfil the other legal requirements shall not be granted a generation license. In addition, before a generation license is granted, where there are any direct or indirect changes in the shareholding structure (with the exception of inheritance), share transfers or non-fulfilment of other legal requirements, the preliminary licence will be cancelled. Moreover, if the preliminary license term expires or the legal entity holding the license files for or falls into bankruptcy, the preliminary licence will automatically become null and void. However, there is no express provision in the new EML stating when the preliminary licence becomes null and void.

Distribution License Holders and Other Market Activities

As per Article 9 of the New EML, electricity distribution companies can only operate in the territory indicated in their license, cannot conduct activities other than distribution activities and cannot directly become a shareholder in other legal active in the electricity market. Moreover, while generation companies are prohibited from becoming controlling shareholders under the Previous Law, the New EML completely prohibits legal entities active in the electricity market from becoming direct shareholders in a distribution company. As argumentum a contrario, indirect shareholding is not prohibited.

Supply License and Supply Companies

Wholesale and retail sale activities, which were regulated as different types of licences, “wholesale license” and “retail sale license”, under the Previous Law, are regulated as one licence type, a “supply license”, under the New EML. As per Article 10 of the New EML, supply companies can conduct wholesale and/or retail sale activities without territorial limitations. In addition, it is stipulated that supply companies may also import from and export to countries with which the interconnection condition is satisfied.

The Conversion of the Auto Producer License to the Generation Licence

The “auto producer” and “auto producer group” licences are not explicitly regulated under the New EML. Instead, temporary Article 7 of the New EML holds that generation licenses will be automatically issued to auto producer license holders within six months of the effective date of the New EML, and no licence issuance fee shall be charged. Moreover, any applications filed to obtain an auto producer license will be treated as generation license applications.

Provisions on Total Market Share

The Previous Law set forth restrictive provisions related to total market share or total sale amounts for companies active in the electricity market. These restrictions were 10% of the previous year’s total energy sales within Turkey for wholesale companies and 20% of the previous year’s calculated total installed capacity within Turkey for generation companies.

The New EML also regulates market share restrictions for license holding companies. Pursuant to its provisions:

  • Generation companies controlled by any real person or any private sector legal entity cannot hold a total installed capacity of more than 20% of the previous year’s calculated total installed capacity within Turkey (Art.7/para.5);

  • Private sector legal entities that hold supply licenses cannot purchase electricity from generation or export companies exceeding 20% of the previous year’s total consumption of electricity within the country (Art.10/para.6);

  • Supply companies cannot sell electricity on a wholesale or retail basis exceeding 20% of the of the previous year’s total consumption of electricity in Turkey (Art.10/para.6).

Changes related to Applicable Sanctions

As per Article 16 of the New EML, the monetary sanctions applicable as a result of non-performance of duties and non-fulfilment of the requirements arising out of the law or related legislation are increased.

Moreover, as per paragraphs 3 and 4 of Article 16 of the New EML, in the event that distribution or supply companies do not conduct their activities pursuant to the legislation, impede their services, decrease their service quality to an unacceptable degree, become insolvent or are in a position to become insolvent EMRA can dismiss some or all of their board members and appoint new ones. In such an event, EMRA will be deemed as the addressee (defendant) of any claims filed against the members it appointed to the board of directors of said distribution or supply companies. Where any such aforementioned claim results in compensation due to the plaintiff, such compensation will be borne by EMRA, with a right of recourse.

Exceptional Provision regarding Environmental Requirements

Pursuant to temporary Article 8 of the New EML, the state owned generation company, EUAS (Elektrik Üretim A.Ş. Genel Müdürlüğü), its subsidiaries and affiliates, as well as publicly owned companies that are to be privatised according to privatisation legislation, are granted a grace period until the end of 2018 to become compliant with environmental laws and acquire the required permits. Accordingly, it is stipulated that their activities cannot be cancelled and no sanction can be applied due to non-compliance with environmental laws during the grace period and even for the period prior to the grace period. This exceptional provision is very important for generation companies that are or will be subject to privatisation.

Temporary Articles and the Extension of Some Deadlines

Some deadlines set in the Previous Law are extended with the New EML. Some of them are as follows:

  • The price equalisation mechanism for distribution companies and supply companies, which was applied until the end of 2012, is extended until the end of 2015, and until such date the national tariff applies.

  • The corporate tax and VAT exemptions, which were applied until the end of 2010 to the mergers, spin-offs and transfers of generation and distribution companies subject to privatisation, are extended until the end of 2023.

  • A 50% discount on system utilization fees during the investment periods and for five years as of the operation start date, and the exemptions from stamp tax and duties granted to generation facilities are extended until the end of 2015.

Further to the aforementioned, pursuant to temporary Article 12 of the New EML, within one year of the New EML’s effective date, generation licenses shall be issued to the generation facilities and projects subject to existing agreements.2 The terms of such licenses will be subject to the same rights and obligations and limited by the term in the existing agreements.

Moreover, it is regulated under paragraph 1 of temporary Article 14 that new licenses shall be issued to former generation license holders who started the construction of power plants but whose licenses were cancelled or ceased before the entry into force of the New EML; provided that the Ministry of Energy and Natural Resources (“MENR”) decides the construction is irrevocable and there is public interest for continuance. However, this provision is not applicable to hydro-electric power plant facilities.

Conclusion

The New EML introduces some important changes in the current electricity market system. These include: amendments to license types, framing its provisions around each type of market activity, specific provisions for certain license types (i.e. distribution, supply and generation), the introduction of a preliminary licensing mechanism and investment incentives such as extended deadlines and grace periods for environmental compliance. The New EML also introduces EPIAS which will be an independent private company authorised for the market operation activity.

The principle reason for drafting the New EML was that the Previous Law was not sufficient to follow the factual progress achieved by the market actors and regulatory authorities since 2001. The goal is that the law, as the primary legislation, shall guide the market actors in the future and constitute a legal basis for secondary legislation. Harmonization with European Union legislation and the composition of a new market with a secure supply that generates investor interest are the other reasons behind the new law.

The systematic of the New EML is based on the market activities. Therefore, one can argue that it is neatly drafted when compared with the Previous Law. On the other hand, from a legal technical point, transformation of the Previous Law to EMRA Law and the lack of succession between its articles after this transformation can be criticized.

Footnotes

1 Official Gazette 3 March 2002, nr. Reiterated 24335

2 Existing agreements are defined as the contracts and concession and implementation agreements signed before the enactment of Previous Law in accordance with the terms and conditions of Law no. 3096 dated 04.12.1984, no. 3996 dated 08.06.1994, no. 4283 dated 16.07.1997 and no. 4501 dated 21.01.2000 and related regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Herguner Bilgen Ozeke Attorney Partnership
Erdem & Erdem Law
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Herguner Bilgen Ozeke Attorney Partnership
Erdem & Erdem Law
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions