The New Regulation on the Procedures and Principles Regarding Execution of Water Utilization Right Agreements for Generation Activities in the Electricity Market (the "Water Utilization Right Regulation") was published in the Official Gazette on February 21, 2015, numbered 29274 and went into effect on the date of its publication. The Water Utilization Right Regulation has abolished the old Regulation for Procedures and Principles Regarding Execution of Water Utilization Right Agreements for Generation Activities in the Electricity Market published in the Official Gazette on June 26, 2003, numbered 25150 (the "Former Regulation").

The purpose of the Water Utilization Right Regulation is to regulate principles and/or procedures regarding: (i) the content of Water Utilization Agreements (the "Water Utilization Agreement(s)") to be executed between the General Directorate of State Hydraulic Works  (the "General Directorate"), and legal entities operating in the electricity market within the scope of the Electricity Market Law numbered 6446; (ii) the execution process for Water Utilization Agreements;  (iii) the rules on the establishment of unlicensed production power plants over dams, water conveyance lines ("su isale hatları") and waste water conveyance lines ("atık su isale hatları") used by Municipalities for the provision of drinking water purposes.

The Water Utilization Right Regulation covers, including among others: (i) application rules and announcement principles for the execution of Water Utilization Agreements;(ii) preparation and evaluation rules  for  feasibility reports regarding hydroelectric power projects; (iii) provisions that must be included in Water Utilization Agreements; (iv) principles and procedures for the execution, renewal, amendment and termination of Water Utilization Agreements; (v) payment rules for the hydroelectric resource contribution fee by generation companies to the General Directorate; (vi) general undertakings of  generation companies to the General Directorate (e.g. submission of notifications, reports and other documents, payment of relevant fees and  submission of temporary letters of guarantee, etc.); (vii) rules on the announcement of hydroelectric power projects by the General Directorate on its official website.

The other rules regulated under the Water Utilization Right Regulation may be summarized as follows:

  • The Water Utilization Right Regulation is different from the Former Regulation since it enables legal entities, whose majority of capital belongs to a Municipality, to establish unlicensed production power plants over dams, water conveyance lines and waste water conveyance lines used by the relevant Municipalities for provision of drinking water purposes. 
  • As per the Water Utilization Right Regulation, legal entities which intend to obtain a hydroelectric generation license are required to execute or obtain the right to execute a Water Utilization Agreement with the General Directorate before applying to the Energy Market Regulatory Authority for the relevant license. The Water Utilization Right Regulation sets forth the principles applicable to this process and provides the draft Water Utilization Agreement. 
  • The Water Utilization Right Regulation also contains a calculation method for the hydroelectric resource contribution fee and foresees that this contribution fee should be paid every year in accordance with this method during the period of the license.

Pursuant to the Provisional Article of the Water Utilization Right Regulation, existing Water Utilization Agreements executed by the generation companies will continue to be effective during the term of their generation licenses.

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.