Thu, Nov
65 New Articles

Turkey: Liberalization of the Electricity Market and the Role of Antitrust Interventions

Turkey: Liberalization of the Electricity Market and the Role of Antitrust Interventions

  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

The Turkish electricity market has been under a liberalization process since 2001. Specific steps had been taken during the 1980s, 1990s, and 2000s but the main amendment to the legal framework for the creation of a competitive electricity market was the enactment of the Electricity Market Act No. 4628, which was brought into force in 2001. As a result, the integrated structure of the electricity market was to be unbundled, following the privatization of distribution activity in accordance with a specific timetable.

Electricity distribution and electricity sales transactions were rearranged with the privatization of the regional distribution companies that carried out both activities. After the rearrangement in 2013, regional distribution companies were divided into electricity distribution companies and incumbent retail companies. Distribution companies, which are natural monopolies, were assumed to function as regional independent system operators, with no electricity sales to end consumers. The retail level was liberalized and opened to competition. Incumbent retail companies were established as separate bodies to supply/sell electricity at a retail level. These companies were entitled both to function as last resort suppliers, with national tariffs announced by the Energy Market Regulatory Authority (EMRA), as a public service obligation, and to supply electricity with competitive prices to end-user customers with national tariffs.

The liberalization process was accelerated upon the enactment of Act No. 6446, which came into force in 2013, replacing Act No. 4628. Act No. 6446 constitutes the primary legal basis for the establishment of organized electricity markets, the energy exchange, and the EPIAS (Electricity Markets Operating Corporation) as the market operator. This led to the rendering of the day-ahead market and the intraday market as well as balancing power in the market, ancillary services market, and the derivatives markets. The Turkish Competition Authority (TCA) has not touched these markets.

The energy policy for electricity generation, on the other hand, is not framed with the prioritization of liberalization, even though a significant number of publicly owned power plants are privatized.  Rather, Turkey’s energy policy towards generation focused on supply security, market predictability, sustainability, and technology development and innovation. The main objectives established are based on certain themes: (1) adding an additional 10,000 megawatts in capacity to the system for each source within ten years, in both wind and solar energy, (2) the continuation of work on the establishment of nuclear power plants in three different areas, (3) the establishment of an additional 5,000 megawatts of domestic coal-based installed power, and (4) bringing the level of coal reserves to approximately 3.5 billion tons.

During the privatization and liberalization of electricity distribution and retail, the EMRA built the regulatory framework to ensure a competitive functioning of the markets. Together with the EMRA, Turkey’s TCA antitrust watchdog was also very active during this process. Both authorities were in close collaboration, whereby the TCA provided significant inputs to the regulations designed by the EMRA from a competition law perspective and towards the elimination of market entry barriers. The TCA also conducted a number of antitrust investigations against distribution companies and incumbent retailer companies, some of which faced huge fines. Regarding the behavior of distribution companies, the authority simply focused on situations where these companies leveraged incumbent retailers – which are sister companies – by providing customer data and positive discrimination in distribution operations such as metering, connection, and maintenance. As for the incumbent retailer companies, the authority was concerned with the activities that complicated customers’ switching to competitors. These antitrust interventions disciplined the anti-competitive behaviors of companies and also provided valuable insight toward continuing the process of regulatory design.

Since 2019, the TCA has been silently keeping an eye on the industry. The key concern nowadays is whether the French competition authority’s EDF decision will trigger a case or not. In that decision, the French watchdog fined EDF for using customer data and certain commercial infrastructure dedicated to the management of customers on a regulated tariff with the objective of maintaining its market share in the electricity retail sector and strengthening its position in the related gas and energy services markets in France. In addition to the fine, the authority mandated EDF to allow access to infrastructure for alternative electricity suppliers requesting access and to separate its subscription process for customers interested in offers at a regulated price and customers interested in offers at market prices.

By Metin Pektas, Partner and Head of Antitrust, Public Policy, and Compliance, Nazali Tax&Legal

This Article was originally published in Issue 9.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Turkey Knowledge Partner

NAZALI offers a broad range of services in the fields of Tax, Audit, Corporate and Commercial Law, Mergers & Acquisitions, Corporate Finance, Banking, Finance and Capital Markets, Protective Legal Services and Dispute Resolution, Personal Data Protection and Privacy, Social Security and Labor Law, Occupational Health and Safety, Competition Law, Intellectual Property Law and R&D, Compliance and White-Collar Crimes, Administrative Law, Real Estate Law, Customs and Foreign Trade, Accounting and Payroll, Financial Incentives and Advisory Services and Public Administration and Compliance through its partners, associates and consultants of different seniorities who have both public and private sector experience.

What sets NAZALI apart from others is that NAZALI offers a truly comprehensive service to its clients with experts from different disciplines working collaboratively as a team under one roof enabling us to evaluate all dimensions of legal matters together with financial and technical matters.

The services that NAZALI provides to its clients include the most appropriate solution with the support of technical departments specialized in their fields. In this context, NAZALI associates are supported by NAZALI technical team and work alongside the experts in the fields of finance, social security and customs matters. NAZALI has set out with the aim of providing the most efficient and comprehensive solution for its clients by adapting to the developing conditions and happily gained the trust of its clients by never compromising the quality of service.

As conditions continuously evolve, NAZALI always aims to further itself remaining true to its motto “GROW WITH KNOWLEDGE” and has set out with the aim of providing the most efficient and comprehensive solution for its clients by adapting to the developing conditions and happily gained the trust of its clients by never compromising the quality of service.

Firm's website: http://www.nazali.com

Our Latest Issue