Electricity Regulation 2015

Legislative framework

Electricity market law (EML) and electricity market licence regulation (EMLR)

In 2001, the main legislative document that created the current market structure, the Electricity Market Law No. 4628 (Law No. 4628) was issuedas part of the efforts to harmonise with the EU and to liberalise the market. Under Law No. 4628, the Energy Market Regulatory Authority (EMRA) was established to regulate and supervise the market as an independent body. It has financial and administrative independence from the government. Law No. 4628 has recently been amended with Electricity Market Law No. 6446 (EML), which entered into force on 30 March 2013. Law No. 4628 is still in force, but its name has changed to the Law on the Organisation and Duties of the Energy Market Regulatory Authority. Therefore, Law No. 4628 only regulates the duties and rights of EMRA, while the EML regulates the market activities.

Pursuant to the EML, electricity market activities consist of generation, transmission, distribution, wholesale and retail, market operation as well as import and export activities. To carry out any of the market activities, market participants are required to obtain licences from EMRA. In line with the amendments and changes made in relation to market activities and types of licences; the secondary legislation, namely the Electricity Market Licence Regulation was amended and the new Electricity Market Licence Regulation (EMLR) was published in the Official Gazette numbered 28809 and entered into force on 2 November 2013, replacing the former Electricity Market Licence Regulation published in the Official Gazette dated 4 August 2002 (former EMLR).

Under the EML and the EMLR, licences may be granted for a maximum term of 49 years and the term for the licences regarding generation, distribution and transmission may not be less than 10 years.

Each activity is subject to a separate licence. However, the export activity can be conducted by generation licensees and supply licensees, while the import activity can be conducted by supply licensees. Import and export activities of such legal entities are regulated under their respective supply or generation licences and do not require separate licences, provided that an approval of EMRA is obtained upon positive opinion of the Ministry of Energy and Natural Resources (the Ministry). The EML merged the wholesale and retail sale activities into one licence type, the ‘supply licence’. The existing wholesale and retail sale licence holders would be ex officio granted with a supply licence without prejudice to their rights under the existing licences.

A licence cannot be assigned. However, a step-in right was provided in the former EMLR for banks and financial institutions, which may be exercised regardless of the type of the licence concerned. EMLR introduced a significant change in the mechanism by limiting its scope with the generation licences, however, the principle provided in the former EMLR remained the same. Accordingly, if the banks or financial institutions provide limited or non-recourse project financing to the generation licensee as per the provisions of their loan agreements by explaining the reasoning, they may request from EMRA that another legal entity be granted a generation licence provided that they assume all the obligations of the related licensee. The terms and conditions of the previous generation licence shall continue under the new licence. As another exception of the nonassignable character of the licences, a generation licence owner can assign the licence to a company incorporated as a result of the demerger of the licence owner or to another company having the same shareholding structure as the licence owner. The terms and conditions of the previous licence shall continue under the new licence.

The rights and obligations of a publicly held legal entity that holds a generation or auto-producer licence may be transferred to another legal entity that is wholly owned by such a legal entity provided that the approval of EMRA’s board is obtained and a new generation licence will be granted to such a legal entity as a continuation of the former generation licence. A similar exemption is provided for merger and demerger transactions conducted by licensee legal entities under Turkish Commercial Code No. 6102: a licensee legal entity may transfer its rights and obligations arising out of EMLR to another legal entity as a result of merger or demerger, provided that such legal transactions are conducted in accordance with the provisions of EMLR and the pre-approval of EMRA’s board regarding such legal transactions is obtained. EMLR introduced another exemption related to the transfer of generation facilities by providing that generation licence holders are allowed to transfer their generation facilities by sale, transfer, lease or other types of contracts that result in change of right to use, to legal entities that intend to continue generation. Such transferees are required to obtain their own generation licence before such transfers, but are exempted from the requirement to apply for a preliminary licence. The transferee’s generation licence enters into force upon the completion of the transfer, which will result in the termination of the transferor’s generation licence.

In both pre-licence and licence applications regarding generation activity, applicants have to submit a letter of guarantee to EMRA for the amount determined by EMRA for each installed capacity in MW. The ceiling of letters of guarantee is determined by EMRA. Licence fees differ depending on the activity.

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