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Turkey introduces significant changes to electricity market licensing regulations

By on March 22, 2022 0

Recent development

The regulation amending the electricity market licensing regulation (“Amending Regulation“) was published in Official Journal No. 31774 and dated March 10, 2022 and entered into force on the same date. Please Click here for the full text of the amending regulation in Turkish.

What does the amending regulation provide?

The significant changes made by the amending regulation can be summarized as follows in four categories: (i) provisions relating to electricity generation facilities, (ii) provisions relating to authorized electricity distribution and supply companies, (iii) provisions relating to stock transfers, mergers and acquisitions, and (iv) provisions relating to storage facilities.

1. Provisions relating to power generation facilities:

  • Explicit license exemption for trigeneration facilities: Prior to the amending regulation, trigeneration facilities were not explicitly listed as exempt from the permit requirement. However, the exemption granted to cogeneration facilities that met the efficiency criteria of the Ministry of Energy and Natural Resources applied in practice to trigeneration facilities. From now on, it is explicitly provided that trigeneration facilities meeting the criteria mentioned are exempt from the authorization requirement.
  • Changes to the minimum capital requirement for facilities established under Renewable Energy Resource Areas (YEKA): Before the amending regulation, all applications for production permits submitted under the YEKA required that the applicant legal person increase its capital to at least 5% of the amount of the investment concerned. With the amending regulation, the 5% rate is now only applicable to production facilities under the YEKA with a mechanical power greater than 100 MW. Accordingly, the other applicants under the YEKA will have to increase their capital to 20% of the amount of the investment.
  • Amendment to the exemption for establishing permit-exempt facilities in licensed facility areas: Prior to the amending regulation, an exemption was provided for the prohibition to establish permit-exempt facilities on areas authorized for production activities. Pursuant to the exemption, applications to establish license-exempt facilities on the landowner’s land could be granted, provided that the engineering assessment of the license-exempt facility is positive and the generating facility authorized production facility in question or another authorized production facility facilities are not affected. The amending regulation modified this exception so that it applies only to authorized wind power plants.
  • New derogation from the obligation of technical advice in the event of a change of site for wind power plants: With regard to site changes, the amending regulation provided that the technical assessment will not be required for wind power plants, provided that part of the installation remains on the same site, that the total site size of the installation does not change, whether the change is required as part of a force majeure event and the installation is partially or fully operational. However, the opinion of the Direction Générale des Affaires Energétiques will be required for site modifications in the event of overlapping and intersection of wind turbines on neighboring land.
  • Termination of production licenses upon finalization of the sale of the affected production facility through an enforcement process: The amending regulation provided that the production licenses would be terminated in the event of the definitive sale of the production installation concerned by means of an enforcement procedure.
  • Obligation for holders of production permits to promptly notify the cancellation of their permits: The amending regulation introduces the obligation for holders of a production license to inform the Energy Market Regulatory Authority (“EMRA“) immediately, in the event that their permits, approvals and licenses, which are the basis of their production licenses, become invalid.
  • Obligation to submit environmental permits to EMRA for biomass power plants: According to the amending regulation, legal persons holding production licenses for operational biomass power plants must submit the permits they have obtained under the Environmental Permits and Licenses Regulation to EMRA within 24 months of the acceptance of their facilities. Even though the obligation to obtain the mentioned permits is already regulated by the Environmental Permits and Licenses Regulation, through the introduction of an additional obligation to submit the relevant permits to EMRA, a mechanism has now been introduced which will allow EMRA to monitor compliance with the license conditions. Biomass power plants operational from March 10, 2022 will have to comply with this obligation by March 10, 2024.

2. Provisions concerning authorized distribution and supply companies:

  • Additional provisions for the separation of the management of approved distribution and supply companies: The scope of dissociation of managers of approved distribution and supply companies has been extended to supply companies within the same control structure. The Amending Regulation also provided for a similar unbundling requirement for: (i) distribution companies and other companies providing services related to the electricity market within the electricity market, with the exception of other distribution within the same shareholding structure; and (ii) licensed supply companies and other companies providing services related to the electricity market within the electricity market, with the exception of other licensed supply companies within the same electricity market structure. shareholding. In the event of non-compliance with these provisions, it must be remedied by July 1, 2022.
  • Obligation for distribution companies to have their notification addresses in their own region: The amending regulations state that a registered notification address for a distribution company’s license cannot be at a location outside of the distribution area in which it operates. If there is currently a non-compliance with this requirement, the non-compliance must be remedied by July 1, 2022.
  • Obligation to set up a website for approved supply companies: It is now mandatory for licensed supply companies to set up and operate a separate website from other companies, including their parent companies, for their operations, in particular for operations subject to tariff regulation as part of their licenses.
  • Extension of the exception for distribution companies to obtain services for consumer services from third parties: Distribution companies were generally prohibited from receiving services from third parties for the operation of consumer service centers, with the exception of call centres. With the amending regulation, in addition to call centres, services received from third parties relating to debt collection operations are also included in the scope of the exemption. Thus, distribution companies will be able to receive third-party services for debt collection operations in addition to their call centers.

3. Provisions relating to transfers, mergers and splits of shares:

  • The notification obligation applicable to holders of a production license in the event of a transfer of shares or a change of control is extended to all holders of a license whose price is not regulated: The obligation to notify EMRA in the event of the sale of shares equal to or greater than 10% (5% for listed companies) or of a change of control, which previously only applied to legal persons holding production authorization will now apply to all permit holders whose tariff is not regulated.
  • EMRA now has the option of extending the six-month deadline for carrying out mergers and demergers: The amending regulation provides that the period of six months granted to a licensed company to carry out its merger and division after the licensee company is authorized to carry out the merger and division operation by EMRA can be extended by EMRA. As a result, EMRA now has the discretion to set a longer time frame for the completion of mergers and divisions.

4. Arrangements for storage facilities:

  • New Provisions for Obtaining TEİAŞ Approval for Storage Facilities: In accordance with the amending regulation, the opinion of TEİAŞ (the national electricity transmission company) will be requested for the integrated electricity storage units to be established for the production facilities (at the stage of pre-authorization or authorisation) and for independent electricity storage facilities to be established within the scope of a supply licence.
  • Environmental Impact Assessment (EIA) obligation for independent storage facilities to be established under the supply license: An EIA decision for independent storage facilities to be established under supply licenses shall be submitted to EMRA within the time period determined by the relevant EMRA board decision. It is expected that changes will also be made to the Environmental Impact Assessment regulations as a result.

Conclusion:

The amending regulation sets out various provisions applicable to production, distribution, authorized supply and supply license holders, and aims to adapt the regulatory framework to market developments.

The content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This may qualify as “lawyer advertising” requiring notice in some jurisdictions. Prior results do not guarantee similar results. For more information, please visit: www.bakermckenzie.com/en/disclaimers.