Following in the wake of the recent price hikes in oil and the ensuing rise in the cost of natural gas production, the Turkish electricity market is also in a state of flux.

Following in the wake of the recent price hikes in oil and the ensuing rise in the cost of natural gas production, the Turkish electricity market is also in a state of flux. 

Private electricity company, Akenerji, the first private generating company in Turkey, announced on August 2nd that they would be applying to the Energy Regulatory Agency (EPDK) to cancel its licenses on two of its plants, as they now intend to terminate production.   Stating that the recent price rises in natural gas, which is used in the production of electricity, have made it impossible for them to cover their costs at both Denizli and Corlu, the company confirmed that they had no other choice but to close down the operations leaving a shortfall in energy production throughout the country. 

The Akenerji General Manager pointed out that as a public company they had to consider the rights of their 17,000 shareholders and they could not continue to produce or sell electricity at a loss. 

The major power cut suffered by 13 cities on July 1st was at first blamed on technical problems, but it became apparent that producers had refused to supply electricity that evening, as costs were too high.

The General Manager of Akenerji also stated that private producers of electricity may have to look to move their production plants abroad.  In May, the company were awarded contracts to build two new electricity production plants in Trabzon and Yalova and in June the World Bank approved a $350million loan to Turkey to support their efforts in power generation.

The Prime Minister is due to confirm soon what, if any, price increase electricity producers will be allowed to pass on to consumers – electricity producers are apparently hoping for a minimum 5% increase.

Production plants that utilise natural gas for producing electricity have to pay the government a special consumption tax (21YTL per 1,000 cubic metres) – coal and hydroelectric plants do not pay this consumption tax, but all electricity producers also have to pay a compulsory contribution to the state-owned TV channel TRT and this all adds to the ever increasing cost of producing as well as supplying electricity.
On 1st August a new system of hourly and daily pricing for electricity production was unveiled and it is hoped that this will help to offer a balance between supply and demand. The “Balancing and Compromising Regulation” (DUY) will help to regulate both private and public electricity generators and allow for consistency of supplies as well as help to create a more competitive market.  In essence all producers report their capacities to the Turkish Electricity Transmission Company (TEIAS) National Power Distribution Centre.  The centre will calculate  production costs, advise on selling prices and capacity and all producers will be informed of the forward month’s selling prices and whether to increase or decrease production.  The Centre will then be able to choose when to purchase electricity and from which supplier.

Whilst private producers will still be able to set their own prices, the new system should aid competitiveness and ensure continuous supplies at the most advantageous prices for consumers.
The government has pledged to continue to work with private electricity producers to help solve their current problems, but it seems almost certain that consumers will have to face price increases for electricity sooner rather than later.