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Legal Alerts

Turkey extends incentives in electricity sector

Legal Alerts
Energy, Mining & Infrastructure

Recent development

A number of changes to the Turkish electricity market were enacted by a decision of the Council of Ministers Decision No. 2015/8317, dated December 14, 2015, and various decisions of the Energy Market Regulatory Authority (“EMRA”) in December 2015. These decisions introduced significant changes such as the extension of incentives under the Electricity Market Law, a new eligible consumer threshold, and the continuation of the national tariff.

Main highlights

Price Equalization, Unified National Tariff and Cross-Subsidization

The Council of Ministers’ decision extended the term of the price equalization, unified national tariff and cross subsidization mechanisms until December 31, 2020. The price equalization mechanism allows a nationwide price to be applied to consumers, despite fluctuating cost differentials between the 21 different electricity distribution and retail sale regions in Turkey, through a national tariff and cross subsidization between regions.

Extension of Incentive Terms

Provisional Article 4 of the Electricity Market Law outlines incentives for power plants commissioned before December 31, 2015. These incentives have now extended until December 31, 2020. Power plants commissioned by December 31, 2020 will benefit from (i) a 50% discount on transmission system usage fees for five years following commissioning, and (ii) a stamp tax exemption for documents signed in connection with the power plant for five years following commissioning.

General Illumination Costs

Pursuant to Provisional Article 6 of the Electricity Market Law, street lighting costs for roads and common areas are borne by the Ministry of Energy and Natural Resources and municipalities, rather than distribution companies, until December 31, 2015. The Council of Ministers’ decision extended this period to December 31, 2017.

New Eligible Consumer Threshold

EMRA, by a decision dated December 24, 2015, reduced the annual eligible consumer threshold from 4,000 kWh to 3,600 kWh for 2016. As a result, consumers that consume more than 3,600 kWh of electricity per year will be able to buy electricity through energy sales agreements from the electricity wholesale company of their choice. The threshold is expected to be reduced to 0 kWh in the near future, allowing full liberalization of the electricity market. The eligible consumer threshold for the natural gas market remains unchanged under EMRA’s decision dated December 17, 2015.

Electricity Retail Sales Profit Margin

The ceiling for the gross profit margin of retail electricity sales was fixed at 2.38% for 2016-2020 by an EMRA decision dated December 16, 2015.

Similarly, the Communiqué on Transmission Income, regulating the calculation of the transmission fees, and the Communiqué on Market Operation Fees were published on December 30, 2015.

Market Operation Income

The Communiqué on Market Operation Income was published on December 22, 2015, abolishing the previous communiqué. The communiqué changes the procedure for adopting the market operation tariff by the Istanbul Energy Exchange (EPİAŞ) instead of the former market operator, the Turkish Electricity Transmission Company. Additionally, the formula for the calculation of the tariff has been simplified and modernized, taking into account both the opportunity cost of capital as well as research and developments costs.

License Fees

EMRA, in a decision dated December 17, 2015, announced new pre-license and license issuance, re-issuance and amendment fees, as well as license fees. The new fees are effective January 1, 2016. According to the decision, pre-license and license issuance fees range from TRY 5,800 to TRY 290,300, depending on the installed capacity of the power plant; and the annual license fee is TRY 0.003 per generated kWh.


While most of the changes were expected, the extension of incentives is a positive development for electricity generation activities and supply security. The impact of the developments related to distribution and retail sales companies, such as the ceiling profit margin, should be evaluated in light of the investment programs for 2015-2020.
Please contact us if you have questions about how these changes might affect your company.