New distribution regulation could hit Turkish wholesale companies
A new regulation on electricity distribution in Turkey could dent profit margins of companies active on the wholesale market, sources said Thursday.
Turkish regulator EMRA approved a new commercial tariff this week currently paid as a subsidy to distribution companies. The subsidy, which helps distribution companies offset grid losses, is expected to drop from Turkish lira (TL) 218.00/MWh to TL185.00/MWh.
A lower tariff will mean distribution companies passing the cost of grid losses on to the end consumer set to shoulder the decrease in the subsidy.
Although the regulation does not directly affect wholesale companies, they insist there could be a domino effect on producers who sell capacity to distribution companies, and who could see profit margins going down as a result.
"At the moment, distribution companies can offer discounts on long-term contracts to eligible consumers. However, when the new prices kick in, it will be hard to offer such discounts," a Turkish source said.
How customers react to the new tariff will be crucial, he said, adding that distribution companies will have to move fast to enable them to offer and sustain viable discounts while keeping an eye on margins.
However, EMRA insists the new regime would have a beneficial affect on the market as a whole. The private distribution sector is expecting investments of €4.2bn over the next five years.
Wind of change for renewables
The approval of green tariffs by the Turkish parliament this week also will impact energy companies going forward. Prices have been set at 7.3 US cents/kWh for wind and hydroelectric energy generated in licensed plants, 13.3 US cents/kWh for solar and 10.5 US cents/kWh for geothermal energy.
Additional incentives for using Turkish-produced equipment could add up to 2.4 US cents/kWh to the purchase price for five years, according to local reports.
The prices will cover energy firms established between May 2005 and 31 December 2015. Energy bought from companies established after that date will be sold at new prices revised by the Cabinet.
The new law also will limit the volume of energy that the state is allowed to buy.
It also limits the total production of licensed solar energy companies to 600MW annually until December 2013. AS
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