Turkish traders expect tariff rise, but not until 2018 or later

Source: Heren


Turkish energy companies expect an increase in the regulated electricity tariff, but not until next year or later, as changing market conditions are making the need for a hike less pressing, an ICIS survey has found.

Electricity and gas companies interviewed by ICIS throughout the week expect an average 7.1% rise in regulated electricity tariffs and an average 4.5% hike in gas tariffs.

Nonetheless, expectations vary both in terms of the likely increase and the actual date when they would be raised.

Wide expectations

In terms of gas and power tariff increase expectations these range from as little as 3% to as high as 15%.

However, companies took a much less consistent view regarding the period when the hikes would be enforced.

On the gas front, six out of 10 companies interviewed by ICIS said there would not be a tariff increase in the foreseeable future. Three companies expect the gas tariff hike to happen from 1 April 2018, while one said the rise may not be enforced until the first quarter of 2019.

On the electricity market, two companies said they were not expecting any increases at all.

Three companies said they were braced for an increase from 1 January 2018, another three thought the rise was likely to happen in Q2 ’18, one expects it as early as 1 October 2018, and another one as late as 1 July 2018.

The results of the survey differ from an earlier poll in June when companies said they expected a 4% rise in power tariffs and a 6.5% hike in the gas tariffs. Furthermore, while most companies expected back in June the tariff to rise this year, those expectations are now pushed further away to 2018 and even 2019.

Changing conditions

This is because electricity prices have been on a consistent upward march throughout the summer, as demand soared to record levels and supplies, particularly on the hydro side, fell because of an ongoing drought.

The bullish spot prices lifted curve values, squeezing electricity retailers, who typically buy from the free market and sell their volumes on to customers at a regulated tariff. This meant that with soaring delivery prices their profit has been shrinking, raising the need for a tariff increase to help them avoid bankruptcy.

Nevertheless, while retailers have been watching with concern their shrinking margins, producers who were hit by last year’s falling spot prices, have been cheering as delivery values have been climbing higher and higher, allowing them to switch to profit.

On the other hand, market fundamentals, which typically trigger the need for tariff increases – the depreciation of the Turkish lira or high oil-indexed import gas prices – have simply not featured over the past months.

The Turkish lira, which dropped to record levels earlier this year, has been on a steady trajectory ever since, while import gas prices have been reined in, reflecting falling crude values.

Growing expectations that Russia’s Gazprom may offer a 10.25% discount to the state company BOTAS reduce even further the need for a gas tariff increase.

Furthermore, companies believe that the government may have only a short window to bring in a tariff increase, if at all. This is because Turkey is expecting another electoral cycle in 2019, and any tariff increases could alienate the electorate from voting the ruling AKP into power again. aura.sabadus@icis.com


While changes in the price of natural gas and electricity tariffs are the remit of the Turkish government, ICIS has intermittently run surveys since the beginning of 2012. The survey aims to reflect market participants’ expectations for tariff increases or decreases, and follows their request for greater transparency in the Turkish electricity and gas markets.

The survey targets a minimum of 10 companies. It asks standardised questions and collects data on an anonymous basis.

The average of the expected tariff increase or decrease reflects the arithmetic average of all the percentage figures submitted to ICIS.

The timing of the anticipated tariff increase reflects the mean of all the percentage figures submitted to ICIS each month.