Turkish companies expect gas, electricity tariff increases from April, survey

24 January 2018 16:09 Source:ICIS

Turkish energy companies are expecting a rise in gas and electricity end user tariffs from April, as the industry is struggling with high costs and negative margins, an ICIS survey has found.

Companies told ICIS they expected an average 7.9% rise in gas tariffs and a 5.45% increase in power tariffs.

Six of the ten respondents said there was a pressing need for a 10% rise in regulated gas tariffs for industrial, commercial and household consumers from April.

On the electricity side, there were only two companies that expected a 10% rise in tariffs to eligible and non-eligible consumers and two said the tariffs would not be raised at all.

The majority of interviewees said the most likely increase date would be April for both gas and power tariffs, but some expected the government to enact the increase from July.

One source said an increase would only happen next year, possibly after elections in November.

Tariff adjustments

At the end of last year the government raised electricity tariffs by 8.8% for the first quarter of 2018 and gas tariffs to gas-fired generators were increased by 8.5% to TL763.62/thousand standard cubic metres (kscm) (€16.24/MWh) and another 4.8% to TL800.00/kscm in January.

Earlier this month, it announced a tariff increase for electricity customers with consumption exceeding 50MWh/year, which will come into force on 1 April.

Companies said there is a need to raise tariffs to all types of electricity and gas customers because costs have risen, but tariffs to industrial, commercial and household consumers have remained unchanged.

On the gas side, companies have been facing steep purchase cost increases on two accounts. Firstly, the Russian oil-indexed import price for gas has been ticking up in line with crude prices. Secondly, the import price is denominated in US dollars, which means the 10% depreciation of the lira against the dollar over the last year has further increased costs.

The regulated tariff for industrial, commercial and household gas consumers has not been adjusted since 2016. This is despite the existing automatic pricing mechanism containing provisions for the government to reflect import costs and exchange range fluctuations in the tariffs.

On the electricity side, last year’s spot prices delivered 18% higher than the last forward price of TL139.50/MWh, assessed by ICIS for Calendar Year 2017 Baseload.

Tariffs to end consumers remained unchanged, forcing several retailers out of business as 2017 drew to an end. aura.sabadus@icis.com

Disclaimer

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

The survey targets a minimum of 10 companies, asking standardised questions and collecting data on an anonymous basis.

By Aura Sabadus