Electricity

State of Compliance 

According to the Protocol on the Accession of Georgia to the Treaty establishing the Energy Community signed on 14 October 2016 in Sarajevo, Georgia shall implement Directive 2009/72/EC concerning common rules for the internal market in electricity and Regulation (EC) 714/2009 on conditions for access to the network for cross-border exchanges in electricity by 31 December 2018. Directive 2005/89/EC on security of electricity supply and infrastructure investment shall be implemented by 31 December 2019.

Georgia is expected to adopt a law harmonising its national legislation with the Third Energy Package by the end of 2018.
 

  • Unbundling

    Unbundling

    Presently, the legislative framework of Georgia does not transpose the requirements for unbundling of transmission and distribution system operators as foreseen by Directive 2009/72/EC. Nevertheless, the obligation to conduct separate accounting is in place. According to the Law of Georgia on Electricity and Natural Gas, when a legal entity holds more than one license, or is engaged in another commercial activity in addition to the licensed activity, it is required to keep separate accounts for revenues, expenses, assets, liabilities, financial outcomes and equity capital for each of the licensed activities and/or other commercial activities.

    The State has almost full control over the transmission system in Georgia and owns shares in the distribution sector. The network ownership scheme in place does not comply with the requirements for transmission system operator unbundling, as defined by the electricity acquis.

  • Access to the system

    Access to the system

    Third party access to the electricity network is guaranteed to certain categories of customers by the legislation of Georgia. The Law on Electricity and Natural Gas provides that persons or legal entities eligible to sell electricity directly to electricity customers shall have access to the electricity transmission and distribution systems of the relevant licensees. Furthermore, the Electricity Market Rules prevent licensed network enterprises from denying interested parties access to their own networks, unless such a refusal is justified by network congestion or non-payment of the network tariff. The network tariff, set by the regulator, is based on the incurred expenses and the volume of transferred electricity.

  • Wholesale market

    Wholesale market

    The existing wholesale electricity market in Georgia is based on bilateral agreements between the sellers and buyers, which become effective upon registration with the Electricity Market Operator (ESCO). The wholesale market participants are electricity transmission and dispatch licensees and the so-called qualified enterprises, which include electricity generation and distribution licensees, small power plants, importers, exporters, the electricity market operator and final customers. Any person willing to participate in wholesale trade must register with ESCO. Power generation from strategic facilities (large-scale hydro) is regulated.

    The Electricity Market Rules set the minimum electricity consumption threshold for final customers to purchase electricity for their own use under non-regulated conditions on the wholesale market, i.e. the existing Electricity Market Rules define the eligibility criteria. The threshold has been reduced from 1GWh to 1kWh in 2017, rendering virtually any customer eligible to participate in the wholesale market. However, due to the lack of maturity with respect to market development, the practical significance of the threshold decrease is low. In fact, some of the large customers have chosen to switch back to the regulated tariff system. The number of customers participating in the wholesale trade of electricity has been consistently decreasing. Presently, only four of them remain.

     

  • Retail market

    Retail market

    The electricity distribution and supply activities in Georgia are not separated, which represents a substantial barrier to the development of a competitive retail electricity market. Retail customers are supplied by the electricity distribution companies (since unbundling is not applied yet) at regulated prices. However, customers have the right to purchase electricity directly from small power plants (up to 13 MW) based on direct agreements at non-regulated electricity prices. Nevertheless, due to the absence of a competitive electricity retail market, non-regulated direct agreements between retail customers and small power plants are not common. In fact, no such agreement has been executed during the last two years.

  • Regional integration

    Regional integration

    The electricity system of Georgia is interconnected with the systems of all neighbouring countries. Georgia’s power system mainly operates in a synchronous regime with the systems of the Russian Federation and Azerbaijan. In addition, the Georgian power system operates in a parallel asynchronous regime with the system of Turkey. The dispatch licensee is responsible for management of parallel operation of the power systems and for this purpose executes necessary agreements with the neighbouring systems.

    Due to the seasonal changes in the patterns of supply and demand and dependence on hydropower, Georgia needs to import electricity during the winter period. Electricity import and export are not subject to licensing and any person may engage in such activities, based on direct agreements. The price for imported electricity is subject to the cap calculated in accordance with the methodology laid down in the Resolution on Electricity Tariffs of 2008 adopted by the regulator. Imports of the cheapest electricity are granted priority. Exporters, on the other hand, are free to determine the price. However, when exporting balancing electricity, the exporter is required to purchase the most expensive electricity from ESCO.