State of compliance
The Georgian National Energy and Water Supply Regulatory Commission (GNERC) is the single authority equipped with nation-wide competences in regulating the electricity and natural gas sectors in Georgia. To this extent, the institutional framework corresponds to the requirements of the Energy Community acquis communautaire, albeit the Third Energy Package has not been transposed into Georgian legislation yet. GNERC is headed by four commissioners, each with a term of six years in office. A rotation scheme is in place. The position of one commissioner is currently vacant. The regulator is granted a large degree of independence by law, including budgetary autonomy as well as the management’s right to design internal organisation and staff salaries.
A central legal shortcoming entails the lack of a limit for the renewal of commissioners’ terms and criteria for the selection of commissioners. A clear timeframe for the procedure of appointing commissioners is also not in place, which has in the past put at stake the ability of GNERC to properly function. The competences of GNERC are largely in line with the Third Energy Package except for the right to approve electricity and gas market rules, which has significant adverse effects on GNERC’s regulatory authority. The regulator has the right to carry out inspections of regulated undertakings and issue penalties, although the latter does not amount up to the level required by the acquis and in praxis has been unable to have an effective deterrent effect.
GNERC’s staff has shown a high level of readiness to engage in Energy Community activities from the start of the country’s membership. This also includes active participation and leadership in ECRB, including the president as well as deputy chair positions in two ECRB working groups. On national level, GNERC has pro-actively contributed to the process of reforming the national legal framework, which is, however, yet to be adapted to completely align the regulator’s organisational framework with the acquis. GNERC also included the Network Code Regulations for electricity into the national grid code.
The authority was unable to take decisions from September to October 2019 due to delayed appointment of a new chairperson resulting from a conflict of the by-law foreseeing the right of the President of Georgia to appoint GNERC’s chairperson. A recent change of the Gas and Electricity Law gives the commissioners the right to elect a chairperson among themselves. This overcame the deadlock but introduced a new risk for effective operation of the regulator: the fact that election requires a qualified majority of at least three commissioners can lead to a perpetual tie in case only three commissioners are appointed and more than one of them applies for chairmanship. Also, the reduction of the chairperson’s term from six to three years entails an element of instability for GNERC’s continuous and predicable work.