State of compliance / Priorities
In accordance with the requirements of the Third Energy Package, GNERC is a single authority with nation-wide competences in regulating electricity and natural gas sectors in Georgia. Since GNERC was established by law, it would require a decision of the parliament to liquidate it.
The competences of GNERC under the applicable legal framework largely reflect the requirements of Directive 2009/72/EC and Directive 2009/73/EC. The main shortcoming of GNERC’s regulatory scope is that in 2005 the power to approve Electricity Market Rules and Gas Market Rules – the key documents regulating electricity and gas markets in Georgia – was shifted to the Ministry of Energy of Georgia, which adversely affects GNERC’s regulatory authority.
Another critical issue is inadequate amount of fines that may be imposed by GNERC. While the Energy Community acquis requires that penalties on energy undertakings in breach of their obligations are effective, proportionate and dissuasive, the amount of penalties foreseen by the legislation of Georgia may be considered to meet this requirement only in case of small undertakings, while they are completely inadequate when large undertakings are concerned.
A high level of independence of GNERC is guaranteed by the applicable legal framework. The Law on National Regulatory Authorities provides that national regulatory bodies must be independent from any political pressure or unlawful interference from state authorities and other bodies, or any other actions that may impinge on their independence. The law provides a comprehensive definition of independence and prohibits any attempt of interference or control of GNERC’s activities.
Financial independence of GNERC is also guaranteed by the law. GNERC determines and publishes its own budget, which is formed by regulatory fees paid by entities carrying out activities that fall within the scope of GNERC’s authority. GNERC publishes annual reports on its activities and sends them to the president, the government and the parliament for informational purposes. GNERC is required to conduct financial audits and publish annual financial reports.
Procedures for appointment of GNERC commissioners are complicated, aiming to ensure their independence. However, due to the lack of timeframe for completion of these procedures, the ability of GNERC to function properly might be at stake under certain circumstances, which has been proved by past experience. In implementing the Energy Community acquis, a selection committee, composed of neutral, high-level experts in the field of energy, regulation and administration, should be introduced for selection of commissioners. Moreover, criteria for appointment of commissioners should be defined more specifically. Vacancies for commissioner posts should be announced publicly, and terms of commissioners should be limited to a one-time renewal. Contrary to the requirements of Directive 2009/72/EC and Directive 2009/73/EC, there is no limit to the number of times a commissioner’s term may be renewed. The rotation scheme was applied to the first three commissioners, while the law requires that if a commissioner is dismissed prior to expiration of the term, the new commissioner should be elected for the remainder of the term.