4 BASIC EFFECTS OF COVID-19 GLOBAL OUTBREAK ON LICENSE OBLIGATIONS IN TURKISH ELECTRICITY MARKET
As in the rest of the world, studies are carried out to offer electricity to consumers in an adequate, high quality, continuous, low-cost and environmentally friendly manner. As a result of the studies carried out in this context, the Electricity Market Law No. 6446 (“Law”), prepared for the purpose of creating a financially strong, stable and transparent electricity market and establishing an independent regulation and control mechanism in this market, entered into force on 31.03.2013.
Although obtaining a license from Energy Market Regulatory Authority is a legal obligation for legal entities who want to operate in the electricity market within the framework of the provisions in the law, it is also required to obtain pre-license from the Authority for the time to be passed until completion of the approval, permit and license proceedings required to commence and complete the generation facility.
In this context, the Electricity Market Licensing Regulation (“Regulation”), prepared for determining the procedures and principles regarding the licensing practices of pre-license and license holders who want to operate in the electricity market and the rights and obligations of the pre-license and license holders, published in the Official Gazette dated 02.11.2013 and came into force.
The Concept of Force Majeure in the Context of the Electricity Market Law No. 6446 and the Licensing Regulation
The concept of force majeure in the electricity market and the effects of force majeure on the obligations of pre-license and license holders are regulated in Article 35 of the Licensing Regulation. According to Article 35 of the Regulation, for an event to be evaluated as a force majeure, although the affected party has taken the necessary care and attention and took all precautions, the incident should not be prevented, avoided and predicted, and this situation should prevent the affected party from fulfilling its obligations under the relevant legislation.
In the mentioned article of the Regulation, there are some force majeure situations are counted such as natural disasters, epidemics, war, nuclear and chemical spills, mobilization, public uprisings, assault, terrorist movements and sabotage, strikes, lockouts or other civil servant and worker movements and it is stipulated that the events that can be regarded as force majeure not limited to those listed in the Regulation.
According to Article 35 of the Regulation, the obligations of the pre-license and license holders arising from the relevant legislation may be postponed or suspended by the Board decision, in the cases where they are affected by force majeure and until the effects of force majeure are eliminated. In cases where it is understood that the said obligations cannot be fulfilled, it may be decided by the Board to remove the obligation of the pre-license and license holder, which is affected by force majeure.
Activities that are Impossible to Postpone or Stop Due to Force Majeure in the Electricity Market
Although it is not possible to postpone or abolish the obligations related to transmission and distribution activities due to force majeure as per the Regulation, it is obvious that an opposite practice will not be compatible with the social state principle. For example, in Article 8 of Law No. 6446, it is stipulated that the transmission activity is conducted by TEİAŞ, since TEİAŞ, a public company that is the property of transmission assets, is also operating as a system operator or market operator, it is unquestionable that it will be contrary to the public benefit of postponing or abolishing the obligations related to the transmission due to force majeure. Likewise, given the natural monopoly character of the distribution activity, it is indisputable that the distribution companies provide uninterrupted service to the consumers in their region, which is an indispensable service for the purpose of public benefit. Consequently, since it is clearly seen that providing uninterrupted and quality electricity supply is indispensable for the public benefit, it is seems that postponing or abolishing the transmission and distribution activities will be clearly contrary to both public benefit and social state principles considering that electricity usage is of vital importance for consumers to continue their daily activities. For this reason, it is undisputed that the regulation that the transmission and distribution activities cannot be suspended due to force majeure is highly appropriate.
4 Main Effects of Force Majeure Application According to Electricity Market Law
From the provisions regarding force majeure application in the electricity market, a table emerges as follows;
- Force Majeure in the Pre-License Period
According to Article 6 of the Electricity Market Law, the term of pre-license cannot exceed 36 months except for force majeure. However, in case of force majeure, this period can be extended. The term of pre-license can be amended within the scope of force majeure specified in Article 35 of the Regulation.
- Force Majeure in the License Period
Under Article 5 of Law No. 6446, it is regulated the license principles, and in paragraph 6 of this article it is stipulated that except for force majeure and justified reasons not resulting from the license holders, in cases where the legal entity fails to establish the generation facility within the construction period specified in the license thereof or where it is fixed that the generation facility may not be completed within the remaining period, the license shall be cancelled. However, it is stipulated that in case of force majeure and for justified reasons not resulting from the licensee, if the said situations directly affect or may affect the establishment of the generation facility, it is necessary to apply to the Authority with the reasons and documents within facility construction period specified in the license.
- Force Majeure in the Return of Guarantees
The letters of guarantee received within the scope of the pre-license application, if the application is abandoned after the license application is started to evaluate or the license application is rejected for a reason except for force majeure and justified reasons not resulting from the licensee, will be recorded as revenue.
Except for force majeure and justified reasons not resulting from the licensee, in cases where the legal entity fails to establish the generation facility within the construction period specified in the license thereof or where it is fixed that the generation facility may not be completed within the remaining period, the license expires or be cancelled for any reason before the temporary acceptance of the generation facility, the letter of guarantee shall be recorded as revenue.
- Provisional Article 9 of the Electricity Market Law No. 6446
A force majeure effect is also regulated in the Provisional Article 9 titled “Procedures with respect to licenses not put into operation or failed to be put into operation” of the Law No. 6446. Accordingly, the legal entities which, during the pre-construction period included in the generation license, could not consummate their obligations they need to fulfil in order to commence the construction of generation facility shall be granted a period of six months only or, if any, in addition to the remaining construction time thereof. Except for the force majeure, the licenses of the legal entities failing to fulfil their obligations within the said duration shall be revoked.
The Effect of Covid -19 Global Outbreak on License and Pre-License Obligations
As clearly stated in the Regulation and accepted by the Supreme Court, epidemic diseases are evaluated within the scope of force majeure; it is indisputable that Coronavirus, which first appeared in Wuhan, People’s Republic of China in December 2019, then spread all over the world and was declared as a pandemic (“Epidemic”) with the statement of the World Health Organization dated March 12, 2020, is a force majeure.
In the light of both legal regulations and other judicial decisions made in the past years (such as the SARS virus outbreak that started in 2003 in China), the coronavirus (Covid-19), which has influenced the whole world and our country, is also accepted in the global dimension as a force majeure objectively.
Accordingly, with the decision of the Energy Market Regulatory Authority published in the Official Gazette dated 04/04/2020 and numbered 31089 (Reiterated), the new type of coronavirus (Covid-19) epidemic affecting the whole world and our country is accepted as force majeure under Article 35 of the Electricity Market Licensing Regulation Article 19 of the Electricity Market Unlicensed Electricity Generation Regulation. Through this decision;
- 1. If within the scope of Electricity Market Licensing Regulation (Regulation) on the date of 10/03/2020 or later in terms of term liabilities of legal persons holding pre-license or license;
- Pre-license durations and pre-construction period and construction period within the scope of generation license or obligation deferral periods within the scope of Provisional Article 15 of the Regulation,
- Durations regarding obligations determined within the scope of pre-license or license amendment works,
- Durations regarding liabilities determined within the scope of merger or division operations,
- Durations regarding the obligations determined within the scope of granting a generation license as a continuation of the prior one,
- Durations given for gathering the necessary information and documents within the scope of pre-license or license applications,
- Durations regarding the applications to make within the scope of the second paragraph of Article 18 of the Regulation,
have expired or will expire, to be valid from the expiration date of and for one time only, the durations in question have been decided to evaluate as extended for 3 (three) months without any action and the Electricity Market Department has been authorized in this regard.
- For the real or legal persons, of which generation facility is envisaged to be established under the Unlicensed Electricity Generation Regulation in the Electricity Market and duration of the connection agreement expires on the date of 10.03.2020 or later, to be valid from the expiration date and for one time only, the durations in question have been decided to evaluate as extended for 3 (three) months without any action and the Electricity Market Department has been authorized in this regard.
Through this decision, these durations have been extended for 3 months due to force majeure for those whose term will expire on 10.03.2020 or later in terms of their term liabilities.
However, if the coronavirus (Covid-19) epidemic’s force majeure effects continue at the end of the additional period granted to the right holders and in case of it is not decided to extend the time again due to force majeure by the Board, right holders need to explain the things following by applying to Energy Market Regulatory Authority for force majeure;
- The starting date and nature of the force majeure,
- Its effects on its obligations under the relevant legislation,
- If possible, the estimated time of removal.
Applications made by the right holders to the Authority are concluded with the decision of the Board within 60 days from the completion of the necessary information and documents.