Assessment of the Draft Auction Rules

The proposed auction rules were expected to facilitate fair and transparent interconnection capacity auctions, which are critical for investors' views on the viability of investing in Georgia's power sector. The rules were intended to be consistent with European approaches, as Turkey has joined the Energy Community, and accessing European markets will require harmonization. Georgia's perspective is that electricity market-related rules, including interconnection capacity auction rules, play a critical role in investors' views about the viability of investing in the power sector. The Auction Rules should send a positive signal to investors and be consistent with European approaches. The critical consistency for countries aiming to eventually join the energy community is compliance with specifications and procedures of the ENTSO-e, the European Network of Transmission System Operators for Electricity. The first draft of the Auction Rules was developed by HIPP experts and passed onto the Cross Border working group. The draft included nine chapters and two appendixes. After receiving the document, GSE prepared an initial version of Auction Rules based on the one proposed by HIPP, and delivered the document for review to the Cross Border working group. HIPP provided comments on the first draft of GSE's Auction Rules. After taking into account part of the HIPP's notes, GSE drafted and presented to the working group a 2nd version of the Auction Rules, which consist of 14 articles, with no appendixes. The key points of the assessment include re-assessing the exporting country concept in the Interconnection Operation Agreement (IOA), giving priority to renewable sources in auctions, defining the cascade concept of CTR auctions, and putting rules in place for daily auctions to maximize use of the interconnection. The assessment also recommends permitting CTR owners to receive auction revenue for resold CTRs, defining the firmness of CTRs, and providing a provision for CTR owners to be refunded the CTR cost if the availability of the interconnection is restricted. The definitions of key terms in the Auction Rules include "Allocated CTRs," "Auction," "Available Transmission Capacity," "Commercial Transmission Right," "Cross Border Electricity Trade Agreement," "Clearing Price," and "Georgian Electricity Market Model 2015." The definitions provide a clear understanding of the terms used in the Auction Rules and are essential for the implementation of the rules. The Georgian Electricity Market Model 2015 (GEMM2015) was developed by USAID through the HIPP and adopted by the Ministry of Energy of Georgia as a core strategy to help the country achieve its energy and social and economic development goals. GEMM2015 sets the concept for creation of a new electricity market model and electricity trade mechanism for Georgia. The Interconnection Operation Agreement (IOA) is a draft of an international agreement concerning cross-border electricity trade via the Akhaltsikhe-Borcka Interconnection Line, prepared to be signed between the Republic of Turkey and Georgia. The IOA establishes principles and obligations regarding the facilitation of electricity trade between the two countries, providing for the technical parameters of operation and maintenance of the Akhaltsikhe-Borcka Interconnection Line and ensuring the implementation of transfers of such quantities of electricity allocated pursuant to the Auction Rules. The Auction Rules proposed by GSE and HIPP have several differences, including the re-assessment of the exporting country concept, the priority levels for auctions, and the definition of the cascade concept of CTR auctions. The assessment recommends that the Auction Rules should be consistent with European best practice and HIPP's recommendations. The recommendations include re-defining the exporting country concept, giving priority to renewable sources in auctions, and defining the firmness of CTRs. The implementation of the Auction Rules will require the establishment of a clear and transparent process for allocating interconnection capacity. The rules should be designed to ensure that all traders have access to transmission capacity, and the allocation process should be fair and efficient. The Auction Rules should also provide a clear and transparent process for resolving disputes and ensuring the implementation of the rules. The Georgian National Energy and Water Supply Regulatory Commission (GNERC) will play a critical role in the implementation of the Auction Rules. The GNERC will be responsible for ensuring that the rules are implemented in a fair and transparent manner and that all traders have access to transmission capacity. The GNERC will also be responsible for resolving disputes and ensuring the implementation of the rules. The implementation of the Auction Rules will require significant investment in infrastructure, including the construction of new transmission lines and the upgrade of existing infrastructure. The investment will be critical for ensuring the efficient and reliable operation of the power system and for providing access to transmission capacity for all traders. The Auction Rules proposed by GSE and HIPP have several implications for the power sector in Georgia. The rules will provide a clear and transparent process for allocating interconnection capacity, which will be critical for ensuring the efficient and reliable operation of the power system. The rules will also provide a clear and transparent