Comments on Draft Energy Law

The program's objectives include building the capacity of the Government of Georgia (GoG) to evaluate the fiscal and long-term impacts of regulatory changes, promoting energy investments, primarily in Variable Renewable Energy (VRE) development, and providing strategic advisory services to increase Georgia's energy security. Georgia's membership in the European Energy Community (EC) undertaking obliges the country to implement mandatory reforms in the energy sector in compliance with European Union (EU) Energy Aquis. The country is committed to integrating into European and Euro-Atlantic organizations and transposing best practices of leading European states into all sectors, including the energy sector. The Association Agreement (AA) signed between Georgia and the European Union in September 2014 serves as the foundation for developing a sustainable, competitive, and secure energy sector. The USAID Energy Program has reviewed the draft Energy Law, which considers most of the recommendations provided to the GoG in past years. The draft law addresses key reforms, including third-party access to electricity and gas transmission and distribution networks, establishment of trading based on bilateral contracts, creation of energy traders, development of balancing markets, and unbundling of Transmission System Operator (TSO) and Distribution System Operator (DSO). However, the USAID Energy Program notes that the draft law is more general and provides different options for institutional setup of energy entities and market setup, while the law should clearly specify obligatory provisions. The program also questions the necessity and role of adopting the Electricity Market Concept Design, especially on the secondary level. The draft Energy Law includes definitions for key terms, such as "ancillary services" and "day-ahead natural gas market." However, the USAID Energy Program suggests modifications to these definitions to ensure clarity and consistency with international practices. For example, the program recommends substituting "short-term" for "day-ahead" in the definition of "day-ahead natural gas market" to include all natural gas exchanges/trading platforms, including exchanges, hubs, and Virtual Trading Points (VTPs). The USAID Energy Program's comments on the draft Energy Law are intended to support the GoG in developing a comprehensive and effective energy law that promotes a competitive and secure energy sector in Georgia.