Draft Outline on Third Party Access

The program aims to improve Georgia's security of supply by promoting the expansion of renewable energy projects. Task 1 of the program supports the development of competitive electricity and electricity markets, including cross-border energy trading. The enabling environment in the Georgian electricity sector requires further development and enhancement to meet the requirements of Georgia's Accession Protocols of the Energy Community Treaty. Under an agreement between USAID Georgia and the Georgian National Energy and Water Supply Regulatory Commission (GNERC), the USAID Energy Program is supporting GNERC in drafting several secondary legislative acts during 2018. Non-discriminatory third-party access to transportation infrastructures in electricity - transmission and distribution networks - is essential for open and effective competition in wholesale and retail electricity markets. Competition in wholesale energy markets is possible and desirable as it will lead to lower prices, increase innovation, improve the quality of the service, foster investment in energy infrastructure, and promote renewable energy sources. Transmission assets are generally considered natural monopolies as they are not economically duplicable. Because of their 'bottleneck' nature and their essentiality to transport electricity from generators to end consumers, network owners may use them anticompetitively. To mitigate these competition risks, it is necessary to grant access to transmission networks to all electricity generators on a non-discriminatory basis through open access tariffs authorized and overseen by energy regulators. Nonetheless, Third Party Access (TPA) alone is insufficient. TPA must be made effective in order to promote and protect competition in electricity and gas markets. This is done by imposing rules regarding the 'unbundling': the functional, control or structural-based separation of the generation and/or supply assets from the physical transmission or distribution networks. The European Parliament and the Council adopted the Third Energy Package on July 13, 2009, paving a way to a fully competitive electricity and gas markets in Europe. One of the important elements in liberalization of the electricity and gas markets is assurance of the third party access to the networks, and this could be done by unbundling of monopolistic network activities from the competitive generation and supply activities. In the EU, competition law has played an active and important role to complement and sometimes implement regulatory law in energy markets since the early 2000s. A review of the Commission's practice and the case law shows that EU competition law has been used to implement TPA and unbundling requirements, even in the light of regulation. The report is drafted pursuant to draft Law of Georgia on Energy, Article 65 – Third party access to the transmission system and Article 88 - Third party access to the distribution system and in conformity with Georgian National Energy and Water Supply Regulatory Commission's (GNERC) Organization, Operation and Procedures Rules. This report takes into consideration and obeys where necessary the requirements under the Law of Georgia on Energy, Operational Rules for Electricity Supply by Supplier of Last Resort, Electricity Market Rules, Network Rules, Rules on Commercial Service Quality, and Electricity/Capacity Supply and Consumption Rules. Third Party Access refers to market access by any eligible party on a fair and equal basis, enabling two and more parties to use transmission or distribution network belonging to another party for electric power transfers. The goal of providing reliable and economic electric service is achieved through regulatory constructs that define the rights and obligations of the parties, operational procedures, economic conditions, and incentives for networks.