Georgia Energy Regulatory Partnership: Technical Assistance on Retail Electricity Market Rules

The technical assistance was undertaken under a cooperative agreement between the National Association of Regulatory Utility Commissioners (NARUC) and the United States Agency for International Development (USAID). The Consultant performed five tasks under the technical assistance, including a technical review of existing secondary legislation governing the retail electricity market in Georgia, on-site technical assistance and advisory services to GNERC, development of Draft Retail Electricity Market Rules, review of the draft rules, and finalization of the Retail Electricity Market Rules and completion of the Final Report. The Consultant made two one-week trips to Tbilisi, Georgia, to present technical reviews and work on developing draft Retail Electricity Market Rules. The key accomplishment of the technical assistance is that GNERC generally accepts the Retail Electricity Market Rules, which address questions and comments raised by GNERC staff over the course of the technical assistance. GNERC indicates it is prepared to implement the rules document once primary legislation is brought into compliance with EU requirements. Implementation of the Retail Electricity Market Rules will be defined by primary legislation necessary to bring Georgia into compliance with the EU and the negotiations for becoming a member of the Energy Community. The Retail Electricity Market Rules incorporate feedback received from GNERC staff and Commissioners. The rules address competitive supply, supplier of last resort, and customer switching. The Electricity (Capacity) Supply and Consumption Rules, which were reviewed by the Consultant, fall short of the needs of a competitive retail electricity market. The rules attempt to promote competition by allowing small hydro generators to enter into direct contracts with retail electricity customers, but the costs of the small hydro plants are much higher than the supply costs included in retail electricity tariffs, resulting in no contracts and no competition. The Retail Electricity Market Rules have been developed to address the weaknesses of the Electricity (Capacity) Supply and Consumption Rules. The rules have been simplified by removing technical details and referencing the Distribution Grid Code. The rules also address open access to the distribution system, which is covered in the Distribution Grid Code. The rules do not cover supply because there is currently no supply function identified in primary legislation, and a major modification is necessary to separate and address the roles and responsibilities of the entities performing the two functions. The Retail Electricity Market Rules are a comprehensive overview document required by Georgian law, covering legal and commercial arrangements. The rules include sections on competitive supply, supplier of last resort, and customer switching. The rules have been developed to transform the Electricity (Capacity) Supply and Consumption Rules into a Retail Electricity Market Rules document that is compliant with EU directives and facilitates the development of a competitive retail electricity market in Georgia.