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Energy Regulations in Bulgaria and Turkey a Comparative Study

By ILIEV & PARTNERS Law Office, Sofia / Bulgaria and
ADMD Law Office, Istanbul / Turkey

After Bulgaria became a member of the European Union at 2007, EU acquis became part of Bulgarian domestic law and although Turkey is not a member to EU, accession process as a candidate country covers legal compatibility therefore making both these jurisdictions closer to each other, however, still not fully compatible. Since the private energy trading barriers between the market players on both sides of the border is a recent development the main aim of this brief article is to give a bird view on energy law in both legal systems and make a comparative study. The comparison that will be attempted herein will be based on general information on regulations and licensing. Although there are differences between energy type classifications as well this article will focus on the most global definitions of such classifications.

1/ Introduction

Bulgarian and Turkish energy law systems are based on various acts, regulations and rules. The Bulgarian energy sector is governed by one single act; Energy Sector Act (hereinafter ESA). This act covers all basic principles about all kind of energy types and settles the public relations with regards to the implementation of the activities of production, import and export, transfer, transit transfer, distribution of electric and heat energy and natural gas, transfer of oil and oil products through pipelines, trade with electric and heat energy and natural gas, as well as the legal powers of the state structures in determining the state policy, regulation and control.

Unlike the Bulgaria, Turkish energy sector is not governed by one single act. Each energy type has its own law and completing regulations. As it will be detailed below legal arrangements are separated under Electricity Market Act, Natural Gas Market Act and the Act for the Use of Renewable Energy Sources for Electricity Generation.

In Bulgaria, the regulation of the activities in the energy sector, water supply and sewerage infrastructure are carried out by the State Commission for Energy and Water Regulation (hereinafter the Commission). The Commission is an independent, specialized state structure - a corporate legal person with headquarters in Sofia, Bulgaria. It is a collective body consisting of 13 members, including a chairman and two deputy chairmen. The chairman, the deputy chairmen and the members of the Commission are elected on the basis of a decision of the Council of Ministers and are appointed by the Prime Minister.

In Turkey, the activities in energy sector are regulated by Energy Market Regulatory Authority (hereinafter the Authority); a legal entity possesses administrative and financial self determination. Main purpose of the Authority is to organize a financially powerful and transparent energy sector to be act in competitive environment. Similar to the Commission, the Authority is responsible of making an independent regulation and supervision for serving energy to consumers in adequate, qualified, constant, low-priced and efficient ways. The Board of Authority has 9 members, including the chairman and a deputy chairman. Lawsuits filed against Board decisions are resolved at the highest administrative Court in Turkey that is called the Council of State (Danistay).

2/ Public Procurement

Public procurement in energy market is related with the necessity and demand of the energy. Under Turkish energy laws, tender procedure is pursued with principles noted in the following codes: Turkish Governmental Procurement Act (Law Number 2886), Turkish Public Procurement Act (Law Number 4734), Turkish Public Procurement Contracts Act (Law Number 4735) and Energy Market Regulatory Authority Regulations. Procurements are announced to public. Companies who wish to apply to tender, firstly apply to Energy Market Regulatory Authority for "Sufficient Qualifications Certificate". As a general rule, there is no limitation or quotations for application of foreign investors. All applications qualifications are same as Turkish nationals. However in Bulgaria, EU Member State applicants and other foreign applicants are treated differently. If the tender is won by a foreign entity not from a Member State, then a license has to be issued to such an entity where the foreign shareholding is more than 67% of the capital.

3/ General Principles of Licenses:

Function of the license is same in both countries. License is a certificate of authorization given by authorized institution to legal entities for the purpose of performing energy market activities. Bulgarian system regulates one type of license for any and all kinds of energy. On the other hand, Turkish system describes different elements to licenses for each kind of energy types.

3.1. Principles of Bulgarian Energy Sector Licenses:

Bulgarian energy sector activities that are subject to licensing under ESA are:

production of electric and/or heat power;
transfer of electric power, heat power or natural gas;
distribution of electric power or natural gas;
storing of natural gas;
trade with electric power;
organizing of market of electric power;
public supply of electric power or natural gas;
transit transfer of natural gas;
supply of electric power or of natural gas by end suppliers;
management of the electric power system;
distribution of electric power to distribution networks of the railway transport.

The license allows the implementation of some of the above mentioned activities under conditions set forth therein and it is an integral part of the decision for its issuing. If a license is issued before the construction of the energy site for performing the relevant activity, the license has to include the conditions for the construction of this site and a term of commencement of the licensed energy activity.

Issuing a license is not necessary for:

production of electric power by a person-owner of electric power station with overall installed capacity up to 5 MW;
production of heat power by a person-owner of a heat power station with overall installed capacity up to 5 MW;
transfer of heat power by a person-owner of heat transfer network, to which are connected power stations with a overall installed capacity up to 5 MW;
production of heat power for own consumption only.

License is issued to a corporate legal person registered under the Commercial Act which has the necessary technical, financial, material and human resources and an organizational structure for meeting the legal requirements for performing the licensed activity or has real rights on the energy sites by means of which it will carry out the activity, if they are built or which gives proof that the energy sites by means of which the licensed activity will be performed correspond to legal requirements for safety and for environmental protection. It shall also be mentioned that a license may also be given to a legal person incorporated and existing under the law of a Member State of the European Union or of another country - party to the European Economic Area Agreement in accordance with the above mentioned conditions.

Only one license may be issued on the territory of the country for:

transfer of electric power or natural gas;
organizing market of the electric power;
public supply of electric power or natural gas;
management of the electric power systems.

Only one license may be issued for one outlined territory for:

distribution of electric power or natural gas;
supply of electric power or natural gas by end suppliers;
transfer of heat power.

One outlined territory of distribution of electric power has to comprise no less than 150 thousand consumers connected to the distribution network This territory must include at least one region according to the administrative and territorial structure of the state. For an outlined territory only one license for supply of electric power by end suppliers is issued. One outlined territory of distribution of natural gas has to include no less than 50 thousand consumers who might be connected to the distribution network. Moreover for an outlined territory only one license for supply of natural gas by end suppliers is issued.

The holder of the license for management of electric power system may not be granted another license for other licensed activity under ESA except for a license for organizing a market of electric power.

The licensee for transfer of natural gas may not be granted a license for another licensed activity under ESA, except for a license for storing natural gas and a license for transit transfer of natural gas. The holder of a license for transfer of natural gas may not trade with natural gas.

Persons to whom license has been issued for distribution of electric power may not be granted licenses for other licensed activities under ESA.

Persons to whom license has been issued for distribution of natural gas, may not be granted licenses for other activities subject to licensing under ESA, except for a license for public supply of natural gas or for supply of natural gas by an end supplier, if the consumers, connected to the gas transfer network on this territory are less than 100 000.

The license has to define:

the title of the license;
the licensed activity;
the sites through which the licensed activity is carried out;
the territorial range of the license;
the period of the license.

License must not be issued if there is a danger of harming the life and the health of the citizens, the property of third persons and the interests of the consumers, lack of the reliable supply of electric or heat power or natural gas. Moreover in case where the same person performs more than one of the licensed activities, individual licenses must be issued for every activity.

The license is issued for a period of up to 35 years in correspondence with the legal rules of the respective ordinance. The term of the license may be prolonged for a period not longer than the above mentioned period if the holder of the license meets the relevant legal requirements and performs all obligations and requirements of the license, and it has filed a request in written form for extension at least one year before the expiry of the term of the initial license.

3.2. Principles of Turkish Energy Sector Licenses:

In Turkish energy sector, all legal entities who are established as a joint stock or a limited liability company that is willing to perform in the market, must obtain a particular license for each activity. The procedures and provisions of license application process, license fees, rights and obligations of legal entities that acquire a license which are regulated by separate Regulations are explained under the follow concerning market activity.

3.2.1. Electricity Energy License:

Corporations to be engaged in market activities must obtain the relevant license for each activity. Furthermore licenses are issued for a maximum period of forty-nine years, at once and the minimum term for generation, transmission and distribution licenses is ten years. Licenses become effective as of the date indicated on each license and the rights and obligations of the license holders become effective as of that date. Written renewal applications can be made during the former year or until nine months before the expiration of the license.

Licensing fees and license renewal fees are annually determined by the Authority by the end of August, to be applied for the following year and such fees are declared both in the Official Gazette and Authority's website. In order to make an evaluation on the license applications, done without deficiency, the applicants are notified in writing to pay the %1 of license fee to Authority's account as deposit, in ten working days after the notification. The necessity of insuring license holders' assets regarding to their fields of activity against the probable risks shall also be mentioned.

For the license applications of generation, autoproducer and autoproducer group activities subject to evaluate, the Authority requests the opinion of Turkish Electricity Transmission Company (hereinafter TEIAS) or the distribution license holders in the same zone that generation facility is located, regarding the connection to the transmission and/or distribution system and system use by the generation facility to be constructed. The opinion should be declared to the Authority within forty five days since the date of notification.

The license applications taken under evaluation by the Authority are resulted in forty five days after receiving the opinions of TEIAS or other license holders which set the basis of Authority's decision.

The activities subject to licensing under Electricity Market Regulatory Authority are:

Production of electric power
Transfer of electric power
Distribution of electric power
Wholesale of electric power
Retail sale of electric power
Autoproduction and autoproduction group activities.

Licenses automatically expire at the end of their terms unless extended by the Authority in accordance with the methods specified in the licenses or in the event of holder's bankruptcy. If the license holder declares intention about cancellation, then Authority terminates the license.

3.2.2. Natural Gas License:

Although every kind of activity has specific license conditions in natural gas market, Article 6 of the Turkish Natural Gas Market Law defines the general principles for all kinds of licenses. Legal entities which will engage in market activities must obtain a license for each activity and for each facility respectively, if the said activities are to be conducted in more than one facility, before starting operation. Besides a legal entity which holds more than one license or a legal entity that conducts the same activity in more than one facility, must keep separate accounting records for each activity or facility subject to a license.

Differently from electricity energy license, natural gas licenses and certificates shall be granted for at least ten years and a maximum of thirty years whenever issued. Though, principles mentioned above for the electricity energy license fees and expiration are also applicable for natural gas license.

3.2.3. Heat Energy and Renewable Energy License:

According to the related regulations, all kinds of renewable energy sources may be used for electricity production. Moreover heat energy and renewable energy are categorized as same for the energy production license.

Legal entities holding licenses are subjected to the following principles of implementation with respect to the generation and the trading of electrical energy from renewable energy resources;

Legal entities holding a retail sale license, shall buy electrical energy from power plants generating electrical energy from renewable energy resources within the scope of this Law, which are holding a Renewable Energy Source Certificate (hereinafter YEK) and which have not completed 10 years of operation, in accordance with the principles set forth in this Article.
The information relating to the amount of YEK-certificated electrical energy available for the implementations within the scope of this Law shall be published by the Authority annually. Each of the legal entitles holding a retail sale license shall purchase the amount of YEK-certificated electrical energy in accordance with the proportion of the energy amount they sold within the previous calendar year to the total electrical energy amount they sold in the country.
The implementations within the scope of this Article shall cover the plants that are put into operation before 31th of December 2013.

Legal entities that breach above-mentioned provisions are fined for the amount up to TRY 250 thousand by Authority and they are also warned to remedy the breach within sixty days. In the case that such actions requiring a fine are not remedied in spite of a warning or such actions are repeated, then the entity is compensated to pay another fine which is equal to two times of the previously issued fine.

4/ Electric Power Sector:

Albeit similarities of electric power sector governance of Bulgaria and Turkey, differences are raised from the policies of two countries.

Due to the changes on Turkish energy policy in 2001, electric power is evicted from being a civil service. Ever after, electric services are substantially provided by private sector. In Turkish energy system there are three basis establishments responsible of production, transfer and whole sale trade of electric power. However in Bulgaria, all electric power sites on the territory of the country are connected and functioning in a unified and integrated electric power system with a joint operational regime and an uninterrupted process of production, transformation, transfer, distribution and consumption of electric power, vice versa.

4.1. General Terms of Electric Power Sector:

ESA defines electric transfer network, electric power lines and electric distribution networks as the main elements of the Bulgarian electric market. "Electric transfer network" is a unity of electric power lines and electric equipment serving for transfer, transformation of the electric power of high voltage to medium voltage, redistribution of electric flows or transit of electric power to a third party.

"Electric power lines" are installations for connection of electric facilities for transfer, transport or distribution of electric power.

"Electric distribution network" is a unity of electric power lines and electric facilities of high, medium and low voltage serving for distribution of electric power.

4.2. Production of Electric Power:

In Turkey, production of electric power may be performed by the state owned Electric Generation Company (hereinafter EUAS), private sector generation companies, the other public companies which consisted by restructuring operation of EUAS, autoproducers and autoproducer groups received license for generation under Energy Market Regulatory Authority. Private sector companies and public generation companies close the sale of electric power or volume.

Production of electric power in Bulgaria is also performed by energy enterprises who having received license for production under ESA from the Commission. The producers of electric power are obliged to maintain reserves of fuel, including local solid fuel in quantities guaranteeing a continuous and reliable production.

4.3. Transfer of Electric Power and Management of the Electric Power System:

The transfer of electric power in Turkey is performed by the Turkish Electric Transmission Company (TEIAS). Taking over all of the transmission facilities which are public property and planning the investment plans for the transmission facilities that anticipated, are the missions of TEIAS.

Further, Turkish Electricity Transmission Company;

Draws the tariffs of transmission, connection and system usage which subjected to Authority approval; overhauls, examines and controls frequency by load distribution;
Substitutes and increases capacity in transmission system;
Follows the real-time system reliability;
Does the interconnection works in the direction of Ministry of Energy and Natural Resources;
Provides transmission and connection service to all of the users in the direction of network regulation, without discriminating;
Due to the changes in market, does infrastructure development about recent commercial procedures.

In Bulgaria, the holder of the license may assign by means of a contract the exploitation and the maintenance of the transfer network only to the electric power system operator, who has received a license for management of the electric power system. The transfer and the transformation of electric power is a universally offered service. The transfer enterprise has to provide the expansion, reconstruction and the modernization of the transfer network in accordance with the long-term prognoses and plans for development of the electric power sector.

In Bulgarian electricity sector the electric power system operator provides:

the united management of the electric energy system and the reliable functioning of the transfer network;
the transit of electric power through the transfer network;
the maintenance of the sites and equipment of the transfer network in accordance with the technical requirements and with the requirements for safety;

In order to draft the energy balance of the country, the electric power system operator has to:

prepare prognoses for change of the consumption of electric power in the country;
organize research of the possibilities of expansion and modernization of the transfer network, introduction of new technologies.

4.4. Distribution of the Electric Power:

The distribution of electric power is performed by private enterprises in both countries and the distributors perform their rights and obligations within their license zone. In Turkey, a licensed distribution company may still retail in its zone even if there is another existing retail company in the zone however in Bulgaria the distribution of electric power, as mentioned earlier, is a universally offered service.

According to the Turkish law, distribution enterprise has to;

renew and substitute the facilities that are in their zone,
provide electric energy distribution and connection service, according to license terms and regulations, to all users connected to system,
provide services without discrimination to all users on an equal basis.

Additional to the Turkish law, in Bulgarian law the distribution enterprise has to provide and guarantee the following:

distribution of the electric power received in the distribution network;
continuity of the electric power supply and quality of the supplied electric power;
management of the electric distribution network;
maintenance of the distribution network, sites and equipment in accordance with the technical requirements;
expansion, reconstruction and modernization of the distribution network and accessory networks.

On the other hand according to the Bulgarian law, the transfer enterprise, respectively the distribution enterprise, is obliged to connect every producer of electric power located on the respective territory that:

has concluded a written contract with the transfer or distribution enterprise at a price for connection determined in accordance with the applicable ordinance;
has met the requirements for connection to the transfer or distribution network, and
has constructed electric equipment within its own property or on the property on where it has a right of construction.

The transfer or the respective distribution enterprises are obliged to expand and reconstruct the transfer or distribution networks related to the connection of electric power stations to the place of connection. The owners of electric equipment are obliged to provide access of the transfer enterprise, respectively the distribution enterprise, to their own installations for the purposes of transformation and transfer of electric power to other consumers.

4.5. Trade Relations, Parties to the Transactions with Electric Power:

Parties to the transactions with electric power which are stated below are same in Bulgarian and Turkish energy law;

the public supplier of electric power;
the producers;
the consumers;
the transfer enterprise (as well the electric power system operator)
the distribution enterprises;
the end supplier
the wholesale trade company;
the retail company;
the autoproducers.

Bulgarian transactions with electric power may be concluded at prices regulated by the Commission, at freely negotiated prices between parties and on the organized market of electric power whereas in Turkey prices of transactions with electric power for the following year are regulated by corporations and subject to approval by the Authority. Corporations draw the prices according to their license and submit it to the Authority before the end of October 31^th of every year. In case the Authority determines that the suggested prices conform to the license provisions, then affirms these prices until December 31^th of the same year. The provisions and conditions of approved tariffs are applicable to both natural persons and legal entities.

5/ Natural Gas:

According to the second article of the "Turkish Natural Gas Licensing Law", natural gases should be natural hydrocarbons in gases status which are obtained from digging the underground. These gases are pressurized, liquefied or chemically processed before being supplied to the market. In both countries, gas supply covers several kinds of activities such as; importing, producing, transferring, distribution, storing and whole sale.

Addition to such, as determined by the Bulgarian Law, "Gas transfer network" is a system of gas pipelines of high pressure and the equipment to them, with a unified technological regime of functioning, for transfer of natural gas to the outlet of the gas measuring station or gas regulation station, having connected consumers and/or distribution enterprises. "Gas distribution network" is a local or regional system of gas pipelines of high, medium or low pressure and the installations to them for distribution of natural gas to the respective consumers on a territory determined by a license. Furthermore another term that is described by the Bulgarian Law which is the "Gas transport system", is a system of connected networks for transfer, transit transfer, distribution of natural gas, as well as installations to and from gas storages and production enterprises on the territory of the country.

At last it shall also be mentioned that, all activities in Turkish natural gas market are carried out by the Turkish Energy Market Regulatory Authority.

5.1. Transactions with Natural Gas:

Transaction of natural gas is characterized by; a public supplier of natural gas, producing enterprises, operators of gas storages, a transfer enterprise, combined operator, a distribution enterprise, dealers of natural gas, privileged consumers, consumers who are not privileged, end supplier of natural gas, consumers - clients of the end supplier. Main legal transaction types are; supply, transfer along a transfer to distribution networks, storing and purchase contract of end users All the legal transaction should have a ground on written contracts and these contracts have to observe the law. Like all differences between two energy sectors system main difference between applicable law of Bulgarian and Turkish system on transaction with natural gas is raised from EU law. Therefore, each country has many similarities, especially on definition of the main elements of transaction with natural gas.

The import enterprises may conclude transactions for supply of natural gas with the public supplier of natural gas, with the public provider of natural gas, with operators of gas storages, with dealers of natural gas and with privileged consumers. A main function of these enterprises is import of the natural gas to the Turkey but if they fulfill conditions for export they may apply for special export license as well. As a rule, import enterprises are allowed to sell import natural gas to the whole sellers or export enterprises, moreover they can sign a contract with privileged consumers. Amount of the natural gas which is imported by one import company cannot exceed %28 percentage of the whole amount of one year need that is announced by the Turkish Energy Market Regulatory Authority.

The producing enterprises (generation companies) are legal persons who are able to produce natural gas, and able to sign legal transactions with the public supplier of natural gas, the public providers of natural gas, the end suppliers, the operators of the gas storages, the dealers of natural gas and the consumers. Producing enterprises are allowed to sell natural gas to directly to the free consumers up %28 percentage of national consumption forecast, and other parts of natural gas can be sell to the market or can be exported it. All the tariff and price duties, quality and delivery rules are determined by the Authority.

Transmission enterprises are legal persons who are obliged to connect the users to the appropriate network, have to provide technical information, able to be part of a contract with import enterprises, generation companies, public providers, export companies, storage enterprises, consumers and other transmission companies. Turkish Natural Gas Law article 4, part c stated: "The national transmission network or any part thereof which is already existing, or planned, or under construction shall belong to BOTAS (Petroleum Pipeline Coorporation) The new pipelines to be constructed by the transmission companies which will together form a connected system with the existing lines for the purpose of transmission shall be operated by other investing transmission companies provided that the former they shall have the ownership. The other rights and liabilities of the transmission companies shall be established by regulations to be issued."

Storage entities are legal persons who have license for storing natural gas under Turkish Natural Gas Law and Regulations. City Natural Gas distribution activities are carried by legal persons who obtain natural gas distribution license and these companies should have observe all rules and principles which are determined by law and Authorities. The legal entity holding a distribution license may sell the distribution facility which is under its ownership to another legal entity before the expiry of the license term. All city natural gas distribution companies can have license for two cities but depends on the population and economic development of the cities number can be increased. The city distribution company obtaining the distribution license from the Authority must offer a partnership at a rate of 10% to the municipality or the municipal company within the city in which it is authorized without the need to provide any capital. Such capital rate may be increased at a rate of maximum 10% provided that the equivalence has been paid. However such increase may be made only if there is no debt to the Treasury and additional credit is not requested or after the discharging of credit debts to the Treasury, loans under the Treasury guarantee are not provided for this purpose.

Free Consumer is a natural person or legal entity that is free to enter into a natural gas sales and purchase agreement with any generation, import, distribution or wholesale company within the country.

Non-Free Consumers (Subscriber) is natural person or legal entity that has to purchase natural gas for their own use from the distribution companies.

The ESA made discrimination between foreign providers and EU nationals. The public providers of natural gas are legal persons registered under the Commercial Act or under the legislation of a Member State of the European Union or of another country - party to the European Economic Area Agreement, that conclude transactions for supply of natural gas with end consumers connected to the gas distribution network, on the territory for which they are licensed.

The end supplier is a person licensed for its activity, that provides the supply of natural gas to household consumers and enterprises, which have less than 50 employees with annual turnover amounting up to 19, 5 million BGN.

Dealer of natural gas may be any Bulgarian and foreign corporate legal person registered as an entrepreneur under the Commercial Act or under its national legislation. The dealers of natural gas may conclude transactions with producing enterprises inside or outside of the country, with privileged consumers, with other dealers of natural gas, with the public supplier of natural gas and with operators of gas storages.

The privileged consumers are consumers of natural gas meeting definite requirements set by the law, having the right to choose the persons from which they will buy natural gas in and/or outside the country. The privileged consumers are obliged to inform in advance the transfer enterprise and/or the distribution enterprise about the contracts concluded by them for natural gas.

The contracts for natural gas have to include these terms; at prices regulated by the Commission for universally offered services related to the transfer, distribution and supply of natural gas or at freely negotiated prices between the parties on an organized market, administered and managed by the operator of the transfer system. The producing enterprises, the dealers of natural gas and the privileged consumers conclude transactions for natural gas among themselves at freely negotiated prices.

The end supplier of natural gas sells natural gas under publicly announced general conditions. The general conditions must include:

the terms of quality of the supply;
information provided by the supplier;
term of the contract;
the responsibility of the energy enterprise for non-performance of the general conditions.

The published general conditions enter into force for the consumers, who buy natural gas from an end supplier without explicit written consent.

The consumers of the end supplier conclude a contract with the distribution enterprise for the transfer to distribution networks of the natural gas, consumed by them under publicly announced general conditions. The general conditions must include:

the terms of quality of the supply;
the terms of termination or interruption of the supply;
the responsibility of the energy enterprise in case of non-regulated interruption and low-quality supply.

5.2. Connection to the Gas Pipeline Network:

The transfer enterprise is obliged to connect to its network, at a point set by it, the distribution enterprises, the producing enterprises and the enterprises storing natural gas. Connected to the transfer network may also be privileged consumers of natural gas via direct connecting gas pipelines. Both in Turkish energy law and ESA lay out the Ministry of Energy in countries as the main governors. Also the Turkish Energy Market Regulatory Authority and the Commission of Bulgaria have responsibilities.

Main function of the transfer enterprise is establishing connection between other parties and its network but under ESA transfer enterprise can refuse to connection, if there is;

a capacity of the network is lacking, or
there is no connection to the network, and
improvement of the network is not economically feasible.

The owner of the connecting gas pipeline is obliged to provide its servicing, maintenance and repair. The transfer enterprise may, at a request of the owner, against payment, service, maintain and repair the connecting gas pipelines. Directly connected to the gas transfer network consumers are obliged to provide access to the respective gas distribution enterprise, having obtained license, through their own installations for the needs of the transfer of natural gas to other consumers on the territory determined by the license. The distribution enterprises are obliged to construct for their account their distribution network to the point of connection determined by the transfer enterprise. Besides the distribution enterprises are obliged to connect and provide the consumers with natural gas on the basis of the conditions of equality and by observing the technical requirements for reliability and safety. Also the branches and the installations for connection of the consumers to the respective distribution network have to be constructed by the distribution enterprise.

All the definitions and functions of the parties in gas pipeline network are same in Turkey except in Turkey local gas pipeline is constructed and operated by the distribution company which shall distribute natural gas within the city. All distribution networks and pipelines are operated by the distribution enterprise that has the license within the city.

6/ Legal framework of renewable and alternative energy sources and biofuels:

The use of renewable energy in Turkey is regulated under "The Use of Renewable Energy Sources for Electricity Generation Act" which regulates the protection of renewable energy resource areas and certification of the energy generated from renewable energy sources and usage of these resources. Addition to that it is the "Renewable and Alternative Energy Sources and Biofuels Act" (RAESBA) in Bulgaria that regulates the public relations in the field of encouragement of the production and consumption of electric power, heat power and/or cooling power from renewable energy sources (RES) or from alternative energy sources, the production and consumption of biofuels and other renewable fuels in the transport sector. Bulgarian domestic legal order is in accordance with European regulations and directives; especially the provisions of Directive 2001/77/EC regarding the encouragement of the production and consumption of electric power from renewable energy sources and Directive 2003/30/EC regarding the encouragement of the usage of biofuels and other renewable fuels in the transport sector.

Two legal mechanisms are designed to achieve the following objectives:

encouragement of the development and usage of technologies for production and consumption of power which is produced from RES (RES power) or alternative energy sources;
encouragement of the development and usage of technologies for production and consumption of biofuels and other renewable fuels in the transport sector;
diversification of energy supply;
increasing the capacity of small and medium enterprises, producers of RES power and power from alternative energy sources and producers of biofuels and other renewable fuels;
environmental protection, reducing green house effect, waste utilization;
creation of conditions for achieving sustainable development on local and regional level.

6.1. Applications during the investment Period of Production of RES power:

Real and legal entities establishing an isolated or grid connected power plant with a maximum installed capacity of 1.000 kW for meeting solely their own needs, shall not pay service fees for these projects whose final project planning master-plan, pre-reviews or first studies have been prepared by DSI or EIE.

Investments, within the framework of the provisions of this Law, in relation to; establishing energy generation facilities, provision of domestically manufactured electromechanical systems, research and development and manufacturing of electricity generation systems bu utilizing solar cells and focusing units and development facilities for the generation of electric energy or fuel by utilizing biomass sources shall be eligible for incentives, based on a resolution determined by the Council of Ministers.

The strictest criterion in Turkish RES investment concerns the land. Among the real estate with the nature of forest or under the private ownership of the Treasury or under the disposal of the state in its entirety, those which shall be utilized for the purposes of the facility, roads for transportation and energy transmission lines up to the gird connection point, a permission shall be granted, lease, easement right could be established or a utilization permit could be granted by the Ministry of Environment and Forestry or the Ministry of Finance in exchange of a remuneration.

In the event that the real estate, which shall be utilized for the purposes set forth in the first paragraph of this Article, is pasture, summer pasture, winter quarts and public owned grazin and grassland within the scope of the Pasture Law No. 4342 dated 25/2/1998, such real estate shall, pursuant to the provisions of Pasture Law No.4342, be registered in the name of the Treasury upon changing the allocation purpose of the same. Leasing shall be conducted or easement shall be established by the Ministry of Finance in exchange of remuneration in relation to such real estate. An eighty five percent discount over such remuneration applicable to the roads for transportation and energy transmission lines up to the grid connection point regarding fees, lease, easement right and utilization permission shall apply in the first ten years of the investment and operation period with respect to the facilities which shall be commissioned by 31 December 2012. Further the collection of Forest Villagers Development Revenue and Erosion Control Revenue shall not be made.

In relation to the real estate which are under the private ownership of the Treasury and the disposal of the state in its entirely, and situated in the reservoir area of the hydro electricity generation facilities within scope of this Las, a utilization permit shall be granted by the Ministry of Finance without any remuneration.

In contrast to the Turkish approach, Bulgarian legal order prefers a different view on RES investments. Bulgarian regulations have more strict and limited criteria for RES investments. The construction of energy sites for production of RES power can be performed after the completion of investment research in accordance with a special ordinance under the Energy Sector Act (ESA). An inseparable part of this research is the evaluation and assessment of the available and prognosticated potential of the respective resource.

The production of RES power is encouraged under the following circumstances:

taking into consideration the characteristics of different RES and technologies for production of electric power from them;
taking into consideration the principles of the energy market;
obligatory accession and connection of RES power producers and biofuels producers to the electric power networks;
preferential price for buying all the RES power;
preferential administrative regulation in the field of production of RES power, as well as in the sphere of construction of the necessary facilities and utilities.

The provisions of the Investment Encouragement Act are applied to all investment projects related to construction, enlargement and modernization of capacities for production of RES power. The same applies to the related infrastructure that is public state or municipal property.

Moreover the obligatory buying of electric power has to be carried out under purchase contracts. The term of the contracts is 25 years - regarding electric power, produced from geothermal and solar energy, and respectively 15 years - regarding electric power, produced from hydropower stations having installed capacity up to 10 MW, as well as regarding electric power, produced from other types of RES.

6.1.1. Rights and obligations of the participants in the RES power market

In Turkey, a legal entity, holding a generation license shall be given a "Renewable Energy Source Certificate" (YEK certificate) by Authority, for the purpose of identifying and monitoring the type of the source in purchasing and selling electric energy generated from renewable energy sources in domestic and international markets. The producers and principles of the YEK Certificate which determine all rights and obligations are stipulated by a regulation.

In Bulgarian system each investor transfer enterprise and the distribution enterprises are obliged to include in their annual investment and repair programs financial resources for the development of networks related to the encouragement of the production of RES electric power. The transfer enterprise and/or the distribution enterprises are obliged to connect preferentially to any producer of RES electric power if that producer meets all legal requirements.

Moreover the producer of RES electric power has to file a written request to the transfer or distribution enterprise about research regarding the conditions and method of connection of the respective energy site to the network. The transfer, respectively the distribution enterprise, are obliged to complete the research in 90 days period from the moment of filing the abovementioned request and to notify in writing the producer about the conditions and method of connection of the respective energy site to the network and to conclude a preliminary contract for connection. The term for connection of the energy site to the transfer or distribution network is determined in the contract for connection and it must not be longer than the declared by the producer term for entering the energy site into operation. The obligation for connection of RES electric power producer belongs to the transfer or the respective distribution enterprise which is located closest to the energy site.

The connection expenses covering the distance to the outlines of the ownership of the electric utilities are for the account of the producer. The connection expenses covering the distance from the outlines of the ownership of the electric utilities to the place of connection are for the account of the transfer or the respective distribution enterprise and the producer has only to pay the price for connection including only the direct expenses made by the transfer or the distribution enterprise in relation to that connection. The expenses related to the enlargement and reconstruction of the transfer and/or distribution network, related to the connection of the producer's energy site, are for the account of the transfer, respectively distribution enterprise and they are not included in the price for connection of the RES electric power producers.

The public provider, respectively the end suppliers, are obliged to buy all the quantities of RES electric power for which there has been issued a special certificate for origin. The exceptions could be for example the quantities with which the producer participates on the balancing market, as well as the quantities produced for the producer's own needs. The public providers, respectively the end suppliers, are obliged to buy all the quantities of RES electric power at preferential price, defined by the order of the respective ordinance under the Energy Sector Act. The exceptions to this rule are hydropower stations having capacity more than 10 MW.

The public provider, respectively the end suppliers, are obliged to buy all the quantities of RES electric power produced by means of combined method at preferential prices defined by the order of a special ordinance under the Energy Sector Act. The exceptions could be for example the quantities with which the producer participates on the balancing market, as well as the quantities produced for the producer's own needs.

In the event of combined combustion of RES and non-renewable energy sources the public provider, respectively the end suppliers, are obliged to buy such quantity of the produced electric energy which corresponds to the share of the involved RES at preferential prices defined by the order of the above mentioned special ordinance. The State Commission for Energy and Water regulation issues certificates for origin of power which has been produced from RES. On the grounds of these certificates the Commission issues "green certificates" to the producers of RES power.

6.2. Prices of RES electric power:

The price to be applicable to the electrical energy to be purchased for each year shall be the electricity average wholesale price in Turkey for the previous year as determined by the Authority. However, such applicable price may not be less than the Turkish Lira equivalent of 5 Euro Cent per kWh and may not exceed the Turkish Lira equivalent of 5, 5 Euro Cent per kWh. However, legal entities that hold licenses based on renewable energy resources and which have the opportunity to sell above the limit of 5,5 Euro Cent kWh in the market shall benefit from this opportunity.

On the contrary in Bulgaria, annually till the end of March the State Commission for Energy and Water Regulation is obliged to define preferential prices for sale of RES electric power. The exceptions are hydropower stations having capacity more than 10 MW. The preferential price of RES electric power must be defined at the rate of 80 % of the average sale price of the public and end suppliers for the previous calendar year plus addition, defined by the Commission on the basis of criteria depending on the type of the initial energy source in accordance with the respective ordinance under the Energy Sector Act. The addition for the following calendar year must not be less than 95 % of the value of the addition for the previous calendar year.

7/ Heat Power:

Heat power may be described as heat carrier of water stream, hot water or waste incineration. According to some classifications, heat power is a kind of RES but due to the legal orders, geo-thermal and waste incineration is linked to specific acts and regulations.

Geo-thermal energy sources have specific property rules under Turkish law; they are not object to private property but no matter where they are, they have public property status. Licenses are given for management and searching. Geo-thermal resources can be used for house heating, scientific activities, touristic aims. During the application license, expenditure and assurance shall be paid. The assurance fees calculated based on the expenditure. All licenses can be subject to the transfer. As principal, housing units within the borders of administrative districts and municipalities located in regions where geothermal resources are sufficient to meet heating needs shall primarily be heated through geo- and solar-thermal sources. Each year, supervision of the entities should be done by the General Directorate of Mineral Research and Exploration.

In Bulgarian law, heat supply is carried out through sites and installations for production, transfer, supply and distribution connected to a heat supply system. The biggest difference between two systems is; although private legal entities have license for search and management, local municipalities and administrative authorities also have responsibilities. In Bulgaria, the production of heating power is carried out in:

power stations for combined production of heating and electric power;
heating power stations;
installations for utilization of waste heating power and of restorable energy sources.

The heat transfer enterprise is obliged to connect to the heat transfer network producers and consumers located on the respective territory defined by the license for transfer of heating power. The connection of the consumers in a building -condominium by means of a junction or its individual branches has to be carried out on the basis of a decision of the general meeting of the condominium with the majority of two thirds of all owners and holders of real right of use of building - condominium.

The sale of heating power is carried out on the basis of written contracts under general conditions, concluded between:

a producer and the heat transfer enterprise;
a producer and directly connected consumers of heating power for economic purposes;
a heat transfer enterprise and consumers of heating power for economic purposes;
a heat transfer enterprise and associations of the consumers of heating power in a condominium;
a heat transfer enterprise and a provider of heat power;
a provider of heat power and the consumers in a building - condominium.

The consumers of heating power in a building - condominium, may buy heating power from a provider, selected by the general assembly of the condominium.

8. Conclusion:

Consequently, without some small differences, Bulgarian and Turkish energy legal orders are similar. The main difference is raised from the EU membership of Bulgaria. All energy types are governed by one act Energy Sector Act in Bulgarian law but Turkish energy law base on different kind of acts and regulations. Each, energy source have its own licensing and pricing, distribution, supply, management criteria.

With the recent decisions of the Istanbul Metropolitan Municipality Parliament, Istanbul Gas Distribution Industry and Trade Joint Stock Company (IGDAS) will be privatized. Since this privatization, in natural gas market some legal changes are expected. Due to this reason this part of this article cannot give basis of legitimate expectation or legal certainty. However, all recent law and practices can be found in this part of the article.

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