Press Release No: Plenary Assembly 8/18
15.02.2018

PRESS RELEASE CONCERNING THE DECISION ON PROVISIONS PROPOSING AMENDMENT TO THE ELECTRICITY MARKET AND CERTAIN LAWS

The Constitutional Court in its plenary sitting on 28 December 2017 dismissed the requests for annulment of:

* Additional Article 1 § 2 of Law no. 2804 on the General Directorate of Mineral Search and Exploration;

* Additional Article 1 which was added to Law no. 2690 on the Turkish Atomic Energy Authority and which is titled “Building Inspection”;

* the following sections of subparagraph (j) added to Article 2 § 1 of Law no. 3154 on the Organization and Duties of the Ministry of Energy and Natural Resources “…legal entities or private law legal entities that are holder of distribution license within the scope of Law no. 6446 on the Electricity Market Law…” and “… or to procure service from these legal entities, and qualifications, authorization, rights and liabilities of these legal entities as well as sanctions to be imposed on them…”;

* Additional Article 12 of the Mining Law no. 3213;

* the following section of Article 3 § 1 (o) of Public Procurement Law no. 4734 “…procurement of electric power by the Turkish Electricity Trade and Contracting Corporation for supply…”;

* paragraph 10 added to Article 6 of the Electricity Market Law no. 6446;

* the following sections of Law no. 6446: second sentence of Article 17 § 3; subparagraphs (ç) and (f) of Article 6; the phrase included in the second and fifth sentences of paragraph 5 added to Article 18 “…without receiving any charge for transfer of assets or shares…”; second sentence of paragraph 7 added to Article 7; the re-arranged Provisional Article 8; and Provisional Articles 19 and 20 added to the same Law.

The Constitutional Court found no ground to adjudicate on the request for annulment of Article 27/A added to Law no. 2565 on the Military Forbidden Zones and Security Zones.

It also dismissed the courts’ requests for annulment of paragraph 1, first sentence of paragraph 3, paragraph 4 and subparagraphs (a) and (d) of paragraph 6 of Article 17 of the Law no. 6446 for lack of jurisdiction on the part of these courts. Finally, the Constitutional Court decided to annul paragraph 10 added to Article 17 of Law no. 6446.

The reasoning of the Court’s decision in respect of certain provisions is briefly mentioned below:

A. Distribution tariffs consisting of fees, which would cover all costs and services to incur while performing distribution activities such as technical and non-technical electricity-loss cost (fee for loss electricity / illegal use of electricity), power disconnection and connection service cost, meter reading cost and system operation cost, and are charged to consumers

Grounds for the Requests for Annulment

In the petitions and applications lodged with the Constitutional Court, it has been maintained in brief that this provision aims at eliminating financial liabilities of the distribution companies; that pursuant to the principle of individual responsibility, consumers should be held liable to pay charges for goods and services only used or consumed by them, and therefore collection of certain fees which are outside individuals’ responsibility is incompatible with the principle of state of law and standards of equity; that this ambiguous provision does not serve for public interest; and that the legal arrangement poses economic obstacles for consumers. It has been therefore alleged that the contested provision is in breach of Articles 2, 5, 10 and 172 of the Constitution.

The Contested Provision

It is provided in the contested provision that distribution tariffs to be prepared by distribution companies shall contain prices, rules and conditions pertaining to services which would be provided for all natural and legal persons supplied with electric power through distribution system without any distinction among equals; and that these tariffs shall consist of all service costs and fees to incur while performing distribution activities such as distribution system investment expenses, system operation cost, technical and non-technical electricity-loss cost, disconnection and connection service cost, meter reading cost and reactive energy cost. It is also prescribed that target rates of technical and non-technical losses to be taken as a basis by the distribution companies shall be determined by the EMRA in a manner that would promote decrease in the losses; that on condition of not exceeding the target rates determined by the EMRA, costs of technical and non-technical losses shall be included in the distribution tariffs and charged to consumers; and that principles and procedures as to determination and change of target rates of technical and non-technical losses as well as inclusion of the incurring cost in the tariffs and charging of this cost to consumers shall be regulated by the EMRA.  

The Constitutional Court’s Assessment

In brief, the Constitutional Court has made the following assessments:

Electricity Market Law no. 6446 aims at establishment of a financially strong, stable and transparent electricity market which is capable of operating, pursuant to the provisions of private law, in a competitive environment in order to supply electricity of good quality for consumers in a sufficient, continuous, cost-efficient and environment-friendly manner. It also aims at performance of independent regulation and supervision in this market. 

By Law no. 4628, the duty to make necessary arrangements in order to ensure supply of secure, continuous and cost-efficient electric power of good quality for consumers is entrusted to the Energy Market Regulatory Authority (“EMRA”). Accordingly, the EMRA is empowered to review and approve wholesale price tariff, transmission tariff, distribution tariffs as well as retail sale tariffs; to determine main principles of pricing for transmission, distribution, wholesale and retail sale procedures and, when necessary, to revise these principles in line with relevant license provisions.

The EMRA has certain responsibilities with respect to tariffs such as balancing the interests of consumers and suppliers, promoting competition and promoting economic efficiency. In adjusting tariffs, the EMRA also pays regard to the financial sustainability of electricity sector as well as supplying electric power in a cost-efficient manner.   

Fees falling into the scope of distribution tariffs are determined on the basis of necessary costs incurring while distribution companies carry out distribution activities. Accordingly, in determination of fees concerning the utilization of distribution system, investment expenses, which are necessary for performance of distribution activities, and all costs and service fees such as reasonable rate of return with respect to investment expenses, system operation cost, technical and non-technical electricity-loss cost, power disconnection and connection service cost, meter reading cost, reactive energy cost as well as amounts paid within the scope of transmission tariff are taken into consideration.

“Loss electricity - illegal use of electricity”, which is included in distribution tariffs and expressed as the cost of technical and non-technical loss, is electric power representing the gap between total energy in the distribution system and energy invoiced to consumers. Such loss may result from technical problems occurring during the distribution of electricity and also from illegal use of electricity.

In charging cost of technical and non-technical loss, which incurs from production of electricity to its transmission to the end-consumer, to consumers, regard is being paid to the target rates of loss electricity / illegal use of electricity determined by the EMRA. The EMRA takes into consideration rates of loss electricity/ illegal use of electricity of the previous years while determining the target rates in the distribution regions. Accordingly, fee for technical and non-technical loss is charged by the distribution companies to consumers provided that the EMRA’s target rates are not exceeded. If the rate of loss electricity / illegal use of electricity in the distribution region is higher than the EMRA’s target rate, surplus rate is borne by the distribution company, whereas  this rate is lower than the  target rate, surplus rate represents the company’s profit. Target rates of loss electricity / illegal use of electricity determined by the EMRA are an incentive for the distribution companies to combat technical and non-technical loss.

To ensure uninterrupted supply of electric power for consumers, distribution companies must purchase electric power from Turkish Electricity Trade and Contracting Corporation (“TETAŞ”) due to technical and non-technical losses. The amount paid by the distribution companies to TETAŞ for technical and non-technical energy loss is collected from consumers through distribution tariffs. It is accordingly observed that fee for loss electricity / illegal use of electricity collected from consumers on the basis of the EMRA’s target rates returns to public resources.

As set out in Articles 48 and 167 of the Constitution, State is liable to take necessary measures for supplying consumers with electric power of good quality in a continuous, uninterrupted and cost-efficient manner and thereby establishing a stable electricity market. It appears that the contested provision was introduced within the scope of measures aiming at proper functioning of electricity market. Neither the examination of legislative intent of the provision nor its objective meaning reveals that it pursues any aim other than public interest.  

In addition, with a view to supplying electric power of high quality in a safe and continuous manner, fee for technical and non-technical electricity-loss, which is regarded as a cost item along with other cost items included in the distribution tariffs, is charged to the consumers, provided that target rates determined by the EMRA are not exceeded. As the EMRA’s target rates of loss electricity / illegal use of electricity encourage the distribution companies to combat technical and non-technical electricity-loss, the provision complies with Article 172 of the Constitution which stipulates that the State has to take measures to protect consumers. The provision does not impose any economic obstacles for consumers. 

By the “principle of equality” enshrined in Article 10 of the Constitution, not actual but legal equality is prescribed. Aim of this principle is to ensure that everyone in the same status must be treated equally by the law and to avoid distinction and privilege among persons before the law. Accordingly, the principle of equality may be infringed only when legislation makes distinction or privilege among persons of the same legal status. As the contested provision prescribes that costs and service fees within the distribution tariffs shall be charged to all natural and legal persons utilizing electric power over the distribution system, it is not in breach of the principle of equality.

For these reasons, the request for annulment of the contested provision was dismissed.

B. Application of Article 17 of Law no. 6446 to All Existing Preliminary Enforcement Proceedings, Cases and Applications regarding Distribution, Meter Reading, Retail Sale Service, Transmission Costs and Fee for Loss Electricity / Illegal Use of Electricity

Grounds for the Requests for Annulment

It is briefly maintained in the petitions and applications lodged with the Constitutional Court that the contested provision enables implementation of the legal arrangement, which was subsequently enacted, by extending its scope in a way that would also cover the previously filed acts and actions which have been already in dispute; that it thereby hinders reimbursement of the amounts that were unduly collected from consumers by the distribution companies; and that the principle of non-retroactivity of laws, the principle of acquired rights as well as the principles of legal security and legal certainty are breached. It is also asserted that the courts have been interfered with while exercising their jurisdiction; that the provision imposes restriction on the right to legal remedies, impairing the very essence of the right; and that the legal arrangement is incompatible with the aim of protection of consumers and the principle of equality. It has been accordingly claimed that the contested provision is in breach of Articles 2, 5, 9, 10, 11, 13, 36, 40, 73, 138 and 172 of the Constitution.

The Contested Provision

The provision provides that Article 17 of Law no. 6446 shall apply to all preliminary enforcement proceedings, cases and applications filed due to distribution, meter reading, retail sale service, transmission costs and fee for loss electricity / illegal use of electricity, which have been accrued in accordance with the EMRA’s decisions.

The Constitutional Court’s Assessment

In brief, the Constitutional Court has made the following assessments:

The fee for loss electricity / illegal use of electricity and the other fees are treated as a single cost item within the tariffs approved by the EMRA and collected from consumers by virtue of Law no. 4628.

Upon the judgments rendered by the General Assembly of Civil Chambers of the Court of Cassation and the 13th Chamber of the Council of State, where different conclusions were reached as to the collection of fee for loss electricity / illegal use of electricity from consumers, the legislator re-formulated Article 17 of the Law in order to eliminate the disputes arising from different interpretation of the legislation. Accordingly, it is prescribed that the fee for loss electricity / illegal use of electricity and the other fees shall be treated as a single cost item within the relevant tariffs and shall be collected from consumers.

This legal arrangement, which was introduced by the legislator in order to eliminate disputes arising from different interpretation of the existing provision, is envisaged to apply to all cases and applications, which were filed due to this dispute and which have not been concluded yet as of the date when the legal arrangement was put into force, and it does not pose any restriction on the right to legal remedies. Therefore, no aspect of this provision is found to be unconstitutional. 

By this provision, it is prescribed that Article 17 of Law no. 6446 shall apply to all preliminary enforcement proceedings, cases and applications filed due to distribution, meter reading, retail sale service, transmission costs and fee for loss electricity / illegal use of electricity, which have been accrued in accordance with the EMRA’s decisions. Therefore, within the scope of the provisions, there can be no legal dispute among parties that had been concluded and completed during the period when the previous provision was in force. As there is an ongoing legal process between the parties, there can be no mention of any acquired right or finalized actions.

The principle that the legislator cannot alter court decisions means that the legislative organ cannot annul any finalized court decision through law. This principle will be at stake only when court decisions are altered or their execution is impeded by law, without making any change in the substantive law.

It cannot be concluded that ensuring implementation of legal arrangements introduced by the legislator to eliminate legal disputes, also with respect to ongoing cases and applications, is in breach of judicial independence.

The legislator has not introduced any arrangement as to the manner in which the proceedings would be conducted or the manner through which a certain concrete dispute would be adjudicated. Nor has the legislator enabled alterations in the finalized court decisions or impeded execution of such decisions.

The stipulation that Article 17 of Law no. 6446 shall apply to all preliminary enforcement proceedings, cases and applications filed due to distribution, meter reading, retail sale service, transmission costs and fee for loss electricity / illegal use of electricity —which are accrued in line with the EMRA’s decisions— cannot be characterized as a retroaction which is in breach of the principle of legal security. Nor can it be regarded as an arrangement which aims at rendering judicial decisions ineffective.

A law may be found contrary to the principle of equality only when it causes a distinction or privilege among persons of the same legal status. As the contested provision prescribes application of Article 17 of Law no. 6446 to all preliminary enforcement proceedings, cases and applications, it would apply to all proceedings filed by those who are of the same legal status. In this respect, as no distinction or privilege has been introduced among those who are of the same legal status, the contested provision is not contrary to the principle of equality.

For these reasons, the request for annulment of the contested provision was dismissed.  

C. In Applications and Cases Filed with respect to Fee for Loss Electricity / Illegal Use of Electricity, Limiting the Jurisdiction of the Arbitration Committees for Consumers and Courts to the Compatibility Review of These Fees with the EMRA’s Regulatory Actions

Grounds for the Requests for Annulment

It is briefly maintained in the petitions and applications lodged with the Constitutional Court that the contested provision causes judicial review to become a formal review; that the rights to legal remedies and to a fair trial exercised by the consumers who claim their rights before arbitration committees and courts conducting judicial reviews have been violated; that the provision led to entry into force of an arrangement which is contrary to the protective measures required to be taken by the State by virtue of the Constitution; and that it is incompatible with the principle of supremacy of the Constitution and its binding nature as well as with the principle of separation of powers. It is therefore asserted that the contested provision is in breach of Articles 2, 5, 9, 10, 11, 35, 36, 73, 125, 138 and 172 of the Constitution.

The Contested Provision

The contested provision prescribes that in applications and cases filed with respect to fees determined by the EMRA within the scope of income and tariffs, the jurisdiction of the arbitration committees for consumers and courts is limited to the compatibility review of these fees with the EMRA’s regulatory acts.

The Constitutional Court’s Assessment

In brief, the Constitutional Court has made the following assessments:

Fees determined by the EMRA within the scope of income and tariffs consist of various fees which would cover all costs and service fees such as active energy cost, invoicing cost, customer-care services cost, retail sale service cost, distribution system investment expenses, system operation cost, cost for technical and non-technical loss, power disconnection and connection service cost, meter reading cost and reactive energy cost. These fees are determined in line with the Regulation on Electricity Market Tariffs, communiqués and decisions which are the EMRA’s regulatory acts.

The contested provision provides that where an application is filed with the arbitration committees for consumers for refund of, or a case is filed with the relevant courts for reimbursement of, the fees determined by the EMRA and collected from the consumers, the jurisdiction of the arbitration committees and courts is limited only to the review as to whether these fees collected from consumers are collected in line with the EMRA’s regulatory acts. Therefore, the provision imposes a restriction on the right to legal remedies.

The right to access to a court is a requisite inherent in the right to legal remedies. However, the mere existence of the right to access to a court does not per se result in the fulfilment of the right to legal remedies.  In cases where a legal arrangement entitles individuals to file a case before courts while at the same time including rules preventing courts from conducting effective proceedings, this arrangement cannot be found compatible with the right to legal remedies.

In applications and cases filed for reimbursement of fees collected from consumers, which are regulated by the EMRA within the scope of income and tariffs, the arbitration committees and courts are required, by virtue of the right to a fair trial, to take into consideration the provisions of the other relevant legislation as well as the EMRA’s regulatory acts while conducting compatibility reviews. 

The contested provision, which prescribes that in applications and cases filed with respect to the fees determined by the EMRA, the jurisdiction of arbitrary committees and courts is limited to conducting reviews as to the compatibility of these fees with the EMRA’s regulatory acts, imposes a disproportionate interference with, and impairs the very essence of, the right to legal remedies.

For these reasons, the contested provision was annulled for being unconstitutional.

This press release prepared by the General Secretariat intends to inform the public and has no binding effect.

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