Administrative fines, although to a lesser extent comparatively to punishment fines do affect lives of real persons and legal entities in a negative manner. Sometimes, even a low administrative fine may harm the companies through a distruction on the companies’ commercial credit.
Our study is limited with the administrative fines which are imposed to generation companies and it will be discussed within the frame of their responsibilities in accordance with the laws and regulations on Electricity Market.
A) The Legal Ground of Administrative Fines within the frame of Turkish Administrative Law and their Legal Essence
B) The Legal Responsibilities of Generation Companies and Administrative Fines in the Electricity Market under Turkish Electricity Market Regime
B-1) Communiqué Concerning Principles and Procedures for Monitoring and Preliminary Investigation and Enquiries
B-2) The Administrative Fines imposed by the Turkish Energy Market Regulatory Authority
B-3) The Legal Responsibilities of Generation Companies under Turkish Electricity Market Laws & Regulations
C) The Legal Remedies against Administrative Fines
A) THE LEGAL GROUND OF ADMINISTRATIVE FINES WITHIN THE FRAME OF TURKISH ADMINISTRATIVE LAW AND THEIR LEGAL ESSENCE
Administrative fines are the punishments which can be carried into effect if only they are permitted or not prohibited by the laws, and without an order of court, directly by the Administration, by an administrative act and in conformity with the procedures of the Administrative Law. In a decision of Supreme Court dated 1996 , administrative fine is defined as the sanctions implemented by the Administration, with its mandate explicitly addressed in the laws in compliance with the procedures inherent in the Administrative Law with an administrative proceeding which directly is implemented.
Administrative fiscal sanctions can appear in different forms: administrative fines, expropriation and confiscation.
Administrative fines are administrative sanctions which are carried into effect directly by the administrative agencies. They are implemented without an order of a court by the Administration and they involve an amount of money to be received.
Administrative decisions on administrative fines are subjective sanctions under principal cause. Under these kinds of sanctions, the juridicial act is private and subjective. According to ÖZAY, administrative fines are subjective acts that embody the sanctions.
The subjective aspects of the persons are considered in the calculation of the amount of the fine by the competent administration and the amount of the fine is determined individually and is concluded once implemented.
Therefore, administrative fines are a kind of administrative sanctions which cover receiving some money in turn which is permitted under the law that the competent administration can directly decide without an order of the court.
Two results can be evolved in accordance with this definition:
1- An administrative fine must be explicitly addressed in law in order to carry into effect.
2- The power to impose an administrative fine must be identified by the Administration as implemented the same for all kinds of administrative sanctions.
B) THE LEGAL RESPONSIBILITIES OF GENERATION COMPANIES AND ADMINISTRATIVE FINES IN THE ELECTRICITY MARKET
According to the directives of European Union (EU), it is stipulated for all the markets to maintain a competitive environment. Many utilities which were public entities before have been privatized in recent years and transformed to operationally and functionally efficient markets. European Commission has implemented a Framework and a set of comminiqués in this direction. The main goal of the Framework and the comminiqués is to maintain efficient, sustainable and perfect competition in these kinds of utilities which have natural monopoly characteristics. Turkey’s full-membership to EU is still pending and Turkey made commitments in this direction. Turkey can make progress in the full-membership process to EU to the extent that Turkey performs its committments.
In line with EU directives, Turkey started liberalization process in electricity market and has still harmonising its laws and regulations in conformity with EU directives. Firstly the services in generation market, then in distribution market were privatized and herewith the operations in these markets were started to be served by private entities with the application of licence procedure. Monitoring in this sector needs more intention by reason of important concerns on security of supply, consumer rights and the public nature of the service. It is also noteworthy to mention that Turkey has also enacted laws and regulations regarding the methods of eliminating the market failures in order to create and sustain a competitive environment in this sector and enacted laws and regulations regarding the other issues pointed at the directives of EU.
“Energy Market Regulatory Authority” (EPDK) was established with the Amending Law No.4646 on Electricity Market Law and the Law on Natural Gas Market and the decision making body of the Authority, “Energy Market Regulatory Commission” has gone into action as of 19.11.2001. According to the article 4 of the Electricity Market Law, Energy Market Regulatory Authority is an independent, administratively and financially autonomous public institution. The Ministry that the Regulatory Authority is in connection with is the Ministry of Energy and Natural Sources. It is ensured under the Electricity Market Law no.4628 that the Authority functions its operations in correspondent with its aim to create an electricity market which performs its operations in a competitive environment under private law provisions and financially powerful, continually and transparent and also which is monitorred and regulated by an independent and transparent regulatory authority in order to serve electricity in quality, without interruption, at low cost and environment-friendly manner to consumers.
Under the section of “Functions and Powers of the Energy Market Regulatory Authority and Energy Market Regulatory Board” of the Electricity Market Law no. 4628 dated 20/02/2001, Article 4, 2. sentence, the functions of the Authority is embodied explicitly. According to that, The Authority is responsible for;
• issuing Board-approved licenses that set forth the activities to which the legal entities are entitled to and the rights and obligations arising from such activities;
• regulation of existing contracts within the scope of transfer of operating rights as per the provisions of this Law;
• monitoring market performance;
• drafting, amending, enforcing and auditing the performance standards and distribution and customer services codes;
• setting out the pricing principles indicated in this Law;
• setting out the pricing principles to be employed for electricity sale to non-eligible consumers with regard to the market conditions;
• enforcing the formulae regarding the modification of such prices due to inflation and auditing of them;
• ensuring the conformity of the market behavior with the provisions of this Law.
Energy Market Regulatory Commission can impose an administrative fine in the event of the legal conditions related in the article 11 of the Electricity Market Law are accrued in order to induce in consistent with the Law.
According to the Misdemeanor Law, one of the public legal entities that may rule to an administrative fine is regulatory authorities. In consequence, it may referred that the punishment mandatory of the Energy Market Regulatory Authority is grounded under the article 22 of the Misdemeanor Law number 5326.
Under the article 11 of the Electricity Market Law, the conditions to rule an administrative fine and the amount of these administrative fines are explicitly and significantly determined.
The Comminiqué on the Administrative Fines no. 27423 dated 05/12/2009 under the Electricity Market Law Art. 11 regulates the actual adiministrative fines being implemented and being implementing for the year 2010.
If illegality is not remedied by the generation entities within the period referred in the articles 21 and 22 of the “Communiqué Concerning Principles and Procedures For Monitoring and Preliminary Investigation and Enquiries”, the Energy Market Regulatory Commission can impose the administrative fine stated at the article 11 of the Law.
B-1) COMMUNIQUÉ CONCERNING PRINCIPLES AND PROCEDURES FOR MONITORING AND PRELIMINARY INVESTIGATION AND ENQUIRIES
According to the “Comminiqué Concerning Priniciples and Procedures For Monitoring and Preliminiary Investigation and Enquiries”, the monitoring function of the Energy Market Regulatory Authority means to examine all activities and practices performed by the legal entities in the electricity market, their transactions and accounting and financial statements from the point of probable error, incompleteness, irregularity and abuses.
The procedure of the monitoring starts with sending the monitoring report prepared by an agent of the Regulatory Authority to the Head Department of the Authority. The Head of the Department examines the document and presents the opinion and delivers it to the Chairmanship.
At the Chairmanship, Commission makes a decision to launch an investigation or not. In the case the investigation is launched, the investigation must be ended after 6 months at the latest beginning from the decision time on launching the investigation. However, if necessary the Commission can grant ad-hoc an extension of time for three months at most. It is required from the concerned legal entity to make its defence in written form regarding the issues that are fixed in the monitoring document in thirty days beginning from the arrival of the notification which is prepared by the staff member who is on duty for the investigation. The written defenses -if not made in the time period denoted in the notification- are not considered at the final decision of the investigation. The Chairman submits the investigation report, the written defense statement of the concerned party and the additional opinion of the Chairman staff who executed the investigation and lastly, the opinion of the Chairman over all the statements mentioned above.
Commission makes a decision upon the investigation report. If the decision is to launch an investigation then the Chairman notifies the Chairmanship in relation to its determination on whether the illegality is remedied within the time ruled at the article 11 of the Law and also denoted in the notification letter. If the illegality is not remedied upon the notification, then the administrative fines ruled at the article 11 of the Law is decided to be implemented.
In the case that the administrative fines are not paid in the given time period, then the sanction is received through the related tax administration.
Within the duration beginning from the notification of the regulatory authority’s decision, a suit of nullity can be brought before the Council of State and duration begins from the date of notification of the regulatory authority’s decision to the concerned person.
Energy Market Regulatory Body can make a start to investigation process ex officio or upon notice or upon complaint.
The Commission can decide to take any kinds of judicial and administrative actions including bringing a lawsuit if ever a breach against the related laws and regulations is recorded ex-officio or upon its findings which are obtained at any phase of the preliminary investigation or the enquiry which is going on. These kinds of decisions are informed immediately to the related authorities after taken.
B-2) ENERGY MARKET REGULATION AUTHORITY AND THE ADMINISTRATIVE FINES IN ELECTRICITY MARKET
According to the principles of “legality” and “legal certainty” in administrative acts, the administrative fines could only be imposed if ever it is mentioned in law. The Article 11 of the Electricity Market Law states that; “The administrative fines are imposed in the undermentioned cases:
a) In cases where it is determined that the information provided upon request by the Board is false, lacking or misleading or if the conditions for on-site investigations by the Board are not made available, the related real person and legal entity is warned to submit the correct information and/or make available the conditions for on-site investigation within fifteen days. In case the breach is not remedied despite the written warning an administrative fine of 200.000 (two hundred thousand) TL is imposed.
The two conditions must necessarily be maintained in order to impose an administrative fine of 200.000 TL. The conditions are;
1. The Information provided by the entities which is requested by the Authority must be suitable in at least one of the conditions prescribed by law as;
– No information is provided and submitted to the Authority,
if the conditions for on-site investigations by the Board are not made available.
2. In the case of a condition mentioned above, the Board must inform with a written warning to submit the the informations in a fair form or to make the conditions for on-site investigation of the Board in fifteen days and the illegality must not be fulfilled despite of this written warning of the Board.
b) In cases where it is determined that legal entity is in breach of the provisions of this Law, and regulations, communiqués issued by the Board, the legal entity is warned to remedy the breach within thirty days and in case the breach is not remedied despite the written warning an administrative fine of 250.000 (two hundred and fifty thousand) TL is imposed.
The breach of the provisions of the Electricity Market Law and the related regulations, prescriptions and communiqués issued by the Board is regulated as a condition to impose an administrative fine. The electricity market laws & regulations in effect can be held in a hierarchy as follows;
1. Turkish Electricity Market Law
2. Regulations in Turkish Electricity Market:
– Electricity Market Licensing Regulation;
– Electricity Market Tariffs Regulation;
– Electricity Market Customer Services Regulation;
– Electricity Market Eligible Consumer Regulation;
– Electricity Market Import and Export Regulation;
– Electricity Market Distribution Regulation;
– Electricity Market Balancing and Settlement Regulation;
– Regulation on Principles and Procedures for Granting Guarantee of Origin;
– Regulation Concerning Electricity Demand Forecast;
– Electricity Market Grid Regulation;
3. Comminiqués in Turkish Electricity Market:
– Communiqué Regarding Connection to and Use of Transmission and Distribution Systems in the Electricity Market;
– Communiqué Regarding Preparation of Retail Contract in The Electricity Market;
– Communiqué Concerning Principles and Procedures for Selection in the Existence of More Than One Application for Generation of Electricity from the Same Source and on the Same Region;
– Communiqué Regarding Regulation of Market Management Revenue;
– Communiqué Regarding The Principles and Procedures of Financial Settlement In The Electricity Market;
– Communiqué Regarding Regulatory Accounting Guidelines;
– Communiqué Regarding the Meters to be used in the Electricity Market;
– Communiqué Regarding Wind and Solar Measurements;
– Communiqué Regarding Determination of Transmission and Distribution Connection Charges;
– Communiqué Regarding Regulation of Distribution System Revenue;
– Communiqué Regarding Regulation of Retail Service Revenue and Retail Prices;
– Communiqué Regarding Regulation of Transmission System Operation Revenue;
– Communiqué Regarding Regulation of Transmission System Revenue;
The provisions of the laws and regulations aim to remove the barriers restricting competition in the market, to prevent abuse of dominance even at the natural monopolistic characteristics of the market and to set a fair or a reasonable price for both the users and the end-users at the wholesale and retail segments of the market. In this context, the Competition Authority’s monitoring function and its mandate over this market has a great importance. Besides the administrative fines imposed by the Regulatory Authority, the Competition Authority has also the mandate to impose an administrative fine in the frame of the Competition Law number 4054.
c) In cases where it is determined that a legal entity fails to comply with any of the general terms or any of the responsibilities set out in its license, the legal entity is warned to correct the same within thirty days and in case the breach is not remedied despite the written warning an administrative fine of 300.000 (three hundred thousand TL) is imposed.
d) If misleading information or non-factual documents related to licensing conditions are presented in license application process or if the changes that affect the licensing conditions occur during the term of the license and the Board is not notified about such changes, the license shall be revoked. However, if the Board considers that the non-factual documents, misleading information or changes in license conditions may be corrected, the legal entity is warned to correct the same within thirty days and in case the breach is not remedied despite the written warning an administrative fine of TL 400.000 ( Four hundred and fifty thousand TL) is imposed.
e) In case the prohibitions on affiliate relations are violated during the term of the license, the legal entity is warned to correct the related affiliate relation within thirty days and in case the breach is not remedied despite the written warning an administrative fine of TL 450.000 (four hundred and fifty thousand TL) is imposed.
f) If a legal entity is engaged in activities not covered by its license, then the legal entity is warned to stop rendering those activities or the adverse actions within fifteen days. In case the breach is not remedied despite the written warning, an administrative fine of TL 500.000 (five hundred thousand TL) is imposed.
The Authority may employ different warning periods according to the quality of the infringement. In cases where the above mentioned actions requiring imposition of fines are not corrected or repeated despite a warning, the fines each time are imposed, increased by two times. If the same action, which requires imposition of an administrative fine, is not committed within two years from the date of initial fine imposition, previous fines are not taken into consideration. However, the increased fines cannot exceed 10% of the gross income stated in the previous financial year’s balance sheet of the legal entity subject to fine imposition. In cases where the total amount of fines imposed reach the referred limit; the Board may revoke the license.
As it is defined above, the Electricity Market Law number 4628 regulates different amounts of administrative fines for different types of breaches in the electricity market.
Besides that, according to the Article 3 of the Turkish Misdemenaor Law, the Misdemenaor Law is applicable for all actions which require an administrative fine sanction. Because EPDK is an independent authority and has the mandate to impose an administrative fine and administrative fines are recognized by the Electricity Market Law, then the Turkish Misdemenaor Law is also applicable for the administrative fines mentioned in Electricity Market Law.
The Misdemenaor Law rules in the sentence 7 of the article 17 that; “The administrative fines are applied increasing them in the revaluation rate which is determined and added by the repeating article 298 of the Turkish Tax Procedural Law number 213 and Dated 4/1/1961 for the year to be valid from the beginning from the calender year. In the calculation of the administrative fine in this way, one TL’s fraction is not considered. This article of the Law is not applicable for the relative administrative fines.”
The Ministry of Finance determined and announced the revaluation rate in 2010 to be %7,7 with the General Comminiqué on the Tax Procedural Law number 392, published in the official gazete number 27757 and dated 12/11/2009. The administrative fines recognized in the article 11 of the Electricity Market Law number 4628 are applied in the revaluation rate mentioned above.
The administrative fines will be applied for the year 2011 beginning from 01/01/2011 in the amount mentioned below according to the Comminiqué on Administrative Fines for 2011, in accordance with the the Electricity Market Law.
B-3) THE LEGAL RESPONSIBILITIES OF GENERATION COMPANIES
As it is mentioned in the article2, paragraph 2 of the Electricity Market Law; the procedures and principles to be followed by legal entities engaged in market activities are set forth in the Electricity Market Law and applicable regulations. Again, in the article 11 of this law regulates the types of the sanctions, the conditions for the sanctions and the duration of the sanctions.
Obtaining a licence from the Authority for every existing generation plants and every generation plants that will be established, to be authorized to generate electrical energy and to sell the generated electrical energy is a legal responsibility. The principals and procedures to obtain a licence is regulated with ordinance.
Electricity Market Licensing Regulation basicly includes;
• the provisions which should be included in the licenses which should be provided in order to engage in generation, transmission, distribution, wholesale, retail and retail sales services, import and export activities in the electricity market;
• the principles and procedures applicable to the granting, modification, renewal, termination and cancellation of licenses
• the rights and obligations of the licensees.
The legal entities obtained license from the Authority; must obey the Electricity Market Licensing Regulation grounded by the Electricity Market Law. The article 5, sentence 11 of the Electricity Market Law also states it.
The obligations of the generation licensees can be identified in two sub-groups;
1) The obligations bring forth for all the licensees in the electricity market,
2) The specific obligations of the generation licensees.
The basic obligation bring forth for all the market players is to obtain a license at the market. According to the article5 of the Electricity Market Licensing Regulation, every entity must obtain a valid license. In other words, without a license, a legal entity cannot operate in the electricity market. Hence, the basic obligation of the generation licensees is to obtain a valid license.
Another important obligation for all the market players ( licensees) is that the licensees can operate within the scope of the operations mentioned in their license. According to the paragraph 4 (a) the article 2 of the Electricity Market Law, legal entities that can operate in the generation market are the Turkish Electricity Generation Joint Stock Company and its affiliates, the other public generation entities and autoproducer and groups of autoproducers formed by restructring of the Turkish Electricity Generation Joint Stock Company. Private and public sector generation companies, in accordance with their licenses, are entitled to sell electricity and/or capacity to real persons and legal entities. Private generation legal companies; are private sector legal entities subject to civil law that are engaged in generation and sale of electricity at generation facility(ies) they own or have acquired through financial leasing or transfer of operating rights (TOOR). In this context, private generation legal entities can operate in the scope of the Electricity Market Licensing Regulation grounded by the Turkish Electricity Market Law and which are also included in their licenses. The article 17 of this Regulation states that the market activities can be performed under Generation Licences are;
• Establishing a generation plant,
• Managing the generation plant,
• Generating electricity energy,
• Selling electricity energy and/or capacity to the customers.
Generation companies can enter into affiliate relationships with distribution companies without having control over them. An explicit description for the term- “affiliate” is given in the article 4,sentence 25 of the Licensing Regulation. The Licensing Regulation states that affiliate is; excluding public institutions, any company that, on its own or together with other company(ies) or real person(s), directly or indirectly controls another legal entity, or, any legal entity under direct or indirect control of a single or a group of other company(ies) or real person(s); and direct or indirect relations between or among such company(ies) and/or legal entity(ies) operating in the market. The affiliate relationships may be formed through the activities which are resulted by direct relationships or by indirect relationships with the companies. It is prohibited to form affiliates in order to engage control over the market. Control or Dominant Position (Absolute Monopoly Power) as is stated in the Competition Act number 4054, is defined as “The power of one or more undertakings in a particular market to determine economic parameters such as price, supply, the amount of production and distribution, by acting independently of their competitors and customers”. European Union Justice Court stated in the lawsuit of “Continental Can 30” that a dominant position of an entity means that it can decide on market forces independent from its competitors, consumers and providers. This position arises in the case that a firm has control over the market price or production or distribution in the related market by means of its market share or besides market share also the technical equipment, raw material or capital it had. The market power does not needed to be achieve a degree of dominance which may even make a result of shut down of the other players in the market. However, the degree of dominance may be different in different markets, if the dominance does not effect the players to independently react in the market”.
According to the provisions of the Act on the Protection of Competition number 4054, it is forbidden to abuse the dominance in the market while the dominance at the market is not illegal itself. The law verbatim states it as; “The abuse, by one or more undertakings, of their dominant position in a market for goods or services within the whole or a part of the country on their own or through agreements with others or through concerted practices, is illegal and prohibited. Besides, the ground for the article of Abuse of Dominance indicates that in terms of competition law, an undertaking’s growth through its own internal dynamics and obtaining a dominant position in various sectors is not an objectionable situation. However, the provisions of the article of Mergers and Acquisitions of the Act mentions that; it is also illegal of a merger or an acquisition with a view of creating a dominant position or strengthening its dominant position, which would result in significant lessening of competition in a market for goods and services within the whole and a part of the country.
The Turkish Electricity Market Law also includes some competition provisions in itself. According to the article 17 sentence 2 of the Electricity Market License Regulation, “The generation companies may enter into affiliate relationships with distribution companies without having control over them”. Hence, “The total share of any private sector generation company, together with its affiliates, in the market may not exceed twenty percent of the total installed capacity of Turkey for the previous year, as published by TEIAS.” And the third sentence of the Act denotes that; “The sale of electricity and/or capacity by EUAS and/or its affiliates in a competitive environment shall not discriminate between public sector institutions and private sector companies and under no condition shall the sale price of EUAS and/or its affiliates be subsidized in any manner.” The main purpose of these provisions is to prevent a vertical integration in the electricity market.Vertical integration describes the ownership or control by a firm of different stages of the production process, e.g., petroleum refining firms owning “downstream” the terminal storage and retail gasoline distribution facilities and “upstream” the crude oil field wells and transportation pipelines.”Forward” integration refers to the production to distribution stages whereas “backward” integration refers to the production to raw material stages of the operations of a firm. In a vertical integration, a firm has the ownership and control over different segments of the market. Within this frame, the affiliate relationship is permitted under the condition that the generation company does not have control over the distribution company.
The responsibilities of the licensees set forth for all licensees specifically to their types of licenses other than the ones recognized in the article 5 of the Electricity Market License Regulation can be summarized in the article 36 of the Regulation as follows;
• Under no condition shall the licensees engage in domestic electricity and/or capacity trading with legal entities that do not hold licenses, other than the consumers.
• The losses and damages arising from the poor quality of electricity and/or interruptions shall be compensated by the responsible licensee within the framework of the procedures and principles set out in the applicable legislation.
• The licensees shall take all safety measures regarding their services and the facilities that they own and/or operate.
• Licensee is obliged to announce in written form the facts that may hamper or hinder the operations subject to the licence, the effects of these facts on the operations subject to license and the precautions taken to diminish or resolve these effects and how to and how long to eliminate these effects totally, to the Authority in seven workdays beginning from the day the fact appeared.
• The licensees shall inform the Authority, in writing, of the events that may hinder or interrupt the performance of activities under their license, the impact of such events on the activities under license, measures taken by the licensee to mitigate or eliminate these effects, and under what conditions and within what period such effects can be eliminated in full, within seven working days following the emergence of such events.
• The licensees shall be obligated to submit the Market Financial Reconciliation Center the necessary documents and data regarding the bilateral agreement concluded among themselves and with eligible consumers.
• The licensees may have the activities under its license performed through outsourcing, whereas the due responsibility of the licensee shall not be eliminated.
• The licensees shall install the meters required by the applicable legislation in order to exchange electricity and/or capacity through bilateral contracts,
According to the article 47 of the Electricity Market License Regulation, there is an approval condition set forth by regulation for transfer of the shares of an electricity firm operating in any segments of the electricity market. Besides the approval condition for the transfer of shares, the acquisition of right to vote and pledging the shares also requires the Energy Market Regulatory Board’s approval. The article 47 states that; “the direct or indirect acquisition, by a real person or legal entity, of shares that amount to more than ten percent of the capital of a licensee (five percent for publicly traded companies), and share acquisitions that result in the increase in a partner’s shares to above ten percent of the licensee’s capital or a transfer of shares that leads to the fall of a partner’s share to below the above-mentioned rate, are subject to Board approval. This provision is also applicable for acquisition of right to vote and pledging the shares.” Board approval shall be given on condition that the real or legal entity, to which the share has been transferred, has the necessary qualifications required for the legal entity’s partners during the license application. Continuing, that provision of this article shall be applied to the real person’s partner or partners in case the management and audit of the capital shares of the partner belong to another legal entity.
Even if there is no transfer of shares, allocation of the privilege on existing shares, termination of a privilege and issuance of a dividend right certificate are subject to Board approval regardless of the ratios stated above.
During the application of a real person or legal entity holding directly or indirectly, ten percent or more (five percent for publicly traded companies) of the capital of a licensee, or even if it is below that ratio, has the shares providing the privilege of appointing members for the Management or Audit Boards, or those who have acquired usufruct on these shares, are required to have the necessary qualifications required for the legal entity’s partners while applying for a license.
According to the article 48 sentence 1 and 2 of the Electricity Market License Regulation, in cases where a single legal entity wishes to take over all assets and liabilities of one or more licensee as a whole, Board approval for such a merger shall be obligatory. If the merger is allowed by a Board decision, the Board decision regarding such merger shall be announced on the bulletin board and on the website of the Authority. If the merger is not completed within a hundred days following the permission date, that permission shall be invalid. In such cases, continuation of the merger procedures shall be subject to a new Board decision.
The Responsibilities set forth specifically for the Generation Licensees
The specific obligations that were set forth to the generation companies according to the Electricity Market Law number 4628, dated 20 /2 /2002 and Electricity Market Licensing Regulation are;
• The sentence 2 of the paragraph 4 (a) of the article 2 of the Electricity Market Law states that; “total market share of generation facilities operated by a particular private sector generation company and its affiliates cannot exceed twenty percent of the published figure for the total installed capacity in Turkey in the preceding year” . This issue is also repeated in the paragraph 3 of the article17 of the Electricity Market License Regulation, as well. According to this article, the total share of any private sector generation company, together with its affiliates, in the market may not exceed twenty percent of the total installed capacity of Turkey for the previous year, as published by TEIAS. The total electricity energy installed capacity reached to MW 44.559 as of 2010. Hence, the limit for the electricity installed capacity for the firms as of 2010 was 8,911 MW.
• According to the Electricity Market Licensing Regulation, the generation companies are obliged to obtain a license each for any generation plant and must have a separate account.
• The licensees faciliating operations subject to their licenses in the market are obliged to keep their power plants active in such a manner that they fulfill the obligations excluding force majeures and annually scheduled maintenance days. The definition of the force majeurs are regulated under the paragraph 1 of the article 51 of the Electricity Market License Regulation. The article states that; “In order to be considered an event as force majeure, the event has to be unpreventable, unavoidable or irremovable although the party affected by it has paid required care and attention and has taken all necessary measures, and the situation emerged should prevent the affected party to fulfill its obligations under related legislation.” Continuing in the same article , the force majeurs are stated -not to be limited with these- as; a) natural disasters and epidemics; b) war, nuclear and chemical leaks, national mobilization, civil unrest, rebellions, military attacks, sabotage, terrorism; c) strikes, lockouts or other worker movements; d) failure to complete, on time or at all, the administrative procedures such as approval, permission, or failure to establish real rights other than real estate possession rights without any due negligence of the related legal entity.
• According to the paragraph (f) of the article19 of the Electricity Market License Regulation, in case the suspension of the generation activity, except for force majeure conditions, scheduled annual maintenances and unscheduled maintenances, is requested, the licensee should file a written application with the Authority in writing at least one hundred and twenty days before the requested date of the suspension of the activity.
• According to the paragraph 7 of the article 17 of the Licensing Regulation, only the legal entities engaged in generation activity at facilities based on renewable energy resources may purchase electricity from private sector wholesale companies on the condition not to exceed the annual average generation amounts indicated in their licenses in a calendar year.
• According to the paragraph (b) of the article 19 of the Licensing Regulation; “There will be timely submission of bids and offers to the Market Financial Reconciliation Center for loading and unloading in accordance with the provisions of the Balancing and Settlement Regulations, and compliance with the orders of the National Load Dispatch Center to load and un-load.
In order to ensure that the National Load Dispatch Center performs its obligations regarding system reliability, regardless of the contract conditions, there should be compliance with all the orders of the National Load Dispatch Center, which shall be justified later and shall be implemented in a non-discriminatory manner, by an emergency statement under the following conditions;
1) The conditions that pose a threat to system stability and security within the framework of the Grid Regulations, the license of the TEIAS and other applicable legislation,
2) Force majeure. The other obligations of the generation licensees in accordance with the License Regulation can be summarized as follows:
• The generation licensees are obliged to submit the required data regarding the bilateral aggrements concluded with the customers to the Market Financial Reconciliation Center within the framework of the Balancing and Settlement Regulations to the National Load Dispatch Center.
• According to the sentence 2 ( ı ) of the paragraph of the article19, the generation licensees are obliged to provide technically possible ancillary services to TEIAS and distribution licensees within the framework of Ancilliary Services Regulation and Electricity Market Grid Regulation.
• The generation licensees are obliged to submit the ancilliary services proposed and the cost details of the services.
• The generation companies cannot engage in affiliate relationships with the distribution companies.
• The generation licensees are obliged to make payments to the legal entities operating TEIAS and/or distribution system or systems for the electricity energy which will be transferred to the customers over the transmission and/or distribution tariffs determined according to the procedures and principles of the Electricity Market Tariff Regulation.
• The generation licensees must announce their energy sources within the context of bilateral aggrements they contracted with the eligible consumers for the coming year, until the end of December to the Authority.
• The generation licensees are obliged to obey the provisions regarding the other provisions subject to legal entities and/or licenses.
• According to the article 39 of the Electricity Market License Regulation; the licensees are under the obligation to insure their assets on the basis of their fields of activity in order to protect them against potential risks. In this context, the licensees shall insure their generation, transmission and distribution facilities throughan “all risks” coverage against natural disasters, fires and accidents etc. The licensees may also cover other risks under insurance. The costs accrued by licensees subject to tariff regulation for including other risks under insurance in addition to “all-risk asset” insurance may be reflected in tariffs only upon Board approval.
• According to the sentence (a) of the article13 of the Electricity Market Law, the proposed tariffs which are submitted to the Board’s does not contain anything not directly related by the market operations.
• According to the article 15 of the Electricity Market Law, private legal entities engaging in generation or distribution operations in the market can establish a right of way or ask for a certificate of occupancy, or lease the real estates which are ensured and owned by the Treasury or the Government only if it is related with their operations in the market. In addition, the Commission must approve the application for the related legal proceedings, as well. If the Commission approves it, an aggrement on establishing a right of way, obtaining a certificate of occupancy or lease aggrement is concluded between the private legal entity and the Ministry of Finance. This aggrement’s duration is limited with the duration of the license and that should be included in the license, as well. The private legal entity is under the obligation to pay for this legal proceedings.
• Another important provision set forth by the Electricity Market Law is the Account Separation and Prohibition on Cross-subsidies. The paragraph 1 of the article 41 of the Law states the account separation and prohibition on cross-subsidies as ; “the licensees engaged in more than one market activity and/or carrying out the same licensed activity at more than one facility or one region shall keep separate accounts and records for each activity or each facility or each region subject to license, and for its activities that are complementary to and/or required by their market activity and are regarding the by-products of their market activity.” Continuing with the paragraph 5 of the same articleof the Law states that;
Licensees cannot cross-subsidize
a) its subsidiaries, affiliates or partners,
b) another company under the body of the same holding or company group,
c) among market activities,
d) between market activities and non-market activities,
e) between regional accounts – if operating in more than one distribution region under the same commercial title. According to the article 11 of the Electricity Market Law, in the breach of the specific obligations set forth for the generation licensees, the legal entity is warned to remedy the breach within thirty days and in case the breach is not remedied despite the written warning an administrative fine of 250.000 (two hundred and fifty thousand) TL is imposed.
• Another important issue is that, according to the “General Provisions of Generation Licenses” under the article19 of the Electricity Market Licensing Regulation states that; “excluding force majeure conditions, in cases where an unscheduled maintenance is initiated, through notifying TEIAS urgently, due to unforeseen failures or events that will inevitably cause failures, if it is determined that the duration of such maintenance negatively effects the market operation and the reason for such maintenance is not deemed convincing by the Authority, the provisions of article 11 of the Law will be applicable with due regard to the characteristics of the act.
C) THE LEGAL REMEDIES AGAINST ADMINISTRATIVE FINES
According to the first paragraph of the provision 123 of the Turkish Fundamental Law, “the administration is a unity with its establishment and functions and is regulated by law.” According to this provision, administrative authority should be in correspondence with the law and will be grounded by the legislative organ. The principle of the legality of the administration implies that the administration function must be executed in correspondence with the Fundamental Law and laws and all the proceedings are object to the judicial control.
According to the first paragraph of the article 125; “ the judicial remedy is open to any kinds of administrative actions and proceedings”. Continuing, the paragraph 4 denotes that the judicial authority is limited with the control of compliance with laws of the administrative actions and proceedings.
The Turkish Supreme Court defines the State of Law in its decision as; “ the State of Law is a state where all its actions and proceedings are open to judicial control and aims to establish a judicious legal order and to sustain it and be attentive to the commitment to the superior rules of the Fundamental Law and the superior rules of law ”. In the control mechanism of the administration, sanctions have a key role to force the administration to obey the laws and regulations.
There are two types of legal protection mechanism could be applied within the frame of national law: the administrative application against the proceeding and to bring a suit before the court for the abolition of the proceeding.
In addition to the legal application methods introduced in national law, the Complaint on the Fundamental Law and bringing the suit to the European Human Rights Court are other methods which has recently been introduced with the amendements on the Fundamental Law.
1) Administrative Remedy against administrative proceeding:v
According to the article 11 of the Administrative Jurisdiction Procedures Law;
“ 1. Before bringing a suit before the administrative court, to cancel, to withdraw or to amend the administrative proceeding or to start a new proceeding could be required from the higher Authority; if there is not a higher authority it could be required from the authority which started the administrative proceeding in the time period of the administrative term of litigation. This application halts the administrative term of litigation which has started.
2. In the case that the authority does not reply in sixty days, it is admitted that the application is refused.”
According to the article 10 of the administrative jurisdiction procedures law, in the case that the administration does not reply to the application, concerned parties can bring a suit -in relation with its subject-matter- to the Council of State, administrative court or tax court beginning from the end of the date of the application. If the response of the administration is not a definitive response, then the concerned party / parties either can bring a suit before the court considering that the response is refused or await for the definitive response.”
In the case that the application is refused by the Authority or not replied in sixty days, the time for litigation starts to proceed from the beginning and in this case, the elapsed time until the application date is also counted in.
Within the frame of those regulations, the entity, to which the administrative fine is imposed can apply to EPDK in order to claim for the administrative fine to be decreased or to be removed. In the case that its claim is refused or not given an answer in sixty days beginning from the application, than the entity can bring a lawsuit.
In the article 7 of the Administrative Jurisdiction Procedures Law number 2577, it is denoted for the time for litigation to the Council of State and administrative courts is sixty days.
It is noteworthy that the opposition which is an administrative application procedure halts the time for litigation and also opposition is not admitted as a prerequisite for bringing a suit before the court.
2) Bringing an annulment suit against the administrative proceeding
The annulment suit is defined as a suit which maintains an unlawful administrative proceeding to be nullify by the administrative judicial authorities.
The annulment suit aims to protect the legal order through cancelling the administrative proceeding which are by the proceeded adjudication.
As it is stated in a decision of the Council of State, “ the annulment suits which are peculiar to Administrative Law, custody of compliance with laws regarding the administrative proceeding, objective suits aiming to protect the legal order and hence, the administrative authority considers only the legal proceeding regarding its validity – whether there is an invalidity and whether it is unlawful”.
The conditions for an administrative proceeding to be subject to an invalidity is implied under the Administrative Jurisdiction Procedures Law. According to the Law, the proceeding could be subject to annulment suit if the proceeding is invalid according to its subject-matter, reason, form, power or intendment.
The reason of an administrative proceeding can be defined as the factors which direct the administration to take action. The reason of an administrative proceeding could be a physical action, a legal status or a proceeding which is before the administrative proceeding. Whatever the principle of the sanction is – a law or an formal basis regulated by the administrative organ- , there must necessarily be a reason behind it. Despite the fact that the legal result concluded per a wrong provision of the law and the one resulted per the right provision of the law could be the same, this invalidity of the reason of the proceeding leads to the annulment of the proceeding.
The subject-matter of the administrative proceeding can be defined the result of the sanction ( Ex. Administrative fine ) . This element resulted by the execution of this sanction becomes invalid by a sanction different than the envisaged sanction for the administrative action or proceeding. One another important provision is the proportionality regarding the subject-matter of an administrative fine.
The administrative authority while they use their power can only take an administrative action or start a legal proceeding only on the proportion which is enough to reach to fruition because the administration can exercise its authority only on the proportion that is determined by law. Otherwise, there results a power exceeding of the administration, and that is also a crime for the person who exceeded its power. The term of “power” in the administrative proceedings can be exercised by the person or the people who are given the authority of declaration of intent on behalf of the administration. That means the Administration can only use its power on the proportion determined by law and the related administrative proceedings can only be exercised by the legally authorized administrative organ or authority. As is the same for the other all the administrative proceedings, the administrative sanctions must necessarily be grounded by a rule of law. The administration can exercise its authority according to the stated rules of law and by the legally authorized administrative organ or authority. Because an invalidity regarding the administration’s power is a rule of public order, it can be submitted at any stage of the proceeding.
The form of an administrative proceeding refers to the evidence of the existence of an administrative proceeding and it implies the procedure of the administrative constitution or authority which issued the proceeding. The rules to be determined and to be known before the proceeding is obligatory for the administrated ones. The real person could be able to contest the invalidities at the stage of the issue of administrative proceeding or judicial protection as annulment reason.
The administrative proceedings ( including the administrative fines ) aim to serve for public interest. The administrative facilities which are not directed to the public interest invalidates the proceeding with regard to its intendment.
Once the proceeding is applied and the administrative fine is paid while the adjudication is on and it is annulled at the end of the adjudification, it causes individuals to suffer irradicably or to suffer by mischiefs which are virtue to recover. Because individuals cannot secure their remedies implicitly by bringing before the court, they have to claim for issue of stay order. Because litigation of a suit takes a long time. It is noteworthy that the issue for stay order is an efficient way in inspecting the administration and preventing the arbitrariness. The decision of issue of stay order reprieves the proceeding’s implementation, collection of administrative fine and while doing this, it aims to estop the implementation of the proceeding and to bring back the status which is before the proceeding is implemented.
The two conditions to rule for the issue of stay order are; presence of the explicit illegality and a mischief which is virtue to recover. If these two conditions are existing, then the collection proceeding of the administrative fine can be detained with an issue of stay order.
The Council of State rules under jurisprudence that; the operation subject to the proceeding shall not rely upon presumption but must rely on explicit and definitive proofs in the principle review of the administrative fines imposed by EPDK.
The first legal consequence of the annulment decision by the Court on the administrative proceeding is to bring back the status to its position before the proceeding. This decision rules out the proceeding beginning from the time of the proceeding’s implementation. By the removal of the illegal proceeding, the status is turned back or should be turned back to its position before the proceeding is implemented. The annulment decision terminates the proceeding beginning from it is originated. It is accepted that the annulment decision results in that the proceeding has never been originated. In terms of administrative fines, the administrative fine shall be removed or if it is collected, then it shall be remanded.
Besides the annulment suit protection against the administrative proceedings, there is another way to protect individuals’ remedies which is soonly recognized in Turkey, the Complaint on the Fundamental Law. Despite of the fact that it is included with an amendment on the Fundamental Law, it has not been in effect because the law on it has not been enacted yet. The Complaint on the Fundamental Law. It will take effect once the law regulating it is enacted.
The international legal protection method is the bringing the suit before the European Court of Human Rights. Despite of the fact that, the imposition of an administrative fine is not an issue which is directly subject to human rights, it is possible to bring this subject-matter as a matter of human rights due to the European Court of Human Rights’ jurisprudence and their additional protocols. In addition, it is noteworthy that not only real persons but also legal entities could be dealed as prejudicied persons excluding the rights categories tightly connected to the real persons from the view point of Court’ consideration. Hence, it is also explicit to bring a suit before the European Court of Human Rights even in the case that a legal entity is suffered. According to the article 35 of the European Convention on Human Rights; “The Court may only deal with the matter after all remedies have been exhausted according to the generally recognised rules of international law and within a period of six months from the date on which the final decision was taken”. It is important to note that the period of six-months is a lapse of time. As it is stated in the article 35 of the Convention, six-months period begin from the date on which the final decision was taken. For the admissibility of the application by reason of an administrative fine imposition, all remedies must have been exhausted. This way not only includes the judicial remedy but also includes all the administrative remedies, as well. Nominately, if an administrative remedy is set forth besides judicial remedy, this administrative remedy or remedies must also be exhausted. Despite of the fact that in the national law the administrative remedy is not a remedy to be exhausted in order to bring before the court, it should be noted that it is an admissibility criteria for the European Court of Human Rights. The Court rejects any application which it considers inadmissible under the article 35 of the Convention and at any stage of the proceedings.
(1) İl Han ÖZAY, “İdari Yaptırımlar”, İstanbul, 1985, p.35.
(2) Supreme Court of Turkey, Dated: 23.10.1996, Base Number: 1996/48, Decision Number: 1996/41, AMKD, C.1, S.33, p. 181-182.
(3) Yücel OĞURLU, “İdari Yaptırımlar Karşısında Yargısal Korunma ( The Judicial Protection against the Administrative Sanctions )”, only available in Turkish.
(4) Official Gazette Date: December 5, 2009, Official Gazette Number: 27423.
(5) The Article Six, “Abuse of Dominance” of the Turkish Act on the Protection of Competition, number 4054, Date of Adoption: 7/12/1994, Official Gazette of Its Publication Date: 13/12/1994.
(6) The Grounds of the Article Six, “The Abuse of Dominance” of the Turkish Act on the Protection of Competition, number 4054 website: http://www.rekabet.gov.tr/index.php?Sayfa=sayfaicerik&icId=165.
(7) Glossary of Competition Authority
(8) The Turkish Competition Authority Competition Glossary, the definition of “Vertical Integration”, ÇINAROĞLU 2003, pg.3, OECD (1990).
(9) TEIAS publication, “The Report on Turkish Electricity Installed Capacity”, 2009.
(10) This article does not apply to generation facilities with total plant efficiency over seventy percent in terms of regional heating and commitments to supply heat and vapor to its customers, hydroelectric generation facilities without reservoirs and generation facilities based on wind, solar, tide and wave energy.
(11) Attorney at Law, Arzu Ongur Ergan