Posted: 8 months ago

Changes in Georgian National Energy and Water Supply Regulatory Commission

Changes in the Georgian National Energy and Water Supply Regulatory Commission (GNERC) –how does David Narmania plan to increase efficiency and productivity of the internal management of GNERC?

David Narmania, nominated for the GNERC chairman position has talked about the mentioned issues for the BusinessPartner TV program.

Parliament of Georgia will vote for the GNERC chairman in two weeks. Narmania supposes that procedures will be specified in 2 weeks and the voting will be held after that. As reported, on October 1 Parliament of Georgia suspended the voting process.

“The issue was postponed because of certain procedural disagreements. Seemingly, there is certain vacuum that should be revised and therefore, the issue may be postponed for a period of one week or more. Presentation has been held. I have passed committee hearings, where I introduced development program views to work for the next 4 years. As soon as the parliament specifies these procedural issues and the vacuum is corrected, the issue will be returned to voting. I think these procedures will take 2 weeks”, Narmania noted.

Natural gas consumer tariffs will be revised by the end of 2019, but analysis of due factors prove that, we should not expect essential growth, he said.

Electricity and water supply tariffs will not be revised in the near future, because long-term tariffs run in the mentioned sectors. As to natural gas, where short-term tariffs run, the tariff will be revised by the end of 2019, but essential changes are not expected. Tariffs revision is a natural process, this will happen definitely, and we will know later whether the tariff rises or declines, Narmania noted.

„The regulatory commission analyzes all economic factors participating in tariff calculation process and based on this analysis it takes due decisions. There are factors that make negative effect and factors that bring positive effect. We will have full information by the end of 2019. Gas companies have submitted their applications. Some sectors set tariffs on annual basis and some sectors set long-term tariffs. For example, electricity sector has moved to long-term tariffs. At the end of 2017, the sector determined the tariff for a period of 3 years. Consequently, if no large-scale macroeconomic instability takes place, in 2018, 2019 and 2020 the electricity tariff will not be revised. Water supply sector has also introduced long-term tariffs. As to natural gas supply sector, tariffs will be revised in 2019, but we want to introduce long-term tariffs in this sector too, but not all factors have been analyzed in the natural gas sector and a final report on the issue will be submitted in late November or early December. However, based on analysis of the absolute majority of factors, we should not expect an essential growth in tariffs. Companies must submit tariff revision applications 180 days earlier. Consequently, gas supply companies have not submitted such applications”, David Narmania said.

The energy market should move to the European model. Protection of consumer rights and provision of market competition will be one of the functions of GNERC, he said.

“Several years ago Georgia signed European Energy Pact and the country assumed the obligation to transform the energy sector through opening the market stage by stage. This process has started, major users move to open market principles stage by stage. Later this margin will be lowered step by step and like European countries we will have an electricity platform, where consumers will be able to buy electricity and natural gas. Therefore, competition will enhance. Today we have one supplier in Tbilisi – TELASI and in regions – EnergoPro. We have monopolists in natural gas sector too. European model calls for opening the market stage by stage. On the open market, consumers are able to select the cheapest supplier and the environment generates competition elements. Jointly with the competition agency, we will make focus on protection of consumer rights and ensuring competitive environment on the market. As soon as the parliament adopts the law on energy and water supply, GNERC will have to issue about 20 various bylaws to regulate the system under new schemes. Including we have prepared the market monitoring and investment appraisal regulations. As soon as the GNERC chairman is appointed, we will adopt these rules. Other regulatory packages will be also prepared stage by stage and this system will be regulated under new mechanisms”, Narmania said.

Arranging the domestic power generation is vitally important. Therefore, construction of the so-called suspended HPPs should be accelerated. In other case, we should endure that the country will have expensive electricity, Narmania noted.

Construction of new HPPs should be intensified and resumed. The country needs more power and more generation. This is vitally important, we need to expand domestic generation. The demand for electricity always grows jointly with economic growth in all normal countries, including European courtries, Narmania pointed out.

„Over the past 3 years Georgia’s economic growth was around 5%, however the demand for electricity has been growing by 7%-8% a year. This signifies the demand for electricity is higher in Georgia because of three key factors: active governmental support for business sector, including many new businesses were launched  as part of Enterprise Georgia and other programs; crypto industry is another factor.

Crypto currency mining needs huge volumes of electricity and the mining’s ratio in Georgia’s total consumption makes up 10%; and the third factor is related to moving to energy-efficient technologies. We have to accelerate the current paces. Combination of these factors grows the demand for electricity. Therefore, it is important to accelerate the construction of the so-called suspended HPPs”, Narmania noted.

Electricity tariffs will rise without construction of new HPPs, David Narmania noted.

“We have to import more expensive electricity from the region, especially in winter period with high deficit. We can generate cheaper power. Therefore, all of us should agree that we should resume a construction of such HPPs that does not make essential negative impact on environment. We should reject such projects that will make disastrous impact on environment, but today we have suspended several projects with very positive conclusions. Therefore, we should definitely implement these projects. We should build HPPs, otherwise we should endure that we will have expensive electricity. Foreign currency always leaves the country because of electricity imports and foreign currency outflow is a negative macroeconomic factor too”, David Narmania said.