The Only Way to Take Back the Electricity Rates is to Switch to the Cost Based Tariff

The Only Way to Take Back the Electricity Rates is to Switch to the Cost Based Tariff
The Only Way to Take Back the Electricity Rates is to Switch to the Cost Based Tariff

Electricity hikes and high electricity bills have been on the agenda of the country since the beginning of the year. While the citizens complained about the electricity bills, the most affected group was the tradesmen and workplaces. Because the highest electricity pricing was applied to workplaces for a long time. However, this situation became even more remarkable after the price hikes, especially at the beginning of the year. It is seen that high electricity prices are a serious problem for all subscriber groups, especially workplaces. While it is being discussed that all possibilities, including VAT reduction, are being evaluated for the solution of the problem, the electricity suppliers comparison and replacement site encazip.com evaluated the examples in European countries and stated that the most attractive and balanced method for the pricing system in our country's electricity market would be to switch to cost-based tariffs for all subscriber groups. With the electricity hikes in January, electricity bills became the hottest topic on the agenda. While the reason behind the electricity hikes was the increase in electricity costs, it was noteworthy that the cost increases were reflected differently to each subscriber group. The upward trend in electricity prices, which started in July 2017, reached its highest point with the latest price hikes. Since 2017, the price of electricity used in homes has increased by 225 percent in the lower level and 451 percent in the upper level, while this increase has been 672 percent in workplaces and 626 percent in industry. At first glance, this shows that the cost of electricity used in homes is indirectly reflected to industrial and workplace subscriber groups.

“Return to the system in 2016 should be evaluated”

While the increases in electricity prices draw attention, it is stated by the energy market players that the problems of the electricity market have not improved since 2017. Similar problems can be seen especially in the macroeconomic data of the last period. However, it is among the prominent opinions that the situation in 2016 and before is better than today, both in terms of the energy market and the general economy. Economic data also supports these views. Stating that the system applied in electricity pricing in 2016 should come to the fore again, energy economist and founder of encazip.com Çağada Kırmızı said, "When we look at the electricity pricing in 2016, industrial and agricultural subscriber groups use electricity at a lower price than other subscriber groups, and thus, all inflation, especially inflation. macroeconomic data shows a relatively positive course. On the other hand, the fact that home and workplace electricity prices are equal to each other draws attention as a more fair and equitable pricing. With the change in the balances, in 2022, workplaces consume electricity at a higher price of 138 percent than homes, and industrial producers consume electricity at a higher price of 110 percent. Increasing producer and workplace costs are naturally reflected in all consumer products from needle to thread.” Underlining that the strategy of providing cheaper electricity to the producer in our country in 2016 is being implemented in Europe, and thus the economies of European countries have become stronger, Crimea continued as follows: The effect of applying cheaper electricity instead of electricity to the whole economy was quite positive. However, this situation changed later, and the electricity price of the houses was kept low at the expense of the other subscriber groups' prices being too high. Although this situation seems to be in favor of home consumers at first glance, it actually means high producer prices, higher prices of all products and higher costs for citizens. Considering both the European examples and the experiences in our country, the return to the system in 2016 should definitely be evaluated in order to solve the problems.”

“A tariff based on market costs should be adopted”

Stating that the transition to a tariff based on market costs will solve the problems for all subscribers in the short term, Krim said: “With the application called the last resource supply tariff, which is applied for users with high consumption in the electricity market, the issue of electricity hike has completely disappeared. With the application, consumer electricity prices are determined according to the costs incurred in the electricity market, so that consumers and producers are provided with the maximum benefit, while the users in this equitable system do not react to the electricity hike. Because prices are determined by the free market, not the state. On the other hand, the regulatory and supervisory role of the state on the market side still continues, and the exorbitant increase in costs is prevented by applying a ceiling price in the market, for example. In this structure, the price to be applied to consumers who have not changed suppliers is determined by adding an equitable margin on top of the market prices. If this method were applied to all consumers, workplaces would use 45 percent lower electricity prices, industrialists would use 28 percent, and households with high tariffs would use electricity at a lower price of 20 percent. Applying this application to high-consumption consumers to all subscriber groups, including homes, will solve all problems in the short term, and prices will be significantly cheaper in the medium and long term, with the smooth functioning of free market dynamics.”

“EÜAŞ prices are low but the perception is wrong”

Also speaking about the prices of electricity sales made by the Electricity Generation Joint Stock Company (EÜAŞ) to 21 assigned supply companies, Kırık said, “Another controversial application is the cheap sales made from the public EÜAŞ power plants. According to the current practice, while the market electricity costs are 1,1 TL, electricity from EÜAŞ power plants is sold to 0,32 assigned supply companies for 21 TL. Although this practice creates unfair competition for other electricity suppliers to these 21 companies, the contribution of EÜAŞ power plants to the total electricity generation is only 18 percent. Therefore, the sale made from EÜAŞ power plants in a different way can only meet a very small part of the electricity need, which is already it almost corresponds to the consumption in the low-level residential tariff.” said.

“The free market is a boon to consumers”

Although the foundations of liberalization and privatization in the electricity market were laid in the 1980s, the real liberalization and privatization was adopted in the Grand National Assembly of Turkey on February 57, 8, following the justification submitted to the Turkish Grand National Assembly with the decision taken by the Council of Ministers of the 2000th Government of Turkey on 20 December 2001. It was realized with the Electricity Market Law No. 4628. With the liberalization of the market, capital inflows were opened both on the electricity generation side and in other technical and non-technical fields, and the market grew by 20 percent in the last 224 years in terms of installed power. Explaining his views on the discussions on the privatization of the electricity market, Crimea said, “There is no need to discuss the privatization of the electricity market anymore. Because at least 20 years have passed since then. The focus at the moment is how best to ensure free market conditions. With the full functioning of the free market conditions, competition opens and consumers get maximum benefit with minimum price. It will be much more beneficial for consumers if we express our views not on the past but on how we can improve the current system.” said.

“The solution is in the cost-based tariff”

Emphasizing that the dynamics of the free market will be disrupted by interventions and that the real benefit can be obtained with a market that is not interfered but kept under control, Crimea said: “The current tariff structure both puts the costs on the backs of tradesmen and industrialists and prevents consumers from participating in the market. The only way to reduce electricity bills from our agenda is to switch to a cost-based tariff for all subscriber groups, including houses, and if a subsidy is required, it is provided to consumers who produce and export. In this way, consumers realize that they are paying the real cost of the energy they use and are less sensitive to price increases. On the other hand, low-income consumers can be comfortable by keeping the electricity price cheap for low-level consumers. For this method, the capacity of EÜAŞ will be sufficient and the lower level electricity price can be further reduced.”

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