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Turkey’s PMUM imposes levy to cover defaults

20 Mar 2012 13:27 GMT
Turkey's PMUM imposes levy to cover defaults

London, 20 March (Argus) — Turkey's day-ahead market operator PMUM yesterday levied a fee of almost 2 Turkish lira/MWh ($1.10/MWh) on all buyers to recoup the debts owed to it by market participants who defaulted on collateral payments last month.

PMUM said TL1.96/MWh levy will apply to all buyers, in addition to the TL9.2/MWh “zero balance correction amount” (ZBCA) — the amount charged to buyers to balance PMUM's accounts — on 15 March. The ZBCA has averaged TL2.6/MWh since its implementation in December 2009.

The additional levy will cover defaulting payments by buyers who were unable to meet their balancing collateral obligations as a result of record high prices on the PMUM in February. The higher prices were a result of critical gas supply shortages and extremely cold weather over the month.

Both fees are above the expectations of market participants, who have expressed concern that all buyers are being forced to foot the bill for defaulting players. “It is not right that someone selling electricity bilaterally and who is not exposed to the market will also have to pay for this,” one participant said. “It should instead be dealt only to those buying on the day-ahead market or intraday.”

Another participant suggested that firms could use legal means at their disposal to contest the additional fee, but others are not so hopeful. “As both [the ZBCA and additional fee] were announced beforehand and are in the regulations, I do not think it is possible to contest it,” one trader said. “One solution however might be to demand a change in the way that these fees are calculated in the regulation.”

Despite the higher fees, there is optimism among traders that PMUM is taking steps to remedy the systemic non-payment of collateral. “PMUM has made steps through instituting a new collateral mechanism,” a trader said. It is a little late, but it can help to rectify the problems from now on.”

Energy regulator EPDK issued new rules earlier this month permitting PMUM to demand “additional collateral” from participants it deems to be posing a disproportionate imbalance risk to the market. It can also remove consumers from the offending traders' portfolio and turn them over a distribution company. The new rules are expected to reduce the amount of defaults made on collateral payments.

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