<article><p class="lead">Turkey's energy regulator EPDK launched a new power tariff for users who consume at least 50 GWh/yr from April, in a bid to "incentivise transition to a competitive market".</p><p>The new tariff will encourage eligible users to negotiate bilateral contracts with suppliers below the regulated price.</p><p>The new tariff will be indexed to monthly day-ahead prices and the monthly Yek fee that finances renewables, along with a profit margin of 12.8pc for retail and wholesale firms.</p><p>Over-the-counter (OTC) market liquidity <a href="http://direct.argusmedia.com/newsandanalysis/article/1602502">fell last year</a>, with retailers struggling to achieve the margins to sell power to eligible users — regulated tariffs have not changed for two years. <a href="http://direct.argusmedia.com/newsandanalysis/article/1599297">The increase in regulated prices for the first quarter of 2018</a> was not sufficient to provide suppliers with profitable margins.</p><p>The new regulation could support OTC liquidity in the coming months, if industrial firms opt to fix the price to avoid being exposed to spot power volatility and foreign currency risk linked to the Yek fee. Stronger hedging demand could lift forward prices in the coming months. Forward prices have risen this year, driven by higher fuel costs for gas-fired utilities and weaker hydro stocks. But the 23GW or so of renewable capacity participating in the Yekdem scheme could help lift day-ahead prices this year. The strategies of state-run utilities are expected to keep spot prices from significant rises and falls, similar to last year, when prices held at 145-185 lira/MWh.</p><p>The number of eligible users that consume at least 50 GWh/yr is expected to be around 250-300, most of which are industrial users. </p><p>An industrial user seeking to fix the price for April-December this year will pay at least TL255-270/MWh ($67-71/MWh), based on current OTC prices and EPDK's Yek fee projection. This suggests at least a 16pc hike in the industrial regulated tariff. EPDK will set the new tariff rate annually. </p><p>The move will come as a relief to state-run trading firm Tetas, which is obliged to sell power to regulated suppliers. Demand from regulated suppliers rose significantly over the last year, with most users switching to regulated tariffs because of higher prices elsewhere and retail firms willing to terminate bilateral contracts. Tetas started <a href="http://direct.argusmedia.com/newsandanalysis/article/1595509">supplying less power</a> to regulated firms this year.</p></article>
