Problems of regulatory reforms in electricity : examples from Turkey

This issue of the Network Industries Quarterly looks into the change in the Turkish electricity markets. The regulatory reform in the Turkish electricity markets began in the 1990s. It has culminated with the privatization of distribution of retail companies in the early 2010s. The enactment of the Electricity Market Act in 2001 was a turning point toward a more competitive market environment. However, the evolution of the reform has not gone perfectly. The transformation of the electricity industry had conflicting consequences for the market structure. The tensions between economic and political preferences have become more prevalent. In this respect, the Turkish experience provides additional insights into issues surrounding the process of opening markets to competition. While regulatory reform seems complete in terms of unbundling, tariff policies and the institutionalization of regulatory processes, competition policy issues begin to surface and political interference become more prevalent. In this issue, we look into different aspects of the recent Turkish experience. In the first article, Özbuğday and Alma discuss distribution/retail unbundling in the Turkish electricity markets. The paper draws attention to the increasing issues of competition policy as a result of privatizations in the industry. The second article by Şenerdem and Akkemik brings forward a fundamental issue: the lack of data and the difficulty of constructing social accounting matrices. The authors introduce a social accounting matrix (SAM) with a special emphasis on electricity for the year of 2010. They put first steps forward of developing a general empirical perspective on the nature of electricity markets. The lack of reliable data has become a key issue in understanding the relative success of the reform efforts. Significantly, changes in efficiency are very hard to measure. These difficulties create opportunities for political interventions. The third paper by Oğuz and Göksal addresses recent policy shifts in the Turkish electricity markets. Focusing on the existing distribution tariffs, the paper emphasizes the need to improve the regulatory framework. In the last paper, Benli and Benli look into a major hurdle in the implementation of the regulatory reform; namely, how to deal with illegal use and electricity theft from a legal perspective. By applying the Coase theorem, they argue that electricity theft should be seen as a social problem rather than a contracting issue.