The ongoing privatization of the energy sector since the 1980s have always harmed public interest and served a handful of private companies. Privatization policies have turned into a legal mechanism for transferring financial resources from consumers to the said companies. The key developments related to this privatization drive have been summarized below:1
1984: The statutory decree no. 233 defined the state economic enterprises (KİT). The law no. 3096 abrogated the monopoly status held by Turkish Electricity Corporation (TEK).
1993: Council of Ministers' resolution no. 93/4789 divided TEK into two separate entities.
1994: The law no. 3996 introduced the Build-Operate-Transfer model.
1997: The law no. 4283 introduced the Build-Operate model.
1999: The law no. 4446 revised the Constitution's articles 47, 125 and 155. The Law on the Council of State was amended. The generation, transmission and trade of electricity were brought under the scope of the law no. 3996.
2000: The law no. 4501 introduced arbitration.
2001: The Law on the Electricity Market (law no. 4628) came into effect.
2013: The law no. 4628 was largely revised by the law no. 6446 on the electricity market.
These legal changes scaled down the public sector's presence in the electricity sector and resulted in the institutional change
depicted in Graphic 1.
Privatization of TEDAŞ
All the regional electricity distribution companies listed below have been privatized. Table 1 also includes the date and worth of the privatization deals, as well as the buyer companies.
Private monopolies take over the industry!
Since the year 2012 when privatization gained speed, the share of the public sector has shrunk while that of the private sector has rapidly grown in terms of both installed capacity and generation, as seen in Graphic 2.
While the public sector prevails in electricity generation, wholesales and distribution is destroyed through privatizations under the pretext of upholding competition. The fact that a single private company currently controls 30% of the distribution sector is considered to be compatible with competition law. Through numerous subsidiaries in electricity generation, distribution and supply, a handful of corporations aim to dominate the sector by means of horizontal and vertical integration. The public monopoly rapidly cedes ground to a private monopoly. At present, two private groups control more than 50% of electricity distribution. Many transnational energy companies have started operations in Turkey and are planning mergers and acquisitions with local private companies. This prospect is defined by sector experts, including Energy Market Regulatory Authority (EPDK) officials, as “consolidation in the energy sector.”
Privatization of plants
The government plans to privatize two thirds of the installed capacity of Elektrik Üretim A.Ş. (Electricity Generation Company – EÜAŞ), that is 14,147 MW out of a total of 23,712, by selling power plants either separately or in groups. Once that capacity is privatized, all state-owned power plants will be transferred to the private sector complete with their coal fields and the installed capacity remaining under public control will drop to 9,574 MW, which is generated by a number of hydroelectric power plants. The Seyitömer, Kangal and Hamitabat coal-fired power plants have already been privatized. Çatalağzı, Kemerköy, Yeniköy and the Yatağan coal-fired power plants were brought under the scope of privatization and bids were collected from private companies. The data on the privatized Seyitömer, Kangal and Hamitabat plants is presented in Table 2, and the data on the Çatalağzı, Kemerköy, Yeniköy and Yatağan plants regarding the privatization process are presented in Table 3.
At the coal-fired power plants handed over to the private sector, no significant improvement investments were undertaken on the pretext that they were going to be privatized anyway. After the handover, the private companies sacked well-experienced employees (e.g. 594 workers were fired in the privatized Seyitömer plant), and the already delayed improvement / renewal investments were not undertaken, which in turn poses a serious risk.
Some of the coal fields run by Turkish Coal Company (TKİ), that is those in Adana-Tufanbeyli, Bingöl-Karlıova, Bolu-Göynük, Bursa-Orhaneli-Keleş-Davutlar, Manisa-Soma, Kütahya-Tunçbilek and Eskişehir-Mihallıçık are being transferred to the private sector on the condition that the new owners establish power plants and pay royalty fees. Still other fields controlled by Mine Research and Exploration Company (MTA), TKİ and EÜAŞ, namely those in Afşin-Elbistan, Konya-Karapınar, Afyon-Dinar, Eskişehir- Alpu will be handed over to foreign corporations through bilateral agreements.2
On the other hand, TKİ, EÜAŞ and other state-owned companies subcontract their operations to private ones, which extract coal without any supervision and control.
TMMOB Chamber of Mining Engineers made the following statement in a press release following the Soma mining disaster, which was tantamount to occupational murder.3
“A horrible incident has taken place at an underground coal mine run by Soma Coal Company on the basis of a service procurement agreement signed with TKİ who holds the operation license. The disaster which occurred on May 13, 2014 at 3.10 p.m. in Eynez, situated in the Soma district of the Manisa province, led to the death of hundreds of mine workers including 5 mining engineers. Analyses by experts from our chamber have revealed the following:
-The employer company, license holder and the relevant public authorities have not undertaken the necessary controls or obtained due results.
- This disaster has once again shown that the Law no. 6331 on Occupational Health and Safety is not enough to prevent the worker deaths or occupational diseases. The disaster is a clear indication that the said law is a failure.
- Wrong policies have steered the profession of mining away from science and technology, and left the engineer to the mercy of the employer. Our chamber's 2010 report entitled “Occupational Accidents in Mining” had presented important findings about the Soma basin and warned of an imminent disaster.
- However, the real cause of workers' deaths is not legislative shortcomings but rather the state's neoliberal policies. Neoliberal policies such as privatization, subcontracting, royalty fees etc. put into practice since early 1980s slashed the share of the public sector in mining, and the mining know-how accumulated in state-owned companies over the years were dissipated. Production has shifted from well-experienced companies to individuals and firms who lack the required technology, infrastructure, expertise and know-how, and the state no longer carries out efficient controls; all of which have resulted in an explosive increase of the number of occupational deaths, or better said murders. Utter disregard for public interest, pushing production to the limit for more profit, long work hours, unhealthy working and accommodation conditions, and the socio-economic status of employees have all paved the way to these lethal accidents. The mining disasters in Karadon, Kozlu, Elbistan and finally Soma attest to the fact that the lives of workers cannot be left to the mercy of the market.
- Even as the fire in the mine was still raging on and research efforts continued, government officials declared that ‘accidents are the nature of this business’, clearly showing their stance towards science and technology.”
Regulations in privatized distribution companies4
1. Rise in security deposits
The security deposit, which is supposed to be increased annually by EMRA in consideration of the Electricity Market Index (EPE) or the CPI, went up by 27.1% in 2011 over the previous year.
2. Rise in meter installation and disassembly fees
In 2010, the Ministry of Industry and Trade had set the total fee for meter installation and disassembly including the cost for lead and stamp wire as 12,5 TL. In September 2010, The Regulation on Customer Services was revised. Accordingly EMRA set separate installation and disassembly fees of 2x18,6 = 37,2 TL (an increase of %197.6) for 2011.
3. Connection cost
The first time the consumer is connected to the distribution network, she or he is supposed to pay a one-off connection cost, which is supposed to be increased annually by EMRA in consideration of the Electricity Market Index (EPE) or the CPI. It went up by 68% in 2011 over the previous year.
4. Electricity cut-off and reconnection fee
This fixed fee is collected from the consumer in case the electricity is cut off and reconnected for various reasons. It is supposed to be increased by EMRA in consideration of the Electricity Market Index (EPE) or the CPI, and went up by 57.7% in 2011 over the prior year.
5. PSH (meter reading) fee
The Retail Service Sales Fee (PSH) was divided into two on January 1, 2011: PSH-Billing and PSH-Meter reading. As a result, its total cost rose by 157% between 2010 and 2011.
6. Electricity leakage / theft rate
The new clause 4 added to Article 34 of the Regulation Electricity Market Tariffs reads “In case a change is demanded as regards the parameters set for state-owned distribution companies before the submission of final bids to Privatization Administration, EMRA shall assess the said demand.” As a result, EMRA issued its resolution dated 15.11.2012 and numbered 4128, which raised the leakage / theft rates for 2013 – 2015 for the regional distribution companies Dicle, Vangölü, Aras, Toroslar and Boğaziçi.
7. Gross profit margin
The gross profit margin ceiling for privatized or to-be-privatized retail sales companies went up from 2.33% to 3.49% for 2013-2015.
8. Price evolution
The change in electricity prices between 2008 and 2013 is shown in Table 4. As can be seen, the electricity prices have gone up by anywhere between 65.7% to 91.4% for various consumer groups in five years.
Urgent need for a public
energy policy
Contrary to what is claimed by Law no. 4628, the privatization of electricity distribution companies have resulted in a rise in electricity tariffs, service fees and other costs, creating a legal mechanism for transferring financial resources from consumers to distribution companies.
The social damage inflicted on workers by low pay and precarious work, rising unemployment due to dismissals for productivity purposes, the drop in the quality of commercial and technical services due to low pay and precarious work, waste of resources due to lack of control, and the added financial burden on consumers all show that the policy of privatization must be abandoned immediately. It is urgent that a central public structure independent of the government's influence must be recreated.
In view of the fact that energy is a common social need, the entire process from electricity generation to consumption must be organized in line with an energy policy designed, planned and implemented in a participative fashion. Such a policy should prioritize public interest, make the best of local and renewable energy resources, uphold national interests, protect the cultural and historical heritage, and preserve natural life.
Accordingly, all privatizations must be stopped. Energy generation, transmission and distribution institutions should have an autonomous public structure where employees have a say, and they should be operated in an efficient and productive fashion. Haphazard projects which are not in tune with the society and environment and are rejected by the locals should be abandoned. The share of foreign fossil fuels such as natural gas, petroleum and imported in energy consumption and generation should be slashed. The high taxes imposed on energy consumption should be lowered.
