Energy Distribution Licensing — the General Picture
The distribution of electricity and natural gas in Georgia is regulated through mandatory licensing under the Law of Georgia on Electricity and Water Supply. This page explains which activities require a license from the commission, what conditions an applicant must satisfy, how a license is issued, and how the status of distribution system operator connects to the distribution activity license. If your company plans to operate a distribution network, knowing these rules is decisive for preparing the license application correctly.
It is worth noting at the outset that distribution is not the only licensed activity in the energy sector, and when preparing an application you see the whole system of which the distribution license is a part. Without it, operating the network is unlawful, while a correctly prepared application clears the path to a decision — refusal being possible only on grounds established by law.
Which Activities Are Subject to Mandatory Licensing
Under the law, the commission issues licenses for the following activities: in the electricity sector — the generation of electricity, except for the cases provided for by law, the transmission of electricity, the distribution of electricity and the operation of the electricity market; in the natural gas sector — the transmission of natural gas, the distribution of natural gas, the operation of the natural gas storage system, the operation of liquefied natural gas devices and the operation of the natural gas market; as well as water supply. It is prohibited to carry out these activities without a valid license issued by the commission, which gives the enterprise the right to carry out the respective activity.
The exceptions are precisely formulated. No license is required for: the generation of electricity solely for one's own consumption, where the object of both generation and consumption is not connected to the transmission or distribution network; the generation of electricity at the moment the object is commissioned, in the manner established by law; the generation of electricity by small and micro capacity power plants; and the closed distribution system operator, which has been granted that status by decision of the commission. In addition, a small capacity power plant or an energy enterprise carrying out an activity that does not require a license — such as supply, trading or the administration of a bilateral contracts platform — is obliged to notify the commission accordingly in the manner established by law. This notification obligation operates alongside, not instead of, the licensing rules.
License Conditions — What the Applicant Must Substantiate
The commission issues a license to an enterprise that satisfies the conditions established by the Law of Georgia on Licenses and Permits, the electricity and water supply law, and the licensing rules approved by the commission. Through the documentation provided for by law, the applicant must substantiate the technical, economic, financial and operational — that is, human resources — capabilities of the enterprise, which are necessary for performing the functions related to the licensed activity under Georgian legislation.
The applicant must also demonstrate the capacity to take all measures necessary to ensure the quality of the services to be provided, and the capacity to duly perform other obligations established by legislation; in the case of an energy activity, the capacity to perform public service obligations as well. These are mandatory license conditions: if the applicant cannot substantiate the capacity to meet them, the commission will not issue the license. Nor do these requirements expire with issuance — the licensee must ensure due fulfilment of the license conditions throughout the entire period of validity of the license. During its supervision of the licensed activity, the commission is entitled to request from the licensee documents confirming compliance with the license conditions, and failure to comply with such a request is deemed a violation of the license conditions entailing liability.