The regulation of the utility sphere under the Law on Energy is built on five interconnected blocks of norms: the general principles, the public-service obligation institution, mandatory authorization (licensing), the licence conditions, and the transition rule for authorization. This page explains all five together — it is in their combination that the legal map of the utility business lies.
General principles
The principles of regulation include: the safety and reliability of the operation of systems; the safe supply of electricity and natural gas to consumers; unrestricted access to systems and the right to change supplier; competition, transparency, non-discrimination and legal certainty; the independence of transmission and distribution from commercial interests; increased efficiency and the promotion of smart, environmentally safe technologies. These principles are the starting point for interpreting every detailed norm.
Public service
Deriving from the general economic interest, for the purposes of supply security, continuity, appropriate quality and price, environmental protection and energy efficiency, an energy undertaking may be charged with a public-service obligation. The obligation is imposed by the government after consultation with the competent authorities, the commission and the Energy Community Secretariat; it is a temporary measure subject to regular review. It must be transparent, non-discriminatory, proportionate and easily verifiable; compensation or an exclusive right is granted in a transparent manner and must not exceed the corresponding costs, taking into account revenue and reasonable profit. The commission is authorized to set the tariff for performing the obligation.
Mandatory authorization
The commission issues licences for generation, transmission, distribution and market operation in the electricity sector, the corresponding activities in the natural gas sector, and water supply. Carrying on these activities without a valid licence is prohibited. Licensing is not required for own-consumption generation not connected to the network, generation during the commissioning period, and small or micro-capacity plants — such activity must be declared.
Licence conditions
A licence is issued to an undertaking satisfying the established conditions. The licence seeker substantiates by documentation: technical, economic, financial and operational capabilities; the capacity to take all measures needed to ensure the quality of the service; and, where relevant, the capacity to perform public-service obligations. If the licence seeker cannot prove these capabilities, the commission will not issue the licence. The licensee must ensure fulfilment of the licence conditions throughout the validity of the licence, and non-compliance with a demand counts as a breach of licence conditions and entails liability.
Transition to authorization
The transitional authorization norm provides that an undertaking carrying on an activity under an authorization obtained before the entry into force of the law continues under those conditions until a new authorization is issued, and must apply for authorization within 2 months of the entry into force. Such transitional rules secure the continuity of regulation during reform.
Frequently Asked Questions
Below are the most frequent questions about utility regulation.
Who imposes the public-service obligation?
The government, after consultation with the competent authorities, the commission and the Energy Community Secretariat; the obligation is temporary and subject to regular review.
Which activities require a licence?
Generation, transmission, distribution and market operation in electricity, the corresponding activities in natural gas, and water supply; own-consumption generation not connected to the network and small/micro-capacity plants are excepted.
What may the commission demand of a licensee?
Documents confirming the satisfaction of the licence conditions at any time during supervision; non-fulfilment of such a demand counts as a breach of licence conditions and entails liability.
What is the transition deadline for authorization?
An undertaking operating under an authorization obtained before the entry into force of the law must apply within 2 months of the entry into force.
How We Help on Legal.ge
The practical algorithm of utility regulation: determine whether your activity opens a licence; assess the risk of a public-service obligation and its compensation mechanism; prepare documentation confirming capabilities; and keep in view the transitional deadlines connected with authorization. These five pillars together create the frame in which a utility business functions lawfully. The role of the regulator should be noted separately: the commission issues licences in a transparent, objective and non-discriminatory manner; it ensures the publication and constant updating on its website of the complete list of documents to be submitted by a licence seeker; and the issuance of a licence is confirmed by a licence certificate indicating the holder, the licensed activity, the service to be provided, the location of the assets, the area of validity and the date of issue. In the case of refusal, only a ground established by law is possible — substantiated and explained. From the public-service block one more detail is decisive: when imposing the obligation, the government determines the recipients of such service or a group of persons — meaning only a defined category may be protected. At the same time, the Energy Community Secretariat is notified of every measure aimed at imposing a new obligation or changing an existing one, with an assessment of its influence on competition; the ministry, in cooperation with the commission, ensures the preparation and delivery of this information. The institutional dynamics matter too: the commission exercises supervision over the licensee and may at any time request documents confirming the satisfaction of the licence conditions. Substantiating capabilities is thus not a one-off act: data on technical, financial and human resources are regularly renewed so that a quick answer to the regulator’s demand is possible. The lawyers of Legal.ge will define your position within this frame and prepare the necessary documentation — contact us for a consultation; an early assessment of licensing questions saves time and reduces risk.