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Utility Regulation

How is the utility tariff set?

Tariffs are set based on the "cost-plus" or incentive regulation principle, reimbursing reasonable costs and providing a profit margin (WACC).

Who qualifies as a direct consumer?

Companies meeting consumption volume and voltage criteria must register as direct consumers and purchase electricity on the free market.

What is an investment plan?

It outlines future projects. Approval by GNERC guarantees that these costs will be reflected in the tariff.

How long is a tariff valid?

The regulatory period is typically 3 years, though annual adjustments may occur for specific components.

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3 min

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Utility Regulation and Tariff Setting: Consulting Services

Utility Regulation refers to the complex process of tariff setting, licensing, and market regulation in the energy and water supply sectors. This service is designed for regulated companies (hydropower plants, distribution networks) as well as large consumers wishing to influence tariff policy. Tariff setting by GNERC is based on a complex methodology considering capital expenditures (CAPEX), operating expenses (OPEX), and return on investment. A team of lawyers and energy economists helps companies in the tariff setting process, prepares tariff applications, and participates in public administrative proceedings. This ensures obtaining a fair and economically justified tariff.

What Does This Service Cover?

Experts on Legal.ge offer specialized services in the regulatory field:

  • Tariff Application: Preparing the tariff application for GNERC, justifying costs, and accompanying the audit.
  • Licensing: Obtaining licenses for generation, transmission, distribution, or supply and monitoring compliance with conditions.
  • Market Rules: Consulting on the new electricity and natural gas market model rules (exchange, balancing).
  • Investment Plans: Agreeing on investment plans with the Regulatory Commission, which is necessary for inclusion in the tariff.
  • Normative Acts: Participating in the review of draft GNERC normative acts and preparing comments.
  • Deregulation: Consulting on entering the free market and obtaining direct consumer status.

Common Situations When You Need a Lawyer

Lawyer involvement in regulation is necessary when:

  • Tariff Review: A company wants to increase the tariff due to inflation or increased costs and needs solid argumentation before GNERC.
  • Disputed Costs: The regulator does not recognize certain costs (e.g., salaries, repairs) for inclusion in the tariff, and you need to appeal this.
  • Direct Consumer: A large enterprise wants to enter the market as a direct consumer and buy power on the exchange, requiring registration.
  • License Modification: You have expanded your activity area and need to amend the license.
  • Market Monitoring: You were fined by the Market Monitoring Department for violating rules.

Georgian Legal Framework

Key acts include the Law "On Energy and Water Supply" and "On Licenses and Permits." Tariffs are set according to "Tariff Calculation Methodologies" approved by GNERC for each sector. The "Energy Market Monitoring and Reporting Rules" also apply.

Process: How Collaboration with a Specialist Works

The process includes:

  1. Analysis: Analyzing the company's financial and technical indicators against the methodology.
  2. Preparation: Forming the tariff application package.
  3. Submission: Submitting the application to GNERC and starting proceedings.
  4. Review: Working meetings with GNERC departments and public hearing.
  5. Resolution: Approval of the tariff via a normative act.

Why Choose Legal.ge?

Regulation is a specific field requiring a synthesis of legal and economic knowledge. The Legal.ge team has experience with tariff methodologies and market rules. We will help you achieve an optimal regulatory environment for your business. Find an expert on Legal.ge.

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Specialists for this service

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