69690 Turkey: Electricity Market Support – Security of Supply, Capacity Mechanism and Auction Draft Regulation on Auctions for Energy and Firm Capacity Certificates January 2009 submitted to the Ministry of Energy and Natural Resources and the World Bank by: Economic Consulting Associates Power Systems Research Inc Economic Consulting Associates Limited 41 Lonsdale Road, London NW6 6RA, UK tel: +44 20 7604 4545, fax: +44 20 7604 4547 email: info@eca-uk.com C:\Documents and Settings\Rob\My Documents\00Work files\Project files\Turkey SoS implementation 261\Docs\DP3\Auction Regulation\TurkeyElectSecurity_Regulation_for_Auctions~v5a.doc 24/5/12 Contents Contents 1 PART ONE: General Provisions 1 1.1 Section One: Objective, Scope, Legal Basis and Definitions 1 1.2 Section Two: Principles of Auctions, Parties, Duties, Authorities and Responsibilities of Parties 3 2 PART TWO: Registration of the Market Participants 8 2.1 Section One: Registration Rules 8 2.2 Section Two: Registration Principles 8 3 PART THREE: Auction Committee 10 3.1 Section One: Establishment, Responsibilities and Procedures of the Auction Committee 10 3.2 Section Two: the Auction Analysis Report 12 4 PART FOUR: Long-term forecasting 13 4.1 Section 1: Preparation of Long-term Forecasts 13 4.2 Section 2: Determination of Gap 15 4.3 Section 3: Determination of Fuel and Technology Options 16 5 PART FIVE: Auction procedures 21 5.1 Section 1: Determination of products to be auctioned 21 5.2 Section 2: Auction Participation Rules 21 5.3 Section 3: Auction Timetable 23 5.4 Section Four: Auction Procedure 25 6 PART SIX: Operation of the auction 28 6.1 Section One: Determination of auction volume 28 6.2 Section Two: Auction operation 30 7 PART SEVEN: Financial Provisions 33 7.1 Section One: Guarantees 33 7.2 Section Two: Credit Cover 33 8 PART EIGHT: Other Provisions 34 8.1 Section 1: The Auction Administrator 34 8.2 Section 2: Auction budget and auction expenses 34 8.3 Section 3: Standard terms in contracts derived from auctions 36 8.4 Section 4: The Contract Reallocation Mechanism 40 9 Provisional Articles and Final Provisions 44 Turkey: Electricity Security of Supply –- Draft Regulation on Auctions i Economic Consulting Associates, Power Systems Research, January 2009 C:\Documents and Settings\Rob\My Documents\00Work files\Project files\Turkey SoS implementation 261\Docs\DP3\Auction Regulation\TurkeyElectSecurity_Regulation_for_Auctions~v5a.doc 24/5/12 Contents 9.1 Effectiveness 44 9.2 Enforcement 44 Turkey: Electricity Security of Supply –- Draft Regulation on Auctions ii Economic Consulting Associates, Power Systems Research, January 2009 PART ONE: General Provisions ELECTRICITY MARKET ENERGY AND FIRM CAPACITY CERTIFICATES AUCTION REGULATION 1 PART ONE: General Provisions 1.1 Section One: Objective, Scope, Legal Basis and Definitions This section specifies the objectives, scope and legal basis of this Regulation. 1.1.1 Objective The objective of this Regulation is to set forth the principles and procedures regarding the activities related with auctions of energy and Firm Capacity Certificates. 1.1.2 Scope The scope of this Regulation covers parties involved in auctions of energy and Firm Capacity Certificates, duties, authorities and responsibilities of the related parties and the principles and procedures regarding; activities related with auctions of energy and Firm Capacity Certificates, the obligations arising from participation of the licensees in auctions for energy and Firm Capacity Certificates and the main provisions of the ensuing contracts. 1.1.3 Legal basis This Regulation has been issued in compliance with the provisions of Law no. 4628 as amended. 1.1.4 Definitions For the purposes of interpretation and implementation of this Regulation, the following terms and abbreviations shall bear the following meanings: Auction Auditor: Auditing entity in charge of ensuring that the auction is organized and held according to the regulation and the rules set forth in the Tender Documents Auction Committee: Committee that organizes the auction and supervises the Auction Administrator Auction Administrator: Entity in charge of preparing and holding the auction Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 1 Economic Consulting Associates, Power Systems Research, January 2009 C:\Documents and Settings\Rob\My Documents\00Work files\Project files\Turkey SoS implementation 261\Docs\DP3\Auction Regulation\TurkeyElectSecurity_Regulation_for_Auctions~v5a.doc 24/5/12 PART ONE: General Provisions Auction: Auction for energy contracts and Firm Capacity Certificates according to the terms of this Regulation. Authority: The Energy Market Regulatory Authority, Balancing and Settlement Regulation issued in compliance with the provisions Regulation (BSR): of Electricity Market Law no. [4628 Article 2] as amended Contract Bond: Bond posted by auction participants as a guarantee that they will sign all relevant contracts after the auction FCC Administrator: The division of TEIAS responsible for the administration of the FCC Obligation arrangements FCC Register: The register in which the FCC Administrator records the FCCs of each Market Participant Firm Capacity Certificate The ability to serve 1 MW of load at any point in time (FCC): meeting the system supply reliability standards Law: Electricity Market Law No. 4628 dated 03.03.2001, LR Declaration: Yearly declaration of supply and demand to be performed by all LRs Load Responsible Party Licensee authorised to accept energy to serve (LR) electricity load consumers from the grid Market Operator: Entity in charge of operating the short-term market Ministry: Ministry of Energy and Natural Resources (MENR) NIPA: Notice of Intent to Participate in Auction PPA: Power Purchase Agreement Prospective Seller: Any generator that participates in an auction Provisional Registration: Situation of a prospective participant after he has complied with all registration requirements, but still has not posted the Contract Bond System Planner: TEIAŞ in its role of planning the development of the Generation System and forecasting of national demand TEIAŞ: Turkish Electricity Transmission Co. Inc., Auction Target Year (ATY): Year when supply starts for auction-derived contracts Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 2 Economic Consulting Associates, Power Systems Research, January 2009 PART ONE: General Provisions Tender Documents: Set of documents that precisely specify the terms and public parameters of an auction, including starting price, auction method, guarantees, handicaps for specific projects or types of projects and draft contracts. Settlement Delivery Point: A transmission system connection point, where energy is withdrawn and which has average transmission loss factor Settlement Period: One of the daytime, peak, night time periods in an invoicing period. Auction Starting Price: Initial price in a uniform price descending-bid auction. Balancing and settlement System consisting of activities related with real-time system: balancing the demand and supply through acceptance of bids and offers, financial settlement of payables and receivables arising from energy supplied to or withdrawn from the system, parties engaged in these activities and relations among the parties. Auction Reserve Price: Maximum admissible value for the final price of an auction, set by the Ministry. Performance Bond: Bond posted by winners of an auction as a guarantee that the projects that support their bid will be built as specified. Contract Reallocation Mechanism whereby auction-derived contracts can have Mechanism (CRM) their volumes reduced, increased or transferred from one purchaser to another. 1.2 Section Two: Principles of Auctions, Parties, Duties, Authorities and Responsibilities of Parties 1.2.1 Auction Management Auction shall include the following activities performed by the System Planner, the Auction Administrator, the Ministry, the Authority, LRs and Prospective Sellers, and related technical and administrative procedures required for these activities in order to promote the timely expansion of generation required for the long-term equilibrium between supply and demand: � Providing long-term supply and demand forecasts; Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 3 Economic Consulting Associates, Power Systems Research, January 2009 PART ONE: General Provisions � Deciding on whether to hold an auction; � Organizing the auction; � Holding the auction; � Signing the ensuing contracts; and � Enforcing the commitments resulting from the auction and resulting contracts. 1.2.2 Principles of Auctions The auction cycle shall be yearly. Each year, the following activities will form part of or be coordinated with the auction process: � Computation of FCCs for new generation projects, which will be performed continuously throughout the year, and any new project whose FCCs have been assigned in the preceding year will be allowed to participate in the auction; � LR declaration, which will be performed once each year. Each LR will provide: a load forecast for the following years, an inventory of existing and future contracts and rights to FCCs, and a statement of the need of further energy and FCC purchases for the Auction Target Year; � Decision to hold an auction, which will be the final decision on whether to hold an auction, and which will be taken by the Council of Ministers, which will be supported in the process by the System Planner, the Ministry and the Authority; � Organization of the auction, which will be performed by the Auction Administrator under the supervision of the Auction Committee. Organization will include: preparation and distribution of all auction documents, enrolment of buyers and prospective sellers, and the physical organization of the auction. � Conduct of the auction, which will normally be in the form of a uniform price descending-bid auction. � Activities following the auction, which will include the following actions undertaken by the Auction Administrator: preparation of the contracts resulting from the auction, and supervision of the signing of those contracts. Auction expenses will be paid by participants, and guarantees will be executed if participants refuse to sign contracts. � The Contract Reallocation Mechanism is a device in auction-derived contracts that mitigates the risks for sellers and provides purchasers a measure of flexibility to adjust contract volumes to their current needs. The mechanism is executed at the end of each year, and redistributes Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 4 Economic Consulting Associates, Power Systems Research, January 2009 PART ONE: General Provisions among LRs that present a contract deficit in the subsequent year volumes of all contracts that are entered into the mechanism by sellers. The consequences of the auction will extend for several years, as contractual supply will start in the Auction Target Year and contract duration will generally exceed ten years. The rules for dealing with the ensuing contracts are the general rules for dealing with energy supply contracts, and those of the contract clauses themselves. 1.2.3 Responsibilities of Prospective Sellers Prospective sellers in the auction will: � Register their projects and obtain relevant licenses for those projects, from the Ministry, the Authority and the System Planner prior to enrolment; � Enrol in the auction and post the Contract Bond; � Participate in all pre-auction activities, including Question and Answer period and training sessions; � During the auction, present their bids according to auction rules; � Post the Performance Bond for winning projects and sign corresponding contracts with the Ministry; � Sign the contracts with LRs as they are allocated by the auction; and � Fulfil all contract commitments resulting from the auction. 1.2.4 Responsibilities of Load Representatives All Load Representatives will: � Present the LR Declaration at the required date; � After the auction, sign the contracts with generators as they are allocated by the auction or through priority sales; � Fulfil all contract commitments resulting from the auction; and � Participate in the Contract Reallocation Mechanism. All LRs will post a Contract Bond corresponding to the full FCC gap in the LR Declaration. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 5 Economic Consulting Associates, Power Systems Research, January 2009 PART ONE: General Provisions 1.2.5 Responsibilities of the System Planner The System Planner will: � Prepare and propose form for LR Declaration � Process LR Declarations � Keep records of LR Declarations for at least ten years, to be used in the Contract Reallocation Mechanism � Prepare and finalize a report on supply and demand for the Council of Ministers � Participate in and lend staff to the Auction Committee � Assist the Auction Committee in its analysis of applications � Provide the Market Operator with the necessary information for the application of the Contract Reallocation Mechanism. 1.2.6 Responsibilities of the System Operator The System Operator will: � Provide its comments to the System Planner report on supply and demand 1.2.7 Responsibilities of the Market Operator The Market Operator will: � Provide its comments to the System Planner report on supply and demand � Participate in and lend staff to the Auction Committee � Assist Auction Committee in its analysis of applications � Register contracts and FCC transfers resulting from auction. � Compute necessary parameters and apply the Contract Reallocation Mechanism. 1.2.8 Responsibilities of the Ministry The Ministry will: � Confirm information in LR declarations Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 6 Economic Consulting Associates, Power Systems Research, January 2009 PART ONE: General Provisions � Provide its comments to the System Planner report on supply and demand � Prepare Tender Documents jointly with the Authority � Define the Auction Initial Price � Define the Auction Reserve Price � Define the value of the Contract Bond for prospective buyers � Define the value of the Contract Bond for prospective sellers � Define the value of the Performance Bond for auction winners � Participate in the Public Hearing on Tender Documents � Preside over and lend staff to the Auction Committee � Assist the Auction Committee in its analysis of applications � Accept and properly keep guard on Performance Bonds. 1.2.9 Responsibilities of the Auction Administrator The Auction Administrator will: � Plan the auction and prepare the auction budget � Procure and hire all services needed for the auction � Accept and properly keep guard on Contract Bonds � Keep auction accounts and present total expenses to the Auction Committee. 1.2.10 Responsibilities of the Authority The Authority will: � Approve and distribute form for LR Declaration � Provide its comments to the System Planner report on supply and demand � Prepare Tender Documents jointly with the Ministry � Participate in the Public Hearing on Tender Documents � Participate in and lend staff to the Auction Committee Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 7 Economic Consulting Associates, Power Systems Research, January 2009 PART ONE: General Provisions � Assist the Auction Committee in its analysis of applications � Supervise signing of auction-derived contracts and free corresponding Contract Bond 1.2.11 Responsibilities of FCC Administrator The FCC Administrator will: � Provide all data from the FCC Registry that are necessary to confirm information in the LR Declarations; � Provide all data from the FCC Registry that are necessary to analyze applications of prospective sellers; 1.2.12 Responsibilities of the Auction Committee The responsibilities of the Auction Committee are set out in section 3.1.2. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 8 Economic Consulting Associates, Power Systems Research, January 2009 PART TWO: Registration of the Market Participants 2 PART TWO: Registration of the Market Participants 2.1 Section One: Registration Rules 2.1.1 Generation and related registration rules Only new generation projects can participate in an auction. New generation projects comprise projects that comply with the following four requirements: � The project is duly licensed; � The project is not commissioned or under construction; � The project has a number of FCCs assigned to it, and this assignment will still be valid by the date of the auction; and � The project has not sold energy in any previous auction. The registration processes for generation projects are set out in Section 5.2.3. 2.1.2 LR and related registration rules Registration is compulsory for all LRs whose LR Declaration shows the need to contract additional FCCs in the Auction Target Year. If it is determined that an auction will take place, then each LR will participate in it as a candidate buyer for 100% of the gap shown in its LR Declaration. Section 5.2.2 sets out the registration processes for LRs. 2.2 Section Two: Registration Principles The full registration processes are set out in section 5.2. The registration principles are as follows: 2.2.1 Application Application is the declaration of intent to participate in an auction and is performed through the presentation of the LR Declaration in accordance with section 4.1.1. 2.2.2 Evaluation Evaluation consists of checking the application documentation of each entity that has submitted an application to participate in the auction against data bases Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 9 Economic Consulting Associates, Power Systems Research, January 2009 PART TWO: Registration of the Market Participants including the FCC Register, in order to see whether these entities can participate in the auction as declared in their respective applications. Evaluation will be performed by the Auction Committee. The following will provide such assistance as the Auction Committee may reasonably request: � The Authority, � The Ministry, � The System Planner, � The Market Operator, � The FCC Administrator. The result of a successful evaluation is a Provisional Registration. 2.2.3 Final Registration The final registration consists of a declaration by each auction participant, stating the FCC volume he wishes to buy or sell at the auction, accompanied by the deposit of the corresponding Contract Bond. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 10 Economic Consulting Associates, Power Systems Research, January 2009 PART THREE: Auction Committee 3 PART THREE: Auction Committee 3.1 Section One: Establishment, Responsibilities and Procedures of the Auction Committee 3.1.1 Establishment of the Auction Committee The Auction Committee will be set up as soon as the final tender documents are published. The Auction Committee will consist of the following members: � One representative from the Ministry, who shall preside it; � One representative from the Authority; � One representative from the System Planner; and � One representative from the Market Operator (unless the Market Operator and the Auction Administrator are the same, in which case the Market Operator should not be represented at the Auction Committee). The members of the Auction Committee must be senior staff members of these entities with relevant knowledge of the auction process in general and of the context of the current auction. The Ministry, the Authority, the System Planner and the Market Operator will put at the disposal of the Auction Committee such staff as the Committee may reasonably require. If there is no representative of the Market Operator at the Auction Committee, a senior staff member from the Market Operator should be designated as liaison to the Auction Committee, in charge of requesting staff and services from the Market Operator. 3.1.2 Responsibilities of the Auction Committee The Auction Committee has the following responsibilities: � Reception of applications from prospective participants by setting up and supervising a “receiving desk� for applications. Receipt of applications will be performed by the Market Operator for prospective buyers, and by the System Planner for prospective sellers. � Reception of questions from applicants; � Answers to questions posed by applicants; Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 11 Economic Consulting Associates, Power Systems Research, January 2009 PART THREE: Auction Committee � Definition and publication of final auction design in which the Auction Committee will be supported by the Auction Administrator, who will be responsible for implementing the final auction design. � Approval of auction budget; � Analysis of registration documents, in which the Auction Committee will be supported by the staffs of the Authority, the Ministry, the System Planner, the Market Operator and the FCC Administrator. Each of these entities will designate supporting staff to be put at the disposal of the Auction Committee, with full access to the relevant registries and data bases for checking the applicants’ credentials and documentation; � Communication of initial evaluation of registration documents; � Analysis of appeals by prospective participants on the initial evaluation of registration documents; � Final acceptance (or rejection) of prospective participants; � Publication of the final list of participants; � Communication of auction results; � Adjudication of contracts; � Approval of auction expenses; � Publication of the Auction Analysis Report; � Supervision of all actions performed by the Auction Administrator. 3.1.3 Procedures of the Auction Committee The Auction Committee will meet at least once prior to each major milestone in the schedule specified in section 5.3, with some milestones requiring more than one meeting. It will be active for not less than 18 weeks in a typical auction, and 25 weeks for the first auction. The first meeting shall establish a schedule of further meetings, and the committee president shall have the power to call for extra meetings when needed. Decisions shall be taken by consensus, the existence of which shall be determined by the president. The members chosen by each entity will be empowered as full representatives of their respective entities. The Auction Committee will have at its disposal staff on loan from participating entities, as well as full access to relevant data needed to perform its functions, such as checking information given by participants on their applications. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 12 Economic Consulting Associates, Power Systems Research, January 2009 PART THREE: Auction Committee 3.2 Section Two: the Auction Analysis Report After the auction is finished, the Auction Committee will prepare a monitoring report with an analysis of the auction outcome, including: � Actual and forecasted demand met; � Mix of technologies sold; � Final prices; and � The identities of purchasers and successful bidders. The Auction Committee report will recommend steps that could be taken in future auctions. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 13 Economic Consulting Associates, Power Systems Research, January 2009 PART FOUR: Long-term forecasting 4 PART FOUR: Long-term forecasting The decision to carry out an auction will be taken based on the gap between demand and supply forecasted for the years(s) when contracts derived from the envisaged auction should become operative. This year is called the Auction Target Year. The Auction Target Year is a component part of the decision to hold an auction, and must also be part of the Tender terms. This decision requires forecasts for both supply and demand covering at least the subsequent five years. Once the assessment is done, the Council of Ministers may decide upon an auction if the gap is sufficiently large. If the decision to carry out an auction is taken, then the Council of Ministers may also determine that there are technology and/or fuel options that should receive incentives in the auction process, and other options that should have disincentives. In deciding whether to provide such additional incentives, the Council of Ministers may take into account longer-term (~10-year) forecasts. 4.1 Section 1: Preparation of Long-term Forecasts 4.1.1 Forecasts by the System Planner Demand Forecast Every year, the System Planner will prepare demand projections covering at least the 10 subsequent years. The System Planner will prepare these forecasts using its own projection models. In making a forecast, the System Planner is entitled to take into account forecasts of economic and demographic parameters, such as GDP, industry growth by sector, population, number of households, GDP per capita, and any other factor, which, in its reasonable opinion, is relevant. The System Planner will apply well established internationally recognized methodologies for forecasting consumption and load growth based on these parameters. The forecast by the System Planner will not be based on forecasts and declarations by LRs but it will use its forecast as an independent check on the LR forecasts. The System Planner will present a draft version of its forecast to the Authority, the Ministry, the System Operator and the Market Operator according to the schedule in section 5.3. These entities may submit comments to the System Planner on the forecasts not later than one week after receipt. A week after the deadline for receipt of such comments the System Planner will present its final report to the same entities and to the Council of Ministers. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 14 Economic Consulting Associates, Power Systems Research, January 2009 PART FOUR: Long-term forecasting Supply Forecast Every year, the System Planner will provide a forecast of all new capacity that shall be added to the system during the next ten years. Projects in this forecast will be separated in three groups: � Category 1 will apply to any existing plant; � Category 2 will apply to any plant under construction and to projects with firm commissioning dates comprising projects that will either have to be under construction (and with no serious impediments that might compromise their commissioning dates) or be under contract with penalties associated with delays. � Category 3 will apply to other projects. 4.1.2 Forecasts in LR declarations Every year, at the date set in the Auction Timetable specified in section 5.3, each LR k (k = 1, …, K)1 will provide the following forecasts to the System Planner for each of the next ten calendar years using a special spreadsheet supplied to them by the System Planner: � Peak load FL(k): MW consumed at the LR’s peak hour during the year. � Yearly energy consumption FE(k): forecasted MWh consumed along the year. � List FCCs that are registered in the name of the LR, with identification and the period during which the FCC will remain with the LR. The following rules should apply to these declarations: � If the LR that possesses generation assets and the corresponding FCCs are not contracted, then the FCCs of these assets should be counted as contracts. � If a contract for FCCs has its term before the end of the declaration period, then the corresponding FCC volume should be counted as part of the LR portfolio, unless these FCCs have already been committed by the generator to a contract with another LR. This verification is part of the processing of LR declarations. Total amount of FCCs (MW) that the LR has already contracted for the same forecasting period, FCC0(k), will be computed by the spreadsheet. LRs include both Distribution Licensees and LRs that supply eligible consumers. In the case of 1 Distribution Licensees, the forecasts should not include the consumption of eligible consumers that opted out of the Distribution Licensee. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 15 Economic Consulting Associates, Power Systems Research, January 2009 PART FOUR: Long-term forecasting The procedure of filling in these forms and handing them to the System Planner is called “LR Declaration�. The forms will be supplied by the System Planner each year to every LR at least two weeks before the last date for providing the information. All LRs must fill the LR Declaration, and by filling it they are automatically and irrevocably declaring their intention to purchase at the next auction the resulting gap for the Auction Target Year of that auction. The System Planner will use the information in the declaration to compute the gap for each LR specified as the number of FCCs that the LR would need to obtain in the target year in order to comply with the security of supply requirement, and the additional energy that the LR needs in the target year in order to supply its full load. The System Planner will check if every FCC declared by a LR corresponds to a project that belongs to categories (1) or (2) and will rely on the association in the FCC Register of each FCC with a power plant and with an LR. The System Planner will check for inconsistencies arising from non-performance of contracts due to force majeure or delays in plant construction, or from loss of FCCs by power plants. The System Planner will ensure that all checks are completed by a date that allows the Auction Committee to deal with any inconsistencies in line with the Auction Timetable. The Market Operator will use the information in the LR Declarations pertaining to the year immediately following the year in which the declarations are presented to compute the necessary parameters and apply the Contract Reallocation Mechanism, as specified in section 8.4. 4.2 Section 2: Determination of Gap The gap is the additional amount of FCCs that must be brought into existence by the Auction Target Year in order to ensure that supply is equal to demand. The System Planner will calculate the following forecast gaps: � The System Planner Forecast Gap for each possible Auction Target Year, which will be based exclusively on the System Planner’s projections, that is, the positive difference between the System Planner’s load projection for the Auction Target Year and total projected supply for the potential Auction Target Year, counting only on FCCs from projects that belong to categories (1) and (2) (as specified in section 4.1.1). � The LR Declaration Gap, which is derived from the sum of all FCC needs informed by LRs in their LR Declarations. The System Planner will compare the LR Declaration Gap with the FCCs available from projects with priority allocation as defined in section 4.3.2, and in accordance with the rules for the allocation of priority contracts set out in Section 6.1.3. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 16 Economic Consulting Associates, Power Systems Research, January 2009 PART FOUR: Long-term forecasting The System Planner will calculate the Auction Gap as the greater of: � The LR Declaration Gap minus all FCCs available from projects with priority allocation; and � Zero. The System Planner will recommend to the Ministry that an auction should take place for a certain Auction Target Year, in its reasonable opinion: � There is a significant System Planner Forecast Gap in that year and thereafter; and � There is a significant Auction Gap. In determining if either gap can be considered significant, the System Planner may (but is not required to) apply one of the following rules: � A gap is more than 1% of the previous year’s demand; � Notwithstanding the fact that there may be no significant System Planner Forecast Gap, existing and prospective generators might be hoarding FCCs and energy by refusing to sell them in advance to LRs. In this case the System Planner may recommend that the threat of an auction in which totally new projects would fill the forecasted additional demand be used in order to avoid such practices. If that happens, it is possible that the threat may have to be exercised. An Auction will take place only by a decision of the Council of Ministers. 4.3 Section 3: Determination of Fuel and Technology Options 4.3.1 Specification of fuel policy options for auction Once the decision to hold an auction is taken, the Council of Ministers may decide that the auction rules should establish preference for certain technologies over others. In making this decision the Council of Ministers will take into consideration the probability that enforcement of energy policies will result in higher prices; with the consequences: � LRs will be reluctant to participate in auctions, in order to evade the higher energy prices; and � Consumers supplied by energy purchased through auctions may pay higher energy prices than other consumers. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 17 Economic Consulting Associates, Power Systems Research, January 2009 PART FOUR: Long-term forecasting The Council of Ministers may decide to place one or more of the following restrictions on the activities of participants in the auction: � Specification of a minimum percentage of the FCCs sold in the auction to be based on a certain class of generation (such as, for example, renewable technologies) or a maximum percentage of the FCCs sold in the auction to be based on a certain class of generation (for example projects based on imported fossil fuels). In selecting this methodology the Council of Ministers will be indicating that the cost of developing generation projects of the preferred type is not to be a consideration. � Specification of a price incentive for the preferred technology or disincentive for projects that the Council of Ministers wishes to discourage. The incentive or disincentive would be in the form of the price considered for auction purposes, which would be lowered by a specified value per unit of energy offered in the auction for projects for which an incentive applies or increased by a specified value per unit of energy offered in the auction for projects for which a disincentive applies. In selecting this methodology the Council of Ministers will be indicating that it wishes to limit the cost of implementing the policy at the potential risk of not developing generation projects of the preferred type. If the Council of Ministers decides to specify any fuel policies for an auction, then the auction procedure (as specified in sections 5.4 and 6.2.1) will be changed accordingly. 4.3.2 Long lead-time projects Long lead-time projects are projects that are not expected to be completed in time to reach their full maturity by the Auction Target Year and require a special auction procedure that allows supply to commence after the Auction Target Year. Assessment of investments with long lead times The assessment of whether a project must be allowed a lead time that takes it beyond the Auction Target Year will be performed by the System Planner and approved by the Authority, upon request by the prospective investor. Whenever a prospective investor believes that his project requires more than the lead time (a Long Lead Time) indicated by the lapse of time until the Auction Target Year, it must ask the System Planner for evaluation of project lead time in the same procedure that computes the project’s FCCs. The prospective investor must provide to the System Planner the proposed building schedule, and the reasons that justify a lead time of more than four years. The System Planner will evaluate the investor’s request for a Long Lead Time, and on the basis of this evaluation it will recommend a schedule for project completion, and will assign the number of FCCs that correspond to each project milestone consistent with this schedule, in the following form: Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 18 Economic Consulting Associates, Power Systems Research, January 2009 PART FOUR: Long-term forecasting Schedule of Long Lead Time Project [Project Id] Year after auction Total FCCs (MW) Additional FCCs (MW) Ratio to ATY Auction Target E(0) A(0) (same as E(0)) R(0) (value: 1) Year (ATY) ATY+1 E(1) A(1) = E(1) – E(0) R(1) = A(1)/A(0) ATY+2 E(2) A(2) = E(2) – E(1) R(2) = A(2)/A(0) …and so on In the case of: � Projects that are entitled to at least 25% of their FCCs in the Auction Target Year, they will participate in the auction and will be projects with priority sales rights if they are successful in the auction. � Projects that are entitled to less than 25% of their FCCs on the Auction Target Year, if the Council of Ministers considers the project to be imperative then either a special auction will be held in which the Auction Target Year is delayed so that the project has at least 25% of its FCCs allocated on or before the Auction Target Year, or a different procedure must be adopted whereby the project is contracted without an auction. Participation in auctions and priority sales If a project with a long lead time participates in an auction, its participation is limited to the amount of FCCs that can be sold in the Auction Target Year (E(0), using the notation of the previous subsection ). 2 However, if new auctions are scheduled for the subsequent years, or if there are no auctions but LRs still declare that they need to purchase energy (i.e. if there is a LR Declaration Gap, as defined in section 4.2), then the owner of the project will have the right to sell his FCCs with priority. The sale will occur at the same prices (after indexing) in which the project participated, using the same contracts, but with the initial and final dates rescheduled by the appropriate number of years, and using the load curve obtained from the current LR Declarations. The maximum number of FCCs that can be sold with priority is (using the example, with S(0) being the amount of FCCs sold in the original auction): The notation of the example of the preceding subsection is used throughout this subsection 2 Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 19 Economic Consulting Associates, Power Systems Research, January 2009 PART FOUR: Long-term forecasting Priority Rights of Long Lead Time Projects Year of Start of Maximum Amount of Amount of auction (# of contract (# of amount of FCCs FCCs project FCCs actually years after years after with priority owner wishes sold with original original (MW) to contract priority auction) auction) with priority (M TAFCC then: a. Set PB(g) = B(g) for all g; b. Set TP = TB; c. Go to step 2 6. If PP > RP then go to step 2 Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 32 Economic Consulting Associates, Power Systems Research, January 2009 PART SIX: Operation of the auction 7. The auction is finished. Final price is PP, and each generator g will sell PB(g) MW of FCCs (and energy through the corresponding contracts). Buyers will be allocated total amount of FCCs sold by each generator in proportion to their AFCC(k) values. Where: IP Incumbent Price, in $/MWh SP Starting Price, in $/MWh PP Preceding Round Price, in $/MWh G Subscript that denotes a for prospective seller B(g) Bid of prospective seller g, in FCC MW IB(g) Initial bid of prospective seller g, given by his contract bond, in FCC MW PB(g) Bid of prospective seller g in the preceding round, in FCC MW TB Total bids of all prospective sellers, in FCC MW TP Total bids of all prospective sellers in the preceding round, in FCC MW K Subscript that denotes a for prospective buyer AFCC(k) Demand of prospective buyer k, given by his contract bond, in FCC MW TAFCC Total demand all prospective buyers, in FCC MW RP Reserve price, in $/MWh PD Price decrement, in $/MWh (this parameter must be established by the Ministry) 6.2.2 Allocation of contracts The contract that each LR k will sign with each seller g will include: � Transfer of an FCC volume corresponding to: CFCC(g,k)  PB(g)*(AFCC(k)/TAFCC) (measured in MW) It is permitted that total purchases by the buyers could become slightly larger than demand (this will happen if total bids in the round preceding the last is larger than total demand), or smaller than demand (if there are not enough bids at the reserve price). � A PPA with a load curve given by: � CFCC(g,k) MW during peak periods; Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 33 Economic Consulting Associates, Power Systems Research, January 2009 PART SIX: Operation of the auction � A constant volume of energy during non-peak periods such that the annual energy volume is (CFCC(g,k) / CEC) MWh. Where: � CEC has the same meaning as in section 6.1.1; � PB(g), AFCC(k) and TAFCC have the same meaning as in section 6.2.1; and � CFCC(g,k) is the volume of FCCs transferred from seller g to buyer k as a consequence of the auction. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 34 Economic Consulting Associates, Power Systems Research, January 2009 PART SEVEN: Financial Provisions 7 PART SEVEN: Financial Provisions 7.1 Section One: Guarantees The guarantee for participation in an auction is the Contract Bond that is specified in section 5.2.1. If any participant (any LR or any generator that has won at the auction) subsequently refuses to sign the corresponding contracts, the guarantee will be called by the Auction Administrator. Should this happen, the ensuing credit will be distributed according to the following priorities: 1. Coverage of auction expenses, up to their total value in order to minimize the cost to borne by the participants of the auction; and 2. Distribution among auction buyers who have signed all their contracts, in proportion to the total volume of FCCs, to defray future expenses in procuring contracts. 7.2 Section Two: Credit Cover Each LR must provide a credit cover for the contracts signed at the auction. The Tender Documents will specify acceptable forms of credit cover, as well as the value of the guarantee (which must be expressed in terms of annual contract income). Although formally this guarantee may require a separate contract, it should be considered as an indivisible part of the main (FCC transfer and energy supply) contract, and any refusal to sign it or accept it should be treated as a refusal to sign the whole contract. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 35 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions 8 PART EIGHT: Other Provisions 8.1 Section 1: The Auction Administrator The Auction Administrator is the entity that will administer, coordinate and hold the auction. 8.1.1 The Auction Administrator The Auction Administrator will be an administrative unit within TEIAŞ in charge of administrating auctions. It will have its own identity even if it is operational for only part of the year. It will report administratively to TEIAŞ, and functionally to the Auction Committee. 8.1.2 Functions of the Auction Administrator The Auction Administrator will be supervised by the Auction Committee. The main function of the Auction Administrator is to administer, coordinate and hold the auction. It is entitled to procure and contract specialized firms to design and implement the auction software, to rent space to hold the auction as needed, to hire auditors, and to perform all activities which are necessary to fulfil its obligations. The main responsibility of the Auction Administrator is to ensure that the auction takes place on the prescribed date, that it occurs strictly according to the rules and to the terms of the Tender Documents, and that it is successful. 8.2 Section 2: Auction budget and auction expenses This section establishes the requirement for an auction budget and specifies the allocation of auction expenses. 8.2.1 Auction budget As soon as a decision is reached to hold an auction, the Auction Administrator shall start to prepare an Auction Budget. The Auction Budget shall include, but not be limited to: � Information Technology expenses, including specifications, software, hardware, and communications needed to hold the auction; � Preparation and publication of Tender terms, including outside legal counsel, if needed; and Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 36 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions � Hiring of Auction Auditor, who shall perform auditing duties on all items directly related to the auction. The auction budget shall not include: � Travel expenses, including those incurred by members of the Auction Committee, the Auction Administrator and the Auction Auditor; � Expenses incurred by sector entities involved in the auction, such as loan of staff and use of office space and communications resources. The Auction Budget, together with a list of possible service providers, should be proposed to the Auction Committee as soon as it is set up, and be approved by it (possibly with changes) at most two weeks later. 8.2.2 Auction expenses All expenses necessary to hold the auction will be paid by the Auction Administrator, against reimbursement by auction participants, to be performed at the moment when contracts are signed. In order to ensure reimbursement, the Auction Administrator must obtain approval from the Auction Committee for each of these expenses, and carry out all necessary accounting activities with respect to these expenses, and present a draft report of auction expenses at most one week after the auction takes place. This draft report on auction expenses will include the allocation of these expenses amongst buyers and sellers at the auction. This allocation will be performed according to the following rules: � One half of auction expenses will be paid by buyers, and one half by successful sellers; � The portion of total expense to be billed to buyers will be allocated among them in proportion to FCCs that were part of Auction Gap; � The portion of total expense to be billed to sellers will be allocated among them in proportion to FCCs that were sold at the auction; � If the auction is unsuccessful and there are no sales, then all the auction expenses will be paid by prospective buyers, and will be allocated among them in proportion to FCCs that were part of Auction Gap. The draft report on auction expenses must be approved by the Auction Auditor and the Auction Committee within one week of its presentation. The approval will result in a final report on auction expenses, which in turn will allow the Auction Administrator to issue bills to auction participants. The auction expenses will be reimbursed at the moment the contracts are signed, and no participant will be allowed to sign auction-derived contracts without first paying his share of auction expenses. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 37 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions 8.3 Section 3: Standard terms in contracts derived from auctions Auctions will result in two types of contracts: � Contracts between sellers and buyers of energy (generators and LR’s that bought energy through the auction); and � Contracts between generators and the Ministry. This section specifies general rules that apply to both types of contracts and the main contract terms of each kind of contract. 8.3.1 Publication of standard terms Standard contract terms will be specified in the auction tender, and will be published together with the tender documentation, as an appendix to the tender document. When the Tender Documents are published, the contract terms will have blank spaces that are to be filled for each contract after the auction. 8.3.2 Contracts between sellers and buyers The functions of these contracts are: 1. To provide the transfer of FCCs from seller to buyer for the duration of the contract; 2. To specify the contract notifications that must be performed for purposes of the Balancing and Settlement System, stating the volumes that are due in each Settlement Period for the duration of the contract; 3. To specify the financial compensation that is due in exchange of (1) and (2) above, and how it should be paid; and 4. To provide guarantees to both parties that (1), (2) and (3) above will actually happen and specify mechanisms for dealing with unexpected events and controversy. In order to perform these functions, the contract will contain at least the following standard terms (the indication “blank� precedes the items that correspond to blank spaced in the contract terms as presented in the public tender): 1. [Blank] Complete identification of buyer and seller, henceforth called “Buyer� and “Seller� 2. Object of the contract Transfer of energy and FCCs between the parties and list of appendixes that are an integral part of the contract Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 38 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions 3. Origin of the contract (auction held on [date], according to [Law number, decree number]) 4. List of definitions 5. [Blank] Identification of projects that support the contract Since the contract is based on the commitment of the seller to build a specified power plant (or a specified set of power plants, if the seller had more than one winning bid at the auction), the contract must identify these power plants, henceforth called “Projects�. 6. Start and end of contract supply obligations The period of time between the start date of the contract and the end date (specified as “0:00 hours of d1m1y1 thru 24:00 hours of d2m2y2�) shall be termed the “Supply Period�. The Supply Period shall be the same for all contracts signed after each auction (as set out in the auction tender), but will not be dependent on the supply period duration set for any previous auction. 7. Contract Reallocation Mechanism Conditions under which contract obligations may be reduced, increased or eliminated by the Contract Reallocation Mechanism. 8. Transfer of the FCCs (obligation of the Seller) The contract shall provide the transfer from Buyer to Seller of [blank] MW of FCCs originating from the Projects during the Supply Period. This transfer shall be accomplished through the FCC Register. The obligation persists even if the Projects are not finished in time, or if they lose FCCs due to underperformance. In that case, the Seller must replace the lost FCC volume, and is subject to penalties (see section on penalties). 9. Transfer of energy (obligation of the Seller) The contract shall provide the transfer of certain amounts of energy from buyer to seller during the Supply Period. The transfer will take place at the Settlement Delivery Point, as defined by the Balancing and Settlement Regulation. The volumes to be transferred shall be specified as: a. During peak periods (as defined by the Balancing and Settlement Regulation) a volume (in MWh/h) equal to the volume of FCCs (MW) transferred by means of the contract; and b. During other (non-peak) periods, a constant volume of energy (measured in MWh/h) such that the total volume of energy sold Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 39 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions during the year (MWh) will coincide with the volume of energy associated with the FCCs (MWh/year). The actual schedule for each year will have to be prepared by the end of the preceding year, taking into account the peak and non-peak periods of the year, and the amounts of capacity (in MW) and energy (in MWh/year) transferred by means of the FCC. The obligation persists throughout the Supply Period, even if the Projects are unavailable or not yet commissioned. 10. General obligations of the Seller a. Obtain the proper permits and build the Projects in time and according to specifications in order to comply with FCC and contract supply commitments, and to keep Projects’ performance on a level compatible with the same; b. Pay all taxes and charges due by the Projects, including transmission fees, and otherwise keep their licenses updated and valid; c. Keep the projects available and in good condition during the Supply Period; d. Provide at its own cost any fuels and other input that are necessary for operation of the Projects; e. Not to use FCCs derived from the projects and committed to this contract for any purpose (such as loan guarantee, etc) that might jeopardize the Buyer´s right to these FCCs; f. Provided the contract schedule (see previous item) is followed, the Seller is entitled to all FCCs allocated to the Projects and all energy produced by the Projects before the start of the Supply Period; g. Provided the contract schedule (see previous item) is followed, the Seller is entitled to all FCCs allocated to the Projects and all energy produced by the Projects after the end of the Supply Period; h. Provided the contract schedule (see previous item) is followed, the Seller is entitled to any FCCs allocated to the Projects that have not been sold at the auction, and a corresponding proportion of the energy they produce; 11. Payment (obligation of the Buyer) The contract will specify, at least: a. Price (in TRY/MWh); Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 40 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions b. Amount due each month (Price * Amount of energy transferred under contract according to BSR); c. Indexing rule (specification of index or indexes to be used, frequency or trigger, exact indexing formula); d. Mode of payment (payment schedule, invoicing, how to perform payment); e. Financial penalties for delays and default; 12. Termination and indemnity The contract will provide for early termination in the following cases: � one of the parties becoming insolvent; � the Seller not building the Projects (and/or a suitable replacement) or losing rights to them; or � either Buyer or Seller losing a license that is essential to the pursuit of its activities. In any of these cases, the injured party can ask for early termination (and corresponding indemnity), but the request must be approved by the Authority. Indemnity in such cases will be set at the lower value of: � one full year’s worth of contract revenues; or � 30% of total revenues still outstanding from the contract. 13. Financial penalties for Seller There will be financial penalties for the seller in the following cases: a. If the Project is delayed beyond the start of the Supply Period the seller will: � provide FCCs for the Buyer as a replacement for the missing FCCs from the Projects; � keep the energy supply schedule; and � forfeit an increasing percentage of contract revenues (10% during the first 3 months, 20% during the next three months, and so forth up to 100%) regardless of whether there is a temporary energy surplus such that the Seller is able to purchase energy at low prices to replace the missing energy from the Projects. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 41 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions b. If the Projects lose FCCs due to bad performance, then the Seller will replace the missing FCCs with either unsold FCCs from the same Project or other FCCs based on projects that are more recent than the Projects. c. If the events described in (a) and (b) above actually come to happen and the Seller does not provide the remedies presented in these items, than the Seller shall suffer the penalties that normally accrue to an insufficiency of FCCs, and these penalties will revert in favour of the Buyers. 14. Dispute The contract will have clauses dealing with the event of dispute between the parties, which will be dealt with through arbitration mechanisms. 15. Force majeure The contract will have clauses dealing with force majeure. 8.3.3 Contracts between generators and the Ministry Each successful bidder in an auction will deposit a performance bond to guarantee that the project will be constructed. The Performance Bond will consist of a deposit corresponding to a reasonable fraction (to be defined by the Ministry) of estimated plant investment cost. The Performance Bond will be executed if commitments assumed in the plant authorization are not fulfilled. Otherwise, it will be held until 3 months after the last unit in the project has been commissioned. The bond may be reduced as successive stages of construction are completed (in accordance with terms set out in the tender documents). The performance Bond may be executed if stages of the project are not reasonably completed in accordance with the project development schedule, or if environmental licensing is delayed. Execution of the bond is preceded by an administrative proceeding in which the developer may present its case. The execution of a Performance Bond will be subject to Turkish commercial Law, but the tender documentation may additionally specify a special contract between the Ministry and the project owner, stating under which conditions the bond is to be returned, and under which conditions it should be executed. If a Performance Bond is executed, the proceedings will revert in favour of all consumers in the system by way of an additional payment made to the FCC Administrator who will treat such payment as a rebate to be paid in line with shortfall payments in accordance the FCC Regulation, as a compensation for the ensuing higher energy prices and deterioration of security of supply. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 42 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions 8.4 Section 4: The Contract Reallocation Mechanism 8.4.1 Responsibilities of entities The Contract Reallocation Mechanism (CRM) will be implemented by the Market Operator. Before the start of each Year, any Generator who has signed a contract pursuant to Paragraph 6.2.2 or a contract resulting from a previous exercise of the CRM application, whose contract is set to be operational during the Year, may: 1. Elect to withdraw from the CRM all contracts made with any specified LR that are operational during the next year; or 2. Allow the FCC volumes and the PPA derived from the contracts to be reallocated under the terms of the CRM Once a Contract has been withdrawn from the CRM, it will remain in force under the terms applying at the time it was withdrawn for the remaining term specified in the contract and may not be subject to the CRM in a later year. Generators undertake to sign contracts created through the CRM with each LR in the volumes determined by the Market Operator as a result of operation of the CRM. LRs undertake to sign contracts created through the CRM with each generator in the volumes determined by the System Planner as a result of operation of the CRM. LRs must sign such contracts regardless of whether the LR had signed the original contract pursuant to Paragraph 6.2.2. 8.4.2 Operation of the CRM Before the start of each Year, the Market Operator will perform the following steps in respect of that Year: 1. For the set of all contracts entered into the CRM pursuant to paragraph 8.4.1 (2), the Market Operator will calculate: a. The FCCs of contracts purchased by each LR k that have been entered into this CRM (LFCC(k)); and b. The Market Operator will record, for each contract that has been entered into this CRM, the FCC volume (in MW) due for the Year C0(i, j, k), where (i,j,k) indicates the contract between generator j and LR k that resulted originally from auction i and has been entered into this CRM (C0(i,j,k) will be set to zero if no such contract has been entered into this CRM).. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 43 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions 2. The System Planner will analyse the LR Declarations made pursuant to Paragraph 4.1.2 and will calculate for each LR k (k = 1, …, K) a contract gap GAP(k) using the same procedure specified in section 6.1.1 to compute the gap DFCC(k), with the following modifications: a. The procedure shall be applied using data corresponding to the subsequent year (called Year), instead of data corresponding to the Auction Target Year; and b. The procedure will not discard negative values: the expressions that use the maximum between a value and zero will simply use the value, so that the resulting GAP(k) can be negative.. 3. The System Planner will inform the Market Operator the values of GAP(k) 4. The Market Operator will designate two sets of LRs: a. Those with a positive value for GAP(k) will be designated undersupplied LRs; and b. Those with a zero or negative value for GAP(k) will be designated oversupplied LRs. 5. For each undersupplied LR the Market Operator will: a. Set the corresponding surplus value SCRM(k) to zero; b. Compute the corresponding deficit value DCRM(k) using the formula: DCRM(k) = GAP(k) 6. For each oversupplied LR the Market Operator will: a. Compute the corresponding surplus value SCRM(k) using the formula: SCRM(k) = Minimum {– GAP(k) ; LFCC(k)} b. Set the corresponding deficit value DCRM(k) to zero; 7. The Market Operator will compute total CRM surplus TSCRM as the sum of all SCRM(k), and total CRM deficit TDCRM as the sum of all DCRM(k) 8. If either TSCRM or TDCRM is zero, then the Contract Reallocation Mechanism is finished without any changes in contract volumes. Otherwise, the Market Operator will compute the fraction of surpluses that will be absorbed by the mechanism FSCRM, using the formula: FSCRM = Minimum {TDCRM / TSCRM ; 1} Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 44 Economic Consulting Associates, Power Systems Research, January 2009 PART EIGHT: Other Provisions 9. For each overcontracted LR k’, the Market Operator will calculate the new volume of FCCs of each contract (i,j,k’) that has been entered into this CRM using the following formula: C1(i,j,k’) = C0(i,j,k’) x (1– FSCRM x SCRM(k’)/LFCC(k’) 10. For each auction i that produced contracts that have been entered into this CRM, and for each generator j, the Market Operator will calculate the volume of FCCs that are to be transferred in this CRM TCRM(i,j) using the following formula: TCRM(i,j) = �(k) C0(i,j,k) x FSCRM x SCRM(k) / LFCC(k) 11. For each overcontracted LR k*, the Market Operator will calculate the new volume of FCCs of each contract (i,j,k*) using the following formula: C1(i,j,k*) = C0(i,j,k*) + TCRM(i,j) x DCRM(k*) / TDCRM 8.4.3 Effect of CRM calculation Each contract (i,j,k) that has been entered into the CRM for which the value of C1(i,j,k) calculated pursuant to paragraph 8.4.2, is different from the original value C0(i,j,k) must be replaced by a binding contract between generator j and the LR k, which will be identical in form to the original contract made pursuant to Paragraph 6.2.2 save that the volumes specified in the schedules for FCCs and PPAs will be those calculated under the CRM. Also, in cases where no contract (i,j,k) has been entered into the CRM and C1(i,j,k) is greater than zero, a binding contract must be signed between generator j and the LR k, which will be identical in form to the original contract made pursuant to Paragraph 6.2.2, with volumes given by C1(i,j,k). If these new or revised contracts enter subsequent applications of CRM, their volumes will reflect the C1(i,j,k) values. Also, the generator option specified in section 8.4.1 will refer to the C1(i,j,k) volumes. For the avoidance of doubt, the end date in each contract will be that originally specified when the contract was first made. Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 45 Economic Consulting Associates, Power Systems Research, January 2009 Provisional Articles and Final Provisions 9 Provisional Articles and Final Provisions 9.1 Effectiveness This Regulation shall become effective as of its publication date. 9.2 Enforcement The provisions of this regulation shall be enforced by President Turkey: Electricity Security of Supply –- Draft Regulation on Auctions 46 Economic Consulting Associates, Power Systems Research, January 2009