Electricity distribution and production scandals in Turkey

Last week, the price of electricity in Turkey rose by 5.75 percent. At a time when the price of everything else is going up by 30 to 40 percent, how bad can a 5.75 percent rise be? 

Meanwhile, Finance Minister Berat Albayrak said the exchange rate did not matter to him at all. He said he had not looked into the matter. “Our industry is strong, production is strong. We will be the ones who will profit the most in this forex rate issue, because we now have the control over the rate,” he added. 

In Turkey, whilst considering the economy, people don’t matter. What matters it whether or not it is controlled. Electricity too is controlled, manipulated and instrumentalised. Consumers do not matter, but there is an abundance of capital transfer. 

Turkey’s energy production is about 300 billion kilowatt per hour. Its consumption, the one that is billed, is lower than that. With all the losses and illegal usage, it is around it 250 billion kwh. The slightest movement, even a one kurus difference corresponds to an amount of 2.5 billion Turkish Liras. This means that some money is taken out of your pocket and put into somebody else’s pocket. In other words, with a price hike of one kurus, some extra 2.5 billion TL are taken from you and given to someone else. The money you pay is not used for doing any other work that would be useful to the country.

With the recent price hike, the price of electricity rose by 3 kurus. In other words, producers will be earning 3 kurus more. 

Not only was the unit price of electricity raised, there was also a price increase for distribution companies. This was about 0.2 kurus. In other words, some 0.2 kurus more will be taken from us and given to others, i.e. an extra amount of 0.2 kurus. 

However, this has its effect on taxes. The money we will pay for a unit of electricity has increased by about 4 kurus in total. In other words, we will pay 4 kurus more and will be financing those who earn money without doing anything. 

A consumer who uses 100 kWh electricity will now pay around 75 liras instead of the previous 71 liras. Some 4 extra liras will be paid for the same service. If your home is inefficient in the sense of energy conservation and if you are just fine with contributing more money to the government, then you are probably consuming at least twice as much of this. In this case, your payments will increase by 8 liras per 100 kWh.   

It is the people, the consumers who are losing in this equation. Well then, who are the winners?

The winners are the electricity production companies. With this 3 kurus price hike, the HES companies, that is, the hydroelectric power plant companies, will profit the most. These companies have somehow already occupied the renewable energy support mechanism. Besides, the coal power plants will profit, which are already selling electricity at prices above the market prices, under the name “capacity mechanism.” 

The other winners are the distribution companies. The Turkish Electricity Authority (TEK) was made dysfunctional, perhaps to pave the way for private companies to make money effortlessly. Distribution companies were established in order for them to collect money and maintain the infrastructure. These companies were then handed over to private companies, with readily available bank loans. The only thing these companies do is collect money from consumers. With this recent hike, the distribution companies will earn 21.2 kurus. In other words, for every 3-lira bill, distribution companies earn 1 lira. 

As if this wasn’t enough, the state also provides electricity to distribution companies at a price you can call “free.” For instance, the Electricity Generation Corporation (EÜAŞ) selling price was 34.9 kurus on October 1, 2019. This price now is 15.48 kurus. In other words, the state has decreased the price 19 kurus compared to the previous year. Price hike for the consumer, discount for the distributor. 

The profits of these companies have increased by 100 percent. But the scheme is not only limited to these. When the price of electricity was 36.5 kurus in 2019, distribution companies bought electricity from EÜAŞ at 34.9 kurus. In other words, including this difference, distribution companies were making 22.5 kurus by distributing EÜAŞ electricity. But now, the price of EUAŞ electricity is 15.5 kurus while this price has become 39.3 kurus for the consumer. The income of distribution price from the electricity bought from EÜAŞ has risen to 45 kurus. In a sense, if there is a 5.75 percent price hike, this means the money transfer through EÜAŞ electricity to distribution companies has increased by 100 percent. 

Is EÜAŞ being siphoned? In 2018, EÜAŞ declared 1,8 billion Turkish Lira in losses. Back then, EÜAŞ wasn’t providing electricity at these incredibly low prices. In 2019, the loss was said to be around 8 billion liras. That year, the loss was probably higher than that figure. In 2020, it got worse. One thing is clear and that is that EÜAŞ is being siphoned via distribution companies. Needless to say this money comes from the VAT of the electricity bill you are paying. 

In a nutshell, for an electricity bill for 100 kwh, 39.27 lira will go to electricity-producing companies while 21.24 liras will go to distribution companies. The distribution companies will multiply their income with the electricity they buy from EÜAŞ.  

With the remaining 14.33 Turkish Liras we pay, we will be contributing to the state broadcaster TRT and its awful TV shows, the energy fund, VAT and the municipal consumption tax. From then on, the losses of EÜAŞ will be financed.

There is no price increase here. Rather, there is an economic model. The hike of 5.75 percent does not matter to me. Yet this hike hides an economic scheme. When there is a 1 kurus raise in the electricity prices, some 2.5 billion liras erode from people’s pockets. This amount is largely transferred to private companies. People are being ripped off, the EÜAŞ is being siphoned off, and the people are ripped off for the second time. What is more, some companies earn large amounts of money without doing anything, the Turkish Renewable Energy Resources Support Mechanism (YEKDEM) is being siphoned and there is a “capacity mechanism” that enables coal power plants to sell electricity with favorable prices and there are distribution companies that buy electricity from EÜAŞ with a 19 kurus discount.