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Information Sharing About the Cost Items on Electricity Bills

As known, disputes and news about the cost items on final consumer electricity bills regarding retail sales operations, take place in the community for some time. It is considered to be beneficial for our customers to share the following information for the sake of correct interpretation of these discussions and news.

1. What are the stages of electricity energy generation and the delivery of electricity we consume to our households ?
Electricity is the most important medium of our energy consumption as an integral part of our daily lives. The stages of electricity energy up until our consumption can be summarized as follows:

Generation; convertion of primary energy resources (natural gas, gas oil, coal, water, wind) into electricity energy which is called secondary energy, through power generation plants,

Transmission; transportation of generated electricity energy to the point of final consumption via installed lines with high voltage levels (over 36,000 volts) (to illustrate, these lines can be thought as intercity highways / roads),

Distribution; transportation of generated electricity energy to the point of final consumption via installed lines with medium or low voltage levels (below 36,000 volts) (to illustrate, these lines can be thought as streets and avenues of a city),

Retail Sales and Services; the supply of electricity energy to final consumers and accomplishment of services such as after-sales services, customer relations, meter reading, billing and payment collection.

2. How is the the cost of the electricity energy we consume calculated?

The cost of the electricity that we consume is basically calculated in line with the required investments and operating costs at the stages that we have mentioned above.

Generation cost; operating costs such as fuel (eg.natural gas), chemicals, operation materials, labor, maintenance and repair required to generate electrical energy and the depreciation and financing costs of the investments for the construction of generation plants and complementary facilities established for electricity generation.

Transmission costs; operating costs such as labor, maintenance, repair, material for the operation of the high voltage grids, and depreciation and amortization of financing costs of the investments for the construction of the reduction centers, lines and complementary facilities established to transmit the electricity generated.

Distribution costs; operating costs for the operation of medium and low voltage grids such as labor, maintenance, material and the depreciation / amortization and financing costs of the investments for the construction of generation plants, lines and complementary facilities established for the distribution of electricity generated.

Energy Loss Costs; covers the technical and trading losses during the transmission of electricity energy through the distribution grids, incurred until delivery to the final point of consumption. Detailed information about the subject cost is available in the Energy Market Regulatory Authority's announcement dated 8 December 2011.

Retail Sales Services costs; operating costs such as labor, material and information technology for the management of after-sales services such as electricity energy billing, meter reading and collection and the depreciation / amortization and financing costs of the investments for hardware and software to enable these services.

Taxes and Funds; Constitutes the items within the scope of the Law No. 3065 Value Added Tax, the Law No. 2464 Municipality Consumption Tax, the Law No. 3291 Electricity Energy Fund and the Law No. 3093 Turkish Radio and Television (TRT) contribution.

3. How do these costs appear on our bills?

Six cost items appear on electricity bills. These reflect the costs incurred throughout the process until the consumption of the generated electricity, as described above;

Retail Sales Cost (Energy Cost); The purchase / supply costs of consumed electricity energy from generation or supply sources,

Energy Loss Cost; Energy loss cost of the consumed electricity energy (energy loss cost which took place on the retail sales tariffs (price) in the previous years, takes place as an individual item on the electricity consumption bills as of 01 January 2011, which is statutory by Energy Market Regulatory Authority decree dated 28 December 2010 on retail tariffs),

Distribution System Utilization Cost; Cost of the consumed electricity energy distribution,

Transmission System Utilization Cost; transmission costs of electricity energy consumed,

Retail Sales Service Cost; Cost of retail sales services of consumed electricity energy excluding the cost of electricity meter reading (though meter reading is a part of the retail services activity, this cost item is separately determined by EMRA),

RSS (Retail Sales Service) Cost for Meter Reading; Service cost for index settings on the electricity meter to determine the electricity energy consumption. On top of above mentioned consumption costs, final consumer cost is calculated by the addition of taxes and funds defined by the legislation.

Retail Sales (Energy) Costs, Energy Loss Costs, Distribution Costs, Transmission Costs and Retail Sales Services Costs are calculated by multiplying the unit prices for these costs (krş./ kWh) with the consumption amount in terms of kwh and retail sales services related to meter reading (with PSH-Counter Reading) is separately billed in terms of medium voltage (MV) and low voltage (LV) basis at each reading as a fixed TL price. The taxes and the funds are included in the bills as defined in the applicable legislation.

4. How are the costs on the bills determined?

The tariffs, that the retail license holder distribution company operating in the electricity market, could reflect to their consumers are determined by the Energy Market Regulatory Authority (EMRA). With this respect, provisions of particularly Electricity Market Law No. 4628, the Electricity Market Tariffs Regulation, other tariff notifications and Communiqué regarding Electricity Market Chart of Accounts, Regulated Items and Reporting are considered.

The prices announced by EMRA are implemented by electricity distribution companies. All costs located on the bill cover the costs of all components of electricity energy. The payment of the subject costs by the consumers who consume the electricity energy, is a requirement for the continuation of the economic life in a sustainable manner.

5. How are the costs on the bills reflected to the distribution companies?

Distribution companies are the entities subject to regulations and inspections of EMRA. Distribution companies’ revenue requirements are determined by EMRA. Revenue requirements for the period 2011-2015 are determined by the Energy Market Regulatory Board decrees dated 28 December 2011 individually numbered for each distribution company.

It is impossible for distribution companies to obtain an income above the maximum set through tariffs covering the costs of distribution and retail sales services. In this respect, the changes made on the unit costs can never increase the revenues of the distribution companies.

The distribution companies transfer the energy cost (including energy loss), except for margins on retail activities, to the respective energy generating companies particularly to the public companies Electricity Generation Inc. and Turkey Electricity Trading and Contracting Inc. which provide energy supply; all transmission costs to the public company Turkey Electricity Transmission Inc., and taxes and funds to the respective public entity defined in by the legislations (TRT, municipalities, the Ministry of Finance and the Ministry of Energy and Natural Resources).