doi.org/10.52340/eab.2025.17.01.09

On December 20, 2019, the Parliament of Georgia adopted the Law on Energy and Water Supply, initiating a fundamental reform in the energy sector. Within the framework of this reform, the Regulatory Commission approved and introduced amendments to the subordinate legislative acts governing the energy sector, aligning them with European best practices.
It is noteworthy that in 2014, Georgia signed the Association Agreement with the European Union, which, among other obligations, mandated the harmonization of Georgian energy legislation with EU energy regulations. Furthermore, in 2016, Georgia signed the Protocol on Accession to the Treaty Establishing the Energy Community, thereby committing to transpose the Community's energy legislation into national law within specified timelines and conditions.
Pursuant to the aforementioned law, the Government of Georgia approved a new concept for the electricity market model through Resolution No. 246 on April 16, 2020.. This document outlines the guiding principles for organizing and operating the wholesale electricity market in Georgia aiming to create an attractive investment environment, foster competitive and transparent trade in energy markets, and provide consumers with free choice at both wholesale and retail levels.
To ensure a secure, uninterrupted, and reasonably priced supply of electricity, the concept introduced a public service obligation (PSO) for specific entities, including universal service providers, public service suppliers, and suppliers of last resort. It also set timelines for key transitional measures, such as imposing public service obligations on relevant energy sources and stages of market liberalization, i.e., opening the market to specific groups of consumers.
In accordance with Government Resolution No. 236 of May 25, 2021, LLC Tbilisi Energy Supply Company (operating in the license area of JSC Telasi) and JSC EP Georgia Supply (operating in the license area of JSC Energo-Pro Georgia) were tasked with providing public service obligations in the electricity supply sector. Consequently, as of July 1, 2021, LLC Tbilisi Energy Supply Company and JSC EP Georgia Supply have been designated as universal electricity service providers, public service suppliers, and suppliers of last resort within their respective license areas.

Under the same resolution, the issue of setting tariffs for fulfilling public service obligations is regulated in accordance with Article 9, Paragraph 6 of the Law on Energy and Water Supply. This provision grants the Georgian National Energy and Water Supply Regulatory Commission the authority to establish tariffs for the execution of public service obligations.
The new market model envisions electricity supply through public and universal service providers for households, small enterprises, and certain large enterprises without suppliers. Meanwhile, the supplier of last resort serves customers who lose their suppliers due to planned or unforeseen circumstances or non-fulfillment of obligations by suppliers, at a tariff set by the Commission. The law assigns public service obligations to enterprises engaged in relevant energy activities, while the Commission is authorized to determine electricity tariffs for final consumers served by public service suppliers, based on an approved methodology.
In line with Articles 102 and 113 of the Commission’s December 4, 2008 Resolution No. 33 on Electricity Tariffs, the final consumption tariffs for LLC Tbilisi Energy Supply Company and JSC EP Georgia Supply consist of the sum of supply tariffs (including universal, public, and last resort supply tariffs), distribution tariffs, and transmission tariffs as determined by the Commission.
In conclusion, the electricity market reform in Georgia is fully harmonized with the directives and regulations of the EU's Third Energy Package, as well as the Protocol on Accession to the Energy Community. The continuation of the reform initiated in 2021, the refinement of the new legislative framework, and the establishment of a market model that fosters an attractive investment environment, promotes competitive and transparent trade, and ensures consumer choice, remain of critical importance.

Keywords: Energy regulatory framework; Harmonization of energy legislation; Energy Community legislation; Electricity supply, transmission and distribution; Public service obligation; Tariff regulation; Cost-reflective tariffs; Electricity consumption tariffs.

JEL Codes: Q41, Q48, L94, K23

References:

• Law of Georgia “On Energy and Water Supply”, (2019, December 27);
• Resolution of the Government of Georgia No. 246 of April 16, 2020 “On Approval of the Concept of the Electricity Market Model”;
• Resolution of the Government of Georgia No. 236 of May 25, 2021 “On Imposing the Obligation of Tbilisi Electricity Supply Company LLC and EP Georgia Supply JSC to Provide Electricity as a Public Service in the Electricity Sector”;
• Resolution of the Government of Georgia No. 246 of May 31, 2021 “On Determining the Indicators of Small Enterprises in the Electricity Sector”;
• Resolution No. 68 of the State Electricity Commission of Georgia dated December 15, 2020 “On Approval of Methodologies for Calculating Tariffs and Fees in the Electricity Sector”;
• Resolution No. 33 of the State Electricity Commission of Georgia dated December 4, 2008 “On Electricity Tariffs”;
• Resolution No. 27 of the State Electricity Commission of Georgia dated June 27, 2023 “On Approval of the Rules for Regulatory Audit of Expenditures”;
• “2020 Activity Report of the National Energy and Water Regulatory Commission of Georgia” 2021, Tbilisi
https://gnerc.org/files/Annual%20Reports/2020%20GEO%20(1).pdf
• “2021 Activity Report of the National Energy and Water Regulatory Commission of Georgia” 2022, Tbilisi
https://gnerc.org/files/Annual%20Reports/2021%20GEO.pdf
• “2022 Activity Report of the National Energy and Water Regulatory Commission of Georgia” 2023, Tbilisi
https://gnerc.org/files/Annual%20Reports/2022%20GEO.pdf
• “2023 Activity Report of the National Energy and Water Regulatory Commission of Georgia” Annual Activity Report 2024, Tbilisi
https://gnerc.org/files/Annual%20Reports/Annual%20Report%202023%20GEO.pdf