Draft law on electricity and natural gas, sets the new threshold for mandatory registration as direct consumer at 15.0 GWh of average monthly consumption from May 2018. This law is expected to be approved by the parliament by mid May 2018. The current law requested mandatory registration as direct consumers from all companies connected to the high voltage (35kV+) transmission grid from May 2018. After approval of the law, eligible companies for registering as direct consumers will be reduced from expected 60 to 4 following companies: Georgian Incorporation, BFDC Georgia, Tsekhi-1, and Block Power. Other companies will retain the option to be registered as direct consumers, with the exception that they will no longer be able to go back to the distribution companies’ services. Notably, BFDC Georgia and Geo Servers already voluntarily registered as direct consumers on 30th of April, before the enforcement of the law.
Consumption growth in 2017 was mainly driven by the consumption of non-residential sector: 1) The direct consumers increased their consumption by 18.1% y/y, due to increase of Georgian Manganese’s production level and 2) the non-residential subscribers of distribution licensees increased their consumption by 8.4% y/y, in line with the average growth rate over 2012-2017. New commercial entities added to the distribution grid are the main drivers of the growth. Electricity consumption by residential subscribers of distribution licensees was down by 2.0% in 2017 and accounted for 20% overall domestic consumption. Notably, the average growth rate of residential consumption is 1.9% over 2012-2017 and we do not expect significant changes to this trend in nearest future.
Domestic electricity consumption increased 9.3% y/y in March 2017. The sole contributors to consumption growth were distribution licensees: 1) Energo-Pro Georgia subscribers’ consumption increased by 18.8% y/y. The growth can be explained by addition of new commercial subscribers; 2) Telasi consumption was up 10.2% y/y. There were no Electricity export and transit in March 2018 although the annual balance envisaged the export of 28.0 GWh. Georgian Urban Energy – owner of Faravani HPP has long-term transmission and dispatch agreement, enabling company to export predetermined volume of electricity from March to November of each year in Turkey. Three years in line, Georgian Urban Energy voluntarily sells electricity to ESCO instead of exporting it. In 2018 Georgian Urban Energy will export only in May, June and July.
Electricity generated by domestic sources increased by 34.5% y/y in March 2017. Hydro generation showed significant increase (+42.4% y/y) in March 2018 from a very low base (-21.7% y/y) in March 2017: Enguri/Vardnili generation almost doubled increasing 87.5% y/y from last year’s low base when Enguri had low generation due to its halted operation in February 2017. Abkhazian region consumed 87.4% of electricity generated from Enguri/Vardnili. Generation of other regulated and deregulated HPPs also increased significantly by 20.4% y/y and 42.8% y/y, respectively, due to high water flow and addition of new HPPs (Dariali and Khelvachauri) to the group of deregulated HPPs.
The surplus in hydro generation reduced electricity imports by 48.4% y/y from last year’s high base, when interruption in Enguri increased demand for imports drastically. Most of the imported electricity came from Azerbaijan (77.3% of total imports of Mar-18), while the rest came from Turkey. Notably, it was first time since 2008 when Turkey served as import country. This import was reflection of ESCO’s tender on barter of electricity won by Aksen Enerji in February-2018.
