ENERGY REGULATORS DISCUSS POSSIBLE RELATIONSHIP

UNCLAS ISTANBUL 000449

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR USAID

E.O. 12958: N/A
TAGS: ENRG TU
SUBJECT: ENERGY REGULATORS DISCUSS POSSIBLE RELATIONSHIP


This message was coordinated with Embassy Ankara.


1. (SBU) Summary: The Energy Regulators Regional Association
(ERRA) met in Istanbul May 21-22 to discuss regional energy
market development, energy security, renewable energy, and
energy efficiency. The conference was partially funded by
USAID. Yusuf Gunay, President of the Energy Market
Regulatory Authority of Turkey (EMRA),seeks collaboration
with the USG on energy regulatory matters, also identified
separately as an Economic Partnership Commission (EPC) action
item. Gunay raised this possibility with Robert Archer,
Energy Team Leader of the Energy and Infrastructure Division
of USAID's Bureau for Europe and Eurasia, on the margins of
the conference. EMRA officials were pleased that Gunay was
named the new ERRA president at the conclusion of the
conference. End Summary.

Regulatory Conference
--------------


2. (U) The Energy Regulators Regional Association (ERRA),a
voluntary organization comprised of energy regulatory bodies
of Central/Eastern Europe (CCE) and the Commonwealth of
Independent States (CIS),held its 6th Energy Regulation and
Investment Conference from May 21-22 in Istanbul, Turkey.
The conference proceedings revolved around the following four
themes: (1) regional energy markets, (2) regional energy
security, (3) electricity and gas market development, and (4)
renewables and energy efficiency. The conference was
partially funded by USAID and several U.S. officials
participated.


3. (U) Robert Archer, Energy Team Leader of the Energy and
Infrastructure Division of USAID's Bureau for Europe and
Eurasia, explained that USAID collaborates with ERRA Member
States to help them develop sound energy regulatory
frameworks. The three main characteristics of such
frameworks are authority, autonomy, and accountability. In
particular, the appropriate actors in the energy sector must
have sufficient authority to exercise their regulatory
functions, including through the levying of tariffs. These
regulatory actors must also be autonomous from short-term
political influence. Accountability should be improved
through increased transparency, specifically by promoting
public participation and regular reporting to legislative
officials. Mr. Archer further stated that regulatory
activities should be predictable, since unpredictability in
this context creates problems for investors. He also
identified two current trends in the energy sector: 1) the
emergence of regional markets and an increase in cross-border
trading necessitates greater transparency, and 2) customers
are demanding higher quality service.


4. (U) James Kerr, president of the U.S. National Association
of Regulatory Utility Commissioners (NARUC),and Missouri
electricity commissioner, stated that NARUC has been working
with ERRA Member States since 1999. The challenges that
regulators and investors face in these countries -
specifically those concerning environmental protection and
energy efficiency - are similar to those faced in the United
States. NARUC has established a task force on climate change
and will encourage lawmakers to consider the impact that any
potential climate-related legislation will have on consumers.
He further noted that the U.S. Congress will consider energy
efficiency legislation in the near future.

Energy Partnership
--------------


5. (U) The issue of an energy partnership between USG and
EMRA was raised on May 22 by a senior EMRA representative.
Robert Archer, Energy Team Leader of the Energy and
Infrastructure Division of USAID's Bureau for Europe and
Eurasia, met Yusuf Gunay, president of EMRA, on the sidelines
of the 6th Energy Regulation and Investment Conference in
Istanbul to follow up on this matter.


6. (SBU) Mr. Gunay explained that EMRA would like to
collaborate with the USG in the same way that USG does with
other foreign regulators (such as Croatia and the New York
State Public Utility Commission) at both the state and
federal regulatory commission levels. EMRA would also like
to engage the State Department in a dialogue on strategic
issues of mutual concern (also separately identified in the
February Economic Partnership Commission meetings by EMRA
officials). Mr. Gunay saw common U.S.-Turkish interests in
the energy sector, as demonstrated by American AES
Corporation's sizable presence in Turkey (strong interest in
the postponed electricity distribution privatization). He
also pointed out Russia's increased interaction with Turkey
on energy matters.


7. (SBU) Mr. Archer said the issue of funding would need to
be examined further and that candidates for state regulatory
partnerships would need to be identified. He told Mr. Gunay
that he would consult with AmEmbassy Ankara and the
Departments of State and Energy and then advise AmEmbassy
Ankara on what can and cannot be done concerning a
relationship between the USG and EMRA.


8. (SBU) COMMENT: Gunay and EMRA officials have long sought
increased interaction with the U.S., building from periodic
visits to the U.S. We strongly endorse this kind of
cooperation to assist EMRA in increasing its competence and
in maintaining its independence. EMRA has struggled to
maintain its authority vis a vis the Energy Ministry and has
not hesitated to work on controversial issues such as fuel
product trade (enforcing a fuel marker provision to combat
rampant smuggling). EMRA has been criticized for moving too
slowly on wind and hydroelectric licensing for new projects.
JONES