Turkey Plans Variable Prices for Power Plants to Tame Inflation

(Bloomberg) -- Turkey’s energy market regulator is set to impose variable rates for how much the nation’s power plants can charge for their output to mitigate for the impact of surging fuel prices and inflation at home. 

The watchdog, known by its Turkish acronym EPDK, is planning a complicated mechanism that will introduce price ceilings for power producers depending on what fuel they use, according to people with direct knowledge of the matter, who asked not to be identified before the decision is announced.

Soaring energy prices was a key driving force behind the jump in annual consumer inflation to more than 54% last month, eating into support for President Recep Tayyip Erdogan a year before general elections.

The regulations -- expected to be announced later this week -- will enable transfer of cash from one corner of the power market to another, allowing plants running on imported coal and natural gas to be in effect subsidized, the people said. Others, mostly solar and wind parks, will be selling power to the national grid at lower prices, the people said.

The regulator declined to comment beyond an earlier statement where it said it will take precautions to prevent cost differences between alternative fuel sources to drive up power prices for consumers.

The changes are aimed at keeping the average cost of electricity at a lower level so that the government can meet its pledge to curb electricity prices without having to provide cash subsidies for producers. 

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