Evaluation of Reimbursement to Consumers of Lost and Illegal Electricity Costs within the Context of Precedents Set by the Court of Appeal and the Legislation

Contact: Att. Ozen Odev; Erdem & Erdem (Turkey)

In this newsletter, we evaluate the reimbursement of lost/illegal electricity costs, a subject that, from a legal perspective, is of particular concern to consumers.

Lost/illegal Electricity Costs

The judgment of the Court of Appeal Assembly of Civil Chambers ruling that lost/illegal electricity costs reflected on electricity bills "cannot be demanded from subscribers," has provided said subscribers with the opportunity to request reimbursement of the charges they have paid over the last ten years.

The event surrounding this Court of Appeal's judgment began in 2012, following a subscriber's application to the Consumer Arbitration Tribunal seeking reimbursement of lost/illegal electricity costs that had been added to the subscriber's bill. The Arbitration Tribunal found the consumer's request to be justified. At the conclusion of the proceedings, and upon application to the court by the distribution company requesting annulment of the said decision, the Court of Appeal Assembly of Civil Chambers passed judgment on the subject matter.

 

This Court of Appeal’s judgment is summarized is as follows:

Nature of lost/illegal electricity:

The lost/illegal electricity cost reflects the difference between the amount of energy input to the distribution system and that of the energy billed to the consumers. In other words, the cost of lost/illegal electricity as determined will, pro rata, meet the costs of lost/illegal electricity that arise as a result of technical and non-technical losses of the electricity system.

Jurisdiction of Energy Market Regulatory Authority:

Under item 1 of Article 4 of Law No. 4628 on the Electricity Market ("Law"), it states that the Energy Market Regulatory Authority is established in order to perform the duties authorized under the said Law and under item 2 of the same Article, in which it states that "The Authority is responsible for the issuance of Authorized Licenses that set forth the permitted activities of the corporate persons, and the rights and obligations arising out of the said activities, existing contracts within the sphere of transfer of those operational rights to be regulated in accordance with the provisions of the Law, monitoring of the market performance, composing of performance standards, as well as the amendment, and enforcement of regulations on distribution, consumer services, establishment of principles of pricing covered by this Law, structure of pricing codes to be applied in the sale of electricity to dependent consumers in line with market requirements, and the application and control of the formulas in relation to adjustments that are needed to be made to the said prices as a result of inflation, and to ensure that the market complies with the provisions of this law ...'

Although the Court of Appeal stated that the Authority has the duty to determine the principal elements for the pricing to be applied to electricity sales made to consumers, it also pointed out that the limit of this authority is the cost and profit share for 1KW electricity energy until it reaches the consumers, and that the Authority is not delegated with the power or duty to determine an unlimited pricing element.

The Authority has sought recompense of lost/illegal costs from consumers to date under the “Communiqué on Retail Sales Service Revenues and Setting up of Sales Price of Retail Electricity Sales” (“Communiqué”), published in Official Gazette 24843 of 11.08.2002. However, the Authorities can only issue regulatory procedures for the purpose of determining the principles and procedures of the rules imposed by the Law. As to this case, the Authority assumed the right to demand payment for lost/illegal electricity from consumers under a communiqué it issued, despite there being no lawful basis for doing so. To that end, in parallel to this notion, the Court of Appeal pointed out that under Article 4 of the Law, which was used as grounds for the communiqué, the Authority is not granted with unlimited powers to set up rates, and, therefore, the Authority may not collect lost-electricity costs on the basis of the subject matter communiqué.

This practise is not compatible with the notions of the rule of law and jurisprudence:

The Court of Appeal does not correlate the collection of the costs of losses that occurred whilst transferring electricity, nor the costs of electricity theft by others, from subscribers who are law abiding.

This opinion of the Court of Appeal is pertinent because, in line with the principle of “individual criminal responsibility,” which is one of the general principles of criminal law, and is stipulated under Article 38 of the Constitution, it is required that punishment for this crime shall only be imposed on the perpetrator of the crime, and that only the perpetrator of the crime is affected by the penalty imposed. In other words, invoicing the non-defaulting, rule abiding subscriber for the costs that do not arise from the neglect of the subscriber is not in compliance with the principle of individual criminal responsibility and, additionally, such an act betrays trust under the law.

This practise prevents the Authority from keeping in pace with technology:

The Court of Appeal further states that the collection of costs for lost/illegal electricity from the law-abiding subscribers prevents the Authority not only from applying necessary technological innovations to combat loss of electricity, but also from expending the efforts necessary to identify the perpetrators and, yet, the Authority has the duty to prevent loss of electricity and theft, and to collect the costs from the perpetrator.

Non-disclosure of the cost of lost/illegal electricity in the itemization of the bill is incompatible with the principle of transparent state.

In addition to the above, the Court of Appeal noted that due to the fact that consumers are unaware as to the amount they are paying as a result of non-disclosure of these amounts on the bills sought for the lost/illegal electricity, this practise is in breach of the notion of transparent state.

What is the course to be taken in collecting the cost of lost/illegal electricity?

Individual subscribers may submit a petition to their supplier company requesting a document detailing the cost of lost/illegal electricity included in their bill. Subsequently, the electricity supply company is obligated to provide the subscriber with a document detailing the electric energy consumption for the past 12 months, retrospectively, and free of charge. This obligation is based on Article 19 of the “Regulation of Electricity Market Consumer Services.” The subscriber then applies to the Consumer Arbitration Tribunal with the said document. Thus, the legal process begins.

At this point, it is important that the applicant and the owner of the installations are the same persons, or that the application is made by a person authorized to act on behalf of the owner of the installations. In accordance with the provisions of the aforementioned regulation, due to the fact that the subscribers may obtain the breakdown of the bills for the past 12 months, whether the calculation of reimbursement is applied, retrospectively, for the last 10 years, and how much that amount will be is determined by the judiciary.

Can the legal entities’ subscribers request reimbursement of lost/illegal use costs?

Under the provisions of the Electricity Market Consumer Services Regulation, the consumer is defined as “The person who purchases electricity for their own use” without any distinction between real or legal entities. Under the provisions of Law 6502 on the Consumer Protection Law (the “CPL”), the consumer is defined as a “real or legal entity who acts for purposes other than commercial or occupational purposes.” As is evident, both in the Regulation, as well as in the CPL, corporate persons are considered to be consumers. It is stipulated under the decisions numbered E. 2014/12810, K. 2014/12352 and E. 2014/7207, K.2014/14473 of the 3rd Civil Chamber of Court of Appeal Chamber that corporate persons may request and collect reimbursement of lost/illegal use costs. In this case as well, the authorized representative of a corporate person may obtain the details of the electric energy consumption, retrospectively, for 12 months from the supplier company and, subsequently, request reimbursement of lost/illegal use costs through the Court.

Conclusion

Although this positive judgment by the Court of Appeal befits the principles of the state of law, the precedents set by this judgment may be blocked under a parliamentary bill brought before the Turkish Grand National Assembly.

A provision proposed under the said parliamentary bill paves the way to add the payments made as reimbursements, as well as the court costs of all cases in regard to reimbursement of the cost of lost-electricity, to date, to new bills issued in the future and, therefore, collect them from the consumers. Under temporary Article 19 that is stipulated to be added to the Law, the provision that “the reimbursements and the expenses specified in the court judgments that have been made by the distribution company or the supplier on the basis of the judgment by the court and consumer arbitration tribunal, shall be realized through the distribution tariffs.” This provision does not comply with the abovementioned principles of law, and betrays the trust in the state of law.