Wholesale energy market liberalized in Armenia: consumers can buy electricity from suppliers at an agreed price

In Armenia on Tuesday was discussed the "Program of the market liberalization and electricity trade", which was developed with the funds of a USAID grant. Thanks to this program, for the first time, market participants will be able to participate in setting prices (tariffs) for electricity and contribute to the harmonization of supply and demand.

Garegin Baghramyan, chairman of the Public Services Regulatory Commission (PSRC) of Armenia, said at the event that an electronic trading platform has been launched since February 1, which allows achieving a certain liberalization of the market.

"We are trying to move forward very slowly in order to minimize the risks for market participants and consumers, since all the regulations are new and certain problems may arise," he said.

G. Baghramyan noted that there are established transitional provisions for 2022: for example, generators will be allowed to enter the market in a very limited number. Consumers have the opportunity to join the market and choose a supplier.

"We already have the "first signs": 1-2 consumers have already left the sphere of regulation of Electric Networks of Armenia CJSC (ENA). One consumer has selected  supplier and buys electricity directly from him. The other has received the status of a qualified consumer and independently participates in the purchase electricity at this electronic platform," he said.

The head of PSRC said that the status of "qualified consumer" means a player who is an independent entity in the wholesale market, can select an electricity producer and purchase at prices based on contracts.

According to G. Baghramyan, if earlier the ENA performed two functions - distribution and sale of electricity - then from now on the option of selling is liberalized. He said that there are already about 6 licensed supplier companies that, without regulated prices, can find consumers and sell them electricity on a contractual basis. Bagramyan clarified that there are requirements for consumers: they must use a voltage of 110-220 volts, and the annual consumption should be over 1 million kWh.

In turn, the Minister of Territorial Administration and Infrastructures Gnel Sanosyan said that in order  to avoid force majeure for the processes in the market and unstable situations, changes are introduced in stages.

"What we have planned to implement is going quite well. There is amount of activity, companies operating in the field and individuals express interest, they learn, begin to master the rules of the sphere. This activity allows us to say that this process will be established as a tool and contribute to our energy security and development of the sphere," he said.

G. Sanosyan stressed that this process can lead to a fair distribution of the cost of the tariff.

USAID Mission Director in Armenia John Allelo said that if Armenia manages energy resources properly, it will be able to provide citizens with proper services and attract more investments in this area.

"We believe that the country has taken all important steps to stimulate competition, ensure system stability and attract investment in the electricity sector. Market regulation ensures transparency and accountability in the energy sector, provides energy supplies and infrastructure that will be used by the citizens of Armenia," he said.

D. Allelo noted that the US is helping Armenia in the field of long-term energy planning.

About the program

Globally, the process of liberalization of the Armenian energy market began in 2018 and is currently at its final stage. For its implementation, USAID provided Armenia with  $8.5 million grant.

The goals of the program are to support the Armenian government in reforming the electricity market, work on simplifying regulatory practices in Armenia, taking into account EU directives, promoting the creation of an investor-friendly environment to increase competitiveness, development of the electricity industry and regional trade.

The activities of the Program for Liberalization of the Market and Electricity Trade are carried out in three key areas: the development of the electricity market, the diversification of supplies and the promotion of interstate electricity trade with Georgia.

Also, from February 1, 2022, a gradual transition to a new model of the electricity market began in Armenia. The goal is to create the necessary legal and economic prerequisites for the liberalization of the Armenian electricity market and the introduction of competitive components.