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Cablegate: Additional Electricity Price Hikes to Hit Mission

VZCZCXRO3056
PP RUEHDA
DE RUEHIT #0495 2591535
ZNR UUUUU ZZH
P 151535Z SEP 08
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 8476
INFO RUEHAK/AMEMBASSY ANKARA 7930
RUEHDA/AMCONSUL ADANA 2378

UNCLAS ISTANBUL 000495

SIPDIS

EUR-IO/EX/PMO SHARON RUSSELL-NORDBERG
EUR-IO/EX/BUD CRISSY SOMMA

E.O. 12958: N/A
TAGS: ABUD AFIN AMGT ECON ENRG TU
SUBJECT: ADDITIONAL ELECTRICITY PRICE HIKES TO HIT MISSION
TURKEY IN OCTOBER

REF: A. ANKARA 11183
B. ANKARA 862

This is a joint Consulate General Istanbul/Embassy Ankara
report.

1. (SBU) The Turkish Electricity Trading Company (TETAS)
announced on September 3 that it will raise the electricity
sales price between internal electricity sales actors --
notably TETAS and the State Distribution Company (TEDAS)-- by
34 percent in October. This change will not immediately
affect consumers. In order to increase consumer electricity
rates, TEDAS will need to apply to EMRA, the electricity
market regulatory body. Analysts expect the price increase
to consumers will be about 10-15% starting October 1. While
passing along only part of the price increase to consumers
may be a good public relations strategy for the government,
it will likely lead to increasing debts for distribution
companies, the same entities the GOT has pledged to
privatize.

2. (U) This is the third electricity price increase the GOT
has announced since the beginning of the year. The first
increase came in January when electricity prices for
households increased 15% while prices for industry increased
10% -- as a result of inflationary accounting these increases
were reflected to consumers as 19.5% and 12%. In May, the
Higher Planning Council decided to adopt an automatic pricing
mechanism as of July 2008 (ref A.) The GOT introduced this
cost-based pricing mechanism to remove the state subsidy in
the sector and pave the way for private sector investment.
With the entry into force of this mechanism in July, the GOT
announced a second price increase of 21% for households and
22% for industry. Adding a possible 10-15% increase in
October to the previous two increases will amount to a total
electricity price hike in calendar year 2008 of 60-65%.

3. (SBU) These price increases will affect Mission Turkey.
A 15% electricity price increase effective October 1 would
increase Mission Turkey's FY09 electricity costs by USD
198,405 for ICASS and USD 51,023 for Program.
WIENER

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