Kazakhstan – From International Expertise To Local Innovation – Revisiting The Market Council.

In 2016, the Market Council in Kazakhstan was designated by the relevant Order of the Minister of Energy of the Republic of Kazakhstan as the Association of Legal Entities “Kazakhstan Electricity Association” (KEA). 

The Market Council was established for monitoring operation of electric energy and power market, as well as other functions foreseen by the Law. In particular, they:

1. monitor operation of electric energy and power market;
2. consider investment programmes for modernisation, expansion, reconstruction and (or) renewal of energy-producing organisations in accordance with the procedure established by the authorised body;
3. provide to the authorised body expertise on draft forecast electricity balance of electric energy and power for the forthcoming seven-year period;
4. make proposals to the authorised body on improvement of electric power industry legislation of the Republic of Kazakhstan;
5. perform other functions determined by the Ministry of Energy.

The status and activities of the Market Council are regulated by: 

• the Law “On Electricity” − the legislation regulates the concept of the Market Council, its functions, the competence of the Ministry of Energy to designate what kind of organisation is the Market Council; the competence of the Ministry of Energy to designate the Market Council functions not specified in the Law;  
• a number of by-laws − orders of the Minister of Energy of regulatory and legal nature −  by-laws regulate what kind of organisation is the Market Council; the procedure of Market Council activities; and
• internal acts of the KEA − regulate the internal procedures of the Market Council, e.g., the functioning of the Investment Programme Review Commission formed by the Market Council as part of its activities.

Based on the analysis of the legislation and internal acts of the KEA regarding to the Market Council, it can be concluded that the issues of the status and functioning of the Market Council need to be revised and fully regulated. Namely, at present, such requirements to the Market Council’s activity as the binding nature of its decisions, its equidistance from the subjects, independence, transparency and others are not ensured. 

Thus, the current internal acts of the KEA cannot replace the legislative regulation, since the acts of the KEA, in accordance with the Law “On Non-commercial Organisations” and the Charter of the KEA, are adopted, first of all, to ensure the protection of the interests of the KEA members, most of which are the subjects of the Energy Sector. 

The primary influence on the decision-making of the KEA bodies (General Meeting, Board of Directors, Chairman of the Association) and the Market Council (Presidium, Secretariat) is exerted by those members who constitute the majority of the total number of members of the Association; these are, first of all, power industry entities, not consumers or scientific and design organisations. At the same time, some of the other KEA members (research organisations, design institutes, educational organisations) indirectly depend on the industry players, as they are potential or current customers of their works/services.

Accordingly, the Concept of Development of the Electricity Industry of the Republic of Kazakhstan for 2023 – 2029 (approved by the Resolution of the Government of the Republic of Kazakhstan dated 28.03.2023) provides for the reform of the Market Council, including the broadening of Market Council functions.

The Concept stipulates that “To increase efficiency, a new model of the Market Council will be introduced based on the analysis of the local context, and best practices from international experience. The consolidation of specific functions of the Market Council in the national legislation, formation of a strong governance structure and culture of rules and procedures implementation, strengthening of decision-making authority of the organisation’s members, as well as the introduction of a dispute resolution (mediation) procedure for market participants will contribute to the effective performance of the Market Council’s duties.”.

The Concept for the Development of the Electricity Sector of the Republic of Kazakhstan for 2023-2029 includes a separate section 3.2 “Experience of Organisation and Functioning of Self-Regulatory Organisations in the Electricity Sector”.  The section studies the international experience of four self-regulatory organisations in the electric power industry − the Russian Federation, the European Union, the State of Texas in the USA (ERCOT − Electric Reliability Council of Texas), and the North American Electric Reliability Corporation (NERC). This experience was taken from the Kazakhstan Market Council Report, a new model TETRA TECH ES, INC prepared for the USAID (United States Agency for International Development) Central Asia Energy Project.

The Annex to the Electricity Sector Development Concept defines an Action Plan for the implementation of the Concept itself. According to the Action Plan, a separate area “Market Development of the Electricity Sector” is planned to reform the Market Council in 2023, including by the development of the relevant draft Law on Amendments and Additions to the Electricity Law by the end of the year.

At present, Unicase Law Firm is currently working under the assignment of TETRA TECH ES, INC for the USAID Central Asia Energy Project to develop proposals for the creation of a new model of the Market Council, which should meet the following basic requirements: 

• The status and authority of the Market Council should be strengthened and enshrined in legislation; 
• The Market Council should be a self-regulating organisation; 
• The Market Council should not duplicate the authority of a state body;
• Procedures for pre-trial settlement of disputes between market participants (mediation) should be established; 
• The work of the Market Council should be transparent; and
• Consumers and other stakeholders should be involved in the Market Council’s work and decision-making.

In conclusion, the reform and strengthening of Kazakhstan’s Electricity Sector Market Council present a tremendous opportunity to revitalise the nation’s energy sector. With a clear vision, dedication to international best practices, and collaboration between public and private entities, Kazakhstan can shape a modern, efficient, and sustainable electricity market, ultimately driving economic growth and prosperity for the country and its citizens.