PROJECTS

Legal and Administrative Unbundling of the Electricity Sector in Azerbaijan

Client: Ministry of Energy of the Republic of Azerbaijan
Implementation Period: December 2023 – December 2024
Location: Azerbaijan

ACE Group Consultants successfully implemented a technical assistance project commissioned by the Ministry of Energy of the Republic of Azerbaijan aimed at supporting the legal and administrative separation (unbundling) of electricity generation, transmission, distribution, and supply activities. The project was implemented in collaboration with international partners CORREGGIONET, OMNIA, EGF Tervuren Consulting, and the Brussels Energy Club.

The assignment aligned with the strategic objectives of Azerbaijan’s power sector reforms and the implementation of the Target Market Model under the Electricity Law. The work was carried out over four key tasks:

1. Legal Framework Assessment
A comprehensive review of the existing legal, regulatory, and institutional framework governing Azerbaijan’s electricity sector was conducted. The outcome was the development of a Conceptual Report providing baseline analysis and laying the groundwork for drafting future legislation.

2. Drafting Key Legislative Acts and Statutory Documents
ACE Group developed multiple draft legal acts to facilitate the unbundling of Azerenerji OJSC and the establishment of new market structures. This included:

• Draft Decree of the President on improving electricity sector governance
• Draft Cabinet Decisions approving the structure and statutes of new entities:
  • "Electricity Production" OJSC
  • "Transmission System Operator" OJSC
  • "Market Operator" OJSC
• Draft Charter of the Market Operator
• Draft Action Plan on Legal and Administrative Separation
• Draft decisions establishing a Coordinating Council and sub-working groups to oversee reform implementation

3. Preparation of Standard Agreements and Regulatory Instruments
To support interim market operations prior to full legislative reform, ACE developed standard agreements regulating the relationships among market players, including:

• Balancing Agreement with a Balance Responsible Party
• Ancillary Services Agreement with a Balance Services Provider
• Distribution and Transmission Service Agreements with Independent Suppliers

These drafts were informed by international best practices, drawing on models from EU countries and regional neighbors.

4. Capacity Building and Strategic Advisory Services
In parallel, ACE provided ongoing consultancy and capacity-building support to the Ministry of Energy. Key outputs included:

• Draft Road Map for Power Sector Reforms
• Policy recommendations and infographics on market design
• Executive training programs held in Baku
• Advisory services on tariff design and regulatory independence
• An Interactive Online Workshop on implementing power market reforms

The project concluded with detailed recommendations and a phased roadmap for aligning Azerbaijan’s electricity sector with European standards, enhancing transparency, competition, and efficiency.