Preparing Other Types of Electricity Market Contracts in Turkey

Electricity trading and supply are rarely governed by a single contract. In practice, market participants rely on a portfolio of agreements that allocate operational, regulatory, and financial risk across different layers of the value chain. This is where Electricity Market Contracts become strategically important: they translate market mechanics—metering, settlement, imbalance, network constraints, and credit exposure—into enforceable commercial obligations. This article explains how to approach the preparation of other common Electricity Market Contracts beyond standard retail supply terms, with a drafting mindset that improves predictability and reduces disputes.

1) Mapping the contract ecosystem

A high-quality drafting process starts by identifying which market function the agreement serves. Common categories of Electricity Market Contracts include:

• Bilateral Sale/Purchase Agreements (Physical): delivery defined at a meter point or balancing boundary, with settlement tied to measured energy.
• Financial/Virtual Power Purchase Agreements (vPPA): price-hedging via a contract-for-differences structure, usually without physical delivery.
• Balancing and Imbalance Allocation Agreements: rules for forecasts, deviations, tolerance bands, and settlement of balancing costs.
• Grid Connection and Use-of-System Interfaces: coordination clauses that reflect technical connection readiness and operational constraints.
• Ancillary Services / Flexibility Agreements: availability commitments, dispatch instructions, and performance measurement for grid support.
• Green Attribute Contracts: renewable attribute transfers, certification logic, and auditability of environmental claims.
• Agency/Brokerage Agreements: mandate scope, remuneration, compliance, and liability boundaries for intermediaries.

Each type has a different “risk centre.” Treating them as interchangeable templates is a frequent cause of litigation.

2) Status, authority, and compliance representations

Because electricity markets are regulated, contract enforceability often depends on whether the parties are legally able to perform their roles. Well-prepared Electricity Market Contracts should include clear representations on:

• corporate authority and signing capacity,
• licensing/authorisation status (where applicable),
• compliance with market rules, anti-corruption, and sanctions screening (if cross-border),
• data privacy and cybersecurity minimums (especially where metering/SCADA data is exchanged).

If a party’s status changes mid-term, the agreement should define the consequence: price adjustment, suspension, replacement, or termination.

3) Product definition, delivery concept, and metering logic

Electricity is “delivered” through measurement and settlement. Therefore, drafting should focus on operational definitions:

• Delivery Point (meter point, connection point, or balancing boundary)
• Measurement source (which meter, which data stream, which correction method)
• Finality rules (when data becomes binding, how disputes are raised, audit rights)
• Losses and pass-through items (network charges, losses, taxes, and how they are allocated)

In financial agreements (such as vPPAs), “delivery” may be replaced by a reference price and reference volume mechanism—this must be expressed with mathematical precision.

4) Pricing mechanics that withstand disputes

Pricing clauses should be drafted like a formula, not like a narrative. To strengthen Electricity Market Contracts, specify:

• price type (fixed, indexed, market-referenced),
• reference source and timing (hour/day/month),
• currency conversion and rounding,
• fallback rules if data is missing,
• invoicing schedule and dispute window.

Even small ambiguities—such as which “day” applies when the settlement calendar differs—can escalate into material claims.

5) Imbalance, forecasting, and curtailment treatment

Imbalance is the contract’s “stress test.” A robust clause design typically includes:

• forecasting duties and submission deadlines,
• tolerance bands and how deviations are priced,
• curtailment events (system constraints, emergency shutdowns, or third-party restrictions),
• rules on “deemed energy” (if used) and exclusions.

This section is essential because it determines whether commercial risk stays predictable when consumption or generation deviates from plan.

6) Credit support and collateral architecture

Electricity is continuous, so credit risk is continuous. Bankable Electricity Market Contracts usually include:

• security deposit, bank guarantee, or parent guarantee,
• margining or top-up mechanics for volatile exposures,
• defined credit events (late payment patterns, insolvency indicators),
• step remedies (request collateral → limit exposure → suspend → terminate).

The goal is to prevent termination from being the first meaningful tool.

7) Change in law, force majeure, and regulatory volatility

Electricity contracts are exposed to regulatory change. A well-prepared agreement should distinguish:

• Force majeure (performance impediments) with strict notice and mitigation duties,
• Change in law / regulatory change (economic impact) with pass-through or renegotiation mechanisms,
• tax or tariff reallocation rules, where relevant.

This is a key reason Electricity Market Contracts should not be drafted as generic “sales contracts.”

8) Remedies, termination, and transition continuity

Termination clauses should be operationally realistic. For supply-critical facilities, include:

• cure periods tailored to the breach type,
• suspension rights separate from termination rights,
• early termination payment logic (where commercially justified),
• transition cooperation: final reconciliation, data handover, and return of collateral.

This reduces the risk of abrupt supply interruption and chaotic end-of-term disputes.

Conclusion

Preparing other types of Electricity Market Contracts requires a system approach: identify the market function, convert operational rules into measurable obligations, and design pricing, imbalance, and collateral clauses that remain enforceable under stress. When drafted with this discipline, the contract portfolio becomes a risk-management framework rather than a dispute generator.