Composition of the First Chamber

Konstantine Vardzelashvili – Chairman of the Hearing

Besarion Zoidze – Member, Judge Rapporteur

Vakhtang Gvaramia – Member

Secretary of the Hearing: Lili Skhirtladze

Title of the Case: Citizens of Georgia Shalva Natelashvili and Akaki Mikadze v. Georgian National Energy Regulatory Commission (GNERC)

The subject of the dispute – Constitutionality of Resolution No.1 of the Georgian National Energy Regulatory Commission (GNERC) dated January 17, 2006 (amended on 29^th of October, 2006 with the Resolution No.32 of the GNERC) “On Approval of the Temporary Rule of JSC “Georgian United Electricity Distribution Company” for Metering of Electricity with Collective Use Meters used by Customers without Individualized Meters” with respect to Article 30, paragraph 2 of the Constitution of Georgia.

Participants of the Oral Hearings: held on 11^th , 22^nd and 26^th of January, 2007: Claimant Shalva Natelashvili and his representatives Marine Tsutskiridze; Claimant Akaki Mikadze; Representative of the Respondent – Georgian National Energy Regulatory Commission (GNERC) – Head of the Legal Department Tamaz Inashvili, Head of Technical Division of the Electricity Department Ilia Nakashidze and Chief Lawyer – Zurab Vanishvili; Witnesses – Independent Public Defender of the Consumers’ Interests of the Georgian National Energy Regulatory Commission David Mikautidze and representative of JSC “United Distribution Energy Company of Georgia” Zurab Bekaia; Specialists – Associate Professor of the Technical University of Georgia Konstantine Tsereteli.

The Claimants state in their constitutional claim, that the impugned Resolution of the Georgian National Energy Regulatory Commission sets forth a temporary rule for metering of the electricity with collective meters used by Customers without individual meters in the coverage area of JSC Georgian United Electricity Distribution Company. In the opinion of the Claimants, the impugned Resolution violated their consumers’ rights enshrined in the Constitution, as the collective meters are not apt to meet consumers’ interests not only due their quantitative and qualitative properties, but also from the perspective of a stable supply of electricity. Inconsistency of this type of charge with the consumers’ interests originates from the fact that only spatial criteria cannot determine the quantity of the consumed electricity. In the opinion of the Claimants, the impugned Resolution enacts unfair differentiation of consumers’ interests, unduly burdens the claimants and those residents, who own several homes, though do not use them regularly. This fact violates the principle of equality in law, as small families are unduly burdened compared with the large families.

The Claimants assert that their rights are violated also due to the fact that the Electricity Distribution Company is the only supplier of electricity in their district, that is, it holds monopoly, and they are compelled to subscribe to the supply contract. Thus article 30, section 2 of the Constitution is violated, which states: “The state shall be bound to promote the development of free entrepreneurial activity and competition. Monopolistic activity shall be prohibited except for the cases permitted by law. The rights of consumers shall be protected by law.”

The original subject of dispute of the constitutional claim was Resolution No.1 of the Georgian National Energy Regulatory Commission dated January 17, 2006 as amended on 31^st of March, 2006 with Resolution No.13 of the Georgian National Energy Regulatory Commission. The Claimants determined the subject of dispute at the court session and applied for review of the constitutionality of the same normative act as amended on 29^th of October, 2006 with Resolution No. 32, pursuant to which the term of validity of the impugned resolution was extended until October 1, 2007.

The Claimants declared that it is unclear, until when the validity of the impugned “temporary rule” will be extended, as the installation of individual meters is being implemented slowly.

Therefore the Claimants assert that the impugned Resolution should be considered unconstitutional and declared invalid.

The representatives of the Respondent, the Georgian National Energy Regulatory Commission, state that the impugned Resolution should not be declared unconstitutional for the following reasons: JSC Georgian United Electricity Distribution Company, in respect to which the impugned Resolution was adopted, supplies electricity to more than 6000 consumers in this country, the majority of which have dysfunctional meters, or have no meters at all. The crisis in the energy sector in 2002-2004, impediments in supply of electricity to the regions, and difficulties in recovering charges in arrears for supplied electricity all serve as grounds for adoption of the impugned Resolution. Such a state of affairs violated consumers’ rights and the Energy Company was close to bankruptcy. The functionality and development of the energy sector in general was endangered. Therefore, in the existing reality, normalization of the metering of consumed electricity had become a priority for developing the energy sector. In the first stage, installation of communal meters was implemented and at the same time installation of individual meters was started. These activities improved conditions for consumers who are now provided with uninterrupted electricity for 24 hours; at the same time the income of the energy company increased.

According to the representatives of the Respondent, the circumstances referred to by the Claimants, such as, termination of electricity supply for all consumers due to non-payment of electricity charges, ignoring the information fixed by individual meters, etc are not caused by the impugned Resolution. The Georgian National Energy Regulatory Commission enquires into these offences on a daily basis and often makes decision to impose administrative penalties for these offences to the Energy Distribution Company. In the opinion of the representative of the Respondent, these problems are caused by violation of the requirements of the impugned Resolution, not because the Resolution itself is unconstitutional.

The witness Zurab Bekaia explained to the Court, that due to the critical situation existing in the energy sector of Georgia, the regions of Georgia were not supplied with electricity. In this situation the headquarters of JSC Georgian United Electricity Distribution Company, with the support of the Government, took steps to handle the problem and started to install so-called “communal meters”. The positive result that followed is that nowadays regions of Georgia have 24-hour electricity supply. The installation of collective meters resulted in a significant increase in recovery of arrears for the consumed electricity. However, installation of communal meters was only the first stage, and installation of individual meters had also been commenced.

The witness David Mikautidze stated, that the method of communal metering was employed for transitional period. At the same time, a number of negative and faulty traits of the system were revealed in the process of metering and accounting. He, the public defender of the consumers’ interests, was addressed multiple times. The population complained of violations of accounting rules, of termination of electricity supply for both consumers who paid for consumed electricity and for those who did not pay, etc.

Konstantine Tsereteli, the specialist, explained to the Court, that electricity metering with collective meters used by customers without electricity meters was carried out according to the impugned normative act. Under article 5 of the impugned Resolution, the quantity of consumed electricity fixed by the collective meter is allocated among the customers without individual meters according to the agreement between them. If there is no such agreement, the quantity of electricity consumed by a customer is determined pursuant to article 6 of the impugned Resolution. The method employed here is an assessment method, which determines the consumed electricity according to the presumable quantity of electricity that might be consumed by electrical devices (electrical stove, water heater, air conditioner, washing machine, etc enlisted in the appendix of the impugned Resolution).

Based on the examination of the merits of the case and analysis of the information in the constitutional complaint, the speeches of the parties to the constitutional litigation, testimonies of the witnesses, reports of the specialists and written evidence in the case, the First Chamber of the Constitutional Court made the following findings, crucial for the decision:

I. Resolution No.1 of the Georgian National Energy Regulatory Commission dated January 17, 2006 on Approval of the Temporary Rule of JSC “Georgian United Electricity Distribution Company” for Metering of Electricity with Collective Use Meters used by Customers without Individualized Meters sets forth the rule for metering of the electricity consumed by Customers who have no meters. The first Article of the “temporary rule” approved by the Resolution states, “1. The temporary rule for metering electricity with collective meters used by Customers without individualized meters determines conditions of metering of electricity consumed without fixation on individualized meters in the coverage area of JSC Georgian United Electricity Distribution Company. 2. The present rule shall not be applied to the category of consumers, who have duly functioning individualized metering devices.”

Pursuant to article 2, section 1 of this Rule, “consumed by customers without individualized meters” is construed to mean “consumption of electricity, when there is no meter, or the meter is technically malfunctioning.”

Thus, in reviewing the constitutionality of the impugned Resolution, the Constitutional Court has to assess rights of “consumers without meters”, and the issue that shall be ascertained is whether the rule that determines the quantity of electricity metered by communal meters is consistent with article 30, section 2 of the Constitution of Georgia.

The impugned Resolution was adopted for finite period. That is why, the Resolution enacts a “temporary rule”, which points to the fact that the Resolution does not purport to enact the final system for metering of consumed electricity, which duly balances the interests of the parties. It presents a transitional method in the process of installation of meters to consumers. Therefore, a consumer, as well as supplier, has recognized the temporary nature of this measure. The population has the expectation that the inconvenience related to this rule will be ended soon.

The first version of the impugned Resolution (Resolution N7) was adopted by the GNERC on April 6, 2005 and it should be valid until December 31, 2005. Later, on 17^th of January, 2006 GNERC extended its validity period until 31^st March, 2006. Afterwards the impugned Resolution was amended twice and its validity period was extended twice: first on 31^st of March, 2006, with the Resolution N13, validity period was extended until 1^st of October, 2006, and second on 29^th of September, 2006 with the Resolution N32 - until 1^st of October, 2007. In response to the progress of the process of installation of individual meters, the scope of application of the Resolution is gradually reduced.

The Constitutional Court shall ascertain the positive and negative implications of the impugned Resolution for both, rights of consumers and rights of Energy Company.

II. The Chamber states, that protection of consumers’ rights does not constitute a uniform legal matter. Its substance is determined with both private and public legal rules, which contain various enactments, which bind different subjects, including the state.

Article 30 of the Constitution of Georgia recognizes the constitutional importance of protection of consumers’ rights. The provision, stating that law protects these rights, implies their protection according to constitutional principles and international standards. The Law of Georgia on Protection of Consumers Rights, the precise substance of these rights aims to ensure that consumers are supplied with quality products, including goods, services and utilities. According to the good practices of international law, consumers’ rights embrace consumers’ right to security, choice, discussion, consumers’ education and legal remedies. Rights of consumers in respect to consumption of electricity, as a good, are granted special protection in the Law of Georgia on Electricity and Natural Gas.

In the present case, enjoyment of the rights of consumers at stake is contingent on the economic strength of a state. Under article 2 of International Covenant on Economic, Social and Cultural Rights, “Each State Party to the present Covenant undertakes steps, individually and through international assistance and co-operation, especially economic and technical, to the maximum of its available resources, with a view to achieving progressively the full realization of the rights recognized in the present Covenant by all appropriate means, including particularly the adoption of legislative measures.” As to the scope of limits of the rights, article 4 of the Covenant states: “The States Parties to the present Covenant recognize that, in the enjoyment of those rights provided by the State in conformity with the present Covenant, the State may subject such rights only to such limitations as are determined by law only insofar as this may be compatible with the nature of these rights and solely for the purpose of promoting the general welfare in a democratic society.”

The Chamber states that nowadays unification and harmonization of the laws related to protection of consumers’ rights have been implemented. The acts adopted by the institutions of the European Union aim to protect a consumer, as a weak party in the market relationships, from the unfair terms proposed by the strong party. In this respect, state intervention to ensure fair and regulated civil turnover is a constitutionally justified undertaking. Considering complicated market relationships, the state cannot step aside from this process. This circumstance points to the process of constitutionalization of private law. Whereas the normative terms of civil turnover violate the balance between the interests of the participants, the private-law regulation of relationships may be viewed from the standpoint of constitutional rights. The German Federal Constitutional Court declared in the judgment on Luth case (BVerfGE 7,198, Judgment of German Federal Constitutional Court, 7,198), that the state is obliged to respect striking a fair balance between the interests of parties to a contract. In later judgments, the Federal Court denounced the inequality entailed by commercial power and ruled in favor of restoration of fundamental rights.

All the aforementioned underscores that consumers’ rights, rendering the most significant value of free and orderly civil turnover, present an object of constitutional protection. Each normative act concerning rights of consumers shall protect them from a stronger counterpart and set forth conditions for balanced and peaceful coexistence of interests.

Thus the constitutional positive obligation of the state is to protect consumers from the unfair power of third parties. A state which fails to meet this obligation, therewith commits a rights violation itself. In any case, to achieve a positive effect in this respect, a state shall apply the most reasonable and the most justified means at its disposal.

Thus, the state is obliged to provide a consumer with the most affordable means for the exercise of their rights, available within the power of the state. For this purpose the state shall be guided by certain principles. It is not authorized to propose to a consumer the means for utilization of certain goods, which would deprive the consumer the possibility to use them, instead of providing opportunity to use these goods. When adopting a normative act, which imposes certain restrictions (including temporary restriction) and terms on utilization of goods, the legislator is obliged to duly research all the circumstances and based on the research, to set forth clearly the restrictions and set a reasonable validity period. Enacting specific rules, which restrict the free choice of a consumer or impose unfavorable terms, may be justified in case, when there is no other means available for utilization of the goods.

According to the principle of proportionality, activities of the state pursuing a certain aim shall be admissible, necessary, causing the least harm and the restriction of a right shall be proportional to the aim of a restriction.

The Constitutional Court takes into consideration the requirements of this principle, when assessing constitutionality of the impugned normative act.

III. When assessing the necessity of enactment of the impugned normative act, its aims shall be identified. It is expressed in the preamble of this normative act, that “the Temporary Rule” was enacted for the purpose of ensuring recovery of arrears for supplied electricity by all categories of consumers of JSC Georgian United Electricity Distribution Company and metering of the electricity consumed by Customers who have no individual meters via communal meters. Though not stated explicitly in the impugned normative act, it was ascertained in the process of litigation, that it is linked with the total installation of individual meters which is why it has temporary character.

It is ascertained from the materials of the case that the solution of the problem of metering consumed electricity constitutes one of the basic problems in the energy sphere. When the measurement point is malfunctioning, mass embezzlement of electricity takes place, which affects negatively the interests of both the consumer and the supplier. Pursuant to article 28, section 1 of the Law of Georgia on Electricity and Natural Gas, a licensee is obliged to meter the total amount of electricity that was transmitted through its facilities and to make this information accessible. Pursuant to article 36, section 3, clause “d”, allocation licensee is obliged to provide consumers with allocation services, according to the rules adopted by the commission and investment program of the licensee.

Settlement of measurement implies installation of a functioning individual metering facility (meter) to each consumer, a process that requires relevant financial investment and is implemented gradually. Installation of communal meters is related to this process and presents a temporary measure. The former director of JSC Georgian United Electricity Distribution Company, David Sornton states in the letter (N241/22-6) sent to the Chairman of Georgian National Energy Regulatory Commission, that installation of communal meters was a temporary measure forced by the Government of Georgia (that should be implemented prior to total installation of individual meters), in order to settle the metering of electricity and to reduce loss of electricity to the extent possible.

Thus, the installation of individual meters is implemented under the scope of a special program and it requires a relevant and reasonably necessary timeframe. In any case, the state is authorized and obliged at the same time to set forth certain rules to regulate electricity supply, as electricity presents a vitally important good for people. Social justice requires that goods as important as this, shall be equally available for its consumers.

Therefore, it is in the interest of a state to supply the population with electricity and to meter it within the limits of its possibility before the process of installation of individual meters is finished. Regard should be given to the fact that temporary transitional rules constitute certain necessity for novel regulation of the social relations in particular cases. At the same time, it is mandatory, that any measure (regulation) concerning constitutional human rights does not contradict the Constitution. The temporary or permanent character of the act is not relevant in this respect. In any case, the means employed to pursue a certain aim shall be optimal and fair. The contrary principle, asserting that the ends justify the means is inadmissible.

IV. When we say that the state is obliged to settle the issue of electricity supply, it means that the state shall also set forth a mechanism for supply, in the present case metering of the consumed electricity, which will be the most expedient for the situation at present. The impugned Resolution of Georgian National Energy Regulatory Commission, as it was mentioned, proposes to consumers employment of communal meters alongside individual meters.

It is declared in article 5, section 1 of the “Temporary Rule”, “If there is written consent of all consumers without meters, who use communal meters, the allocation among the consumers of the quantity of electricity fixed by the communal meters (without the technical losses) shall take place according to the agreement of the parties, except the case of three-phase electricity consumers, which shall dispose with functioning individual metering device and the electricity consumed by them shall be subtracted from quantity of electricity fixed by the communal meter.”

It is clear from aforementioned that communal meters are employed with the volition of the consumers. According to the specialist’s explanation, the quotient of electricity fixed by a communal meter will be allocated among the consumers as it was agreed between them. Consumers shall agree beforehand on the way of allocation of the consumed electricity (i.e. equally or percentage). The agreement shall be presented to the Energy Company, which will implement allocation of the consumed electricity among the consumers accordingly.

This shall not be understood as if the consumer, independent party in the relationships with the Energy Company, vanishes and is swallowed up by a collective, such as consumer’s groups. The same is clear from the content of the impugned act and its certain norms. Alongside groups of consumers, a certain consumer still presents a person vested with a number of rights and duties and the Energy Company is accountable to and can bring claims towards this person.

A consumer without a meter, who refuses the terms stated in article 5, is provided with other chances to have access to electricity. Even in this case consumed electricity is measured by a communal meter. The rule of its calculation is stated in article 6 of the impugned act.

It is clear from that stated above that a consumer has two ways for measurement of consumed electricity fixed by a communal meter.

It is noteworthy, that none of these methods grant a possibility for full protection of consumers’ rights. On the contrary, using them, a consumer may appear disproportionately burdened. This is clear from the temporary character of the impugned Act and from its practice. Originally principles of consumers’ equality and fairness was underscored in the “temporary rule”, whereas the Act currently in force does not mention them, the fact that underscores the above finding. Thus, it was admitted by the rulemaking authority, that the Act could not ensure equality for consumers.

Consequently the issue raised is whether there is an alternative way for measurement of consumed electricity, which would be most favorable to consumers.

V. The fact that employment of a communal meter is not the only method for measurement of consumed electricity shall be taken into regard while assessing the impugned Act. A consumer is not deprived a possibility to use individual metering device (meter). As soon as an individual metering device is recognized as functioning by the Energy Company, a consumer does not fall within the scope of the impugned Act. Pursuant to article 4 of “Temporary Rule”:

“1. If there is an application of a consumer, the Company is obliged to check within a month from the moment of application functioning of an individual metering device and to give a document certifying functioning or malfunctioning of an individual metering device... After the examination of an individual metering device, when the device is functioning, the consumer falls beyond the scope of regulation of the present rule and the Company is obliged to charge a consumer for consumed electricity according to the data fixed by individual metering device.

5. In case a consumer (or consumers) applies to the Company for examination or functioning of an individual metering device and within one month the consumer is not provided with a well-founded response in writing on malfunctioning of the device (except when there is no stamp present), it shall be presumed, that the electricity metering device is functioning.”

It is clear from the aforementioned, that prior to installation of individual meters to the total population, each consumer has a right to employ functioning individual device. Moreover, a consumer is protected from the Energy Company, as there is a presumption that a device is functioning in case the Company fails to meet its obligations. When a meter is malfunctioning, a consumer can repair it or install a new one. Considering the purposes of the impugned Act, the Energy Company is obliged to assist a consumer in this.

It shall be stated so far, that communal meters present an alternative to individual meters. It is impermissible that Energy Company arranges relationships as if individual meters present alternative to communal meters. Such an understanding of the impugned Act is essentially at odds with its temporary character. It is evident from the case materials, that all the efforts of the Energy Company are directed to ensure employment of communal meters and intentionally obstruct employment of individual meters. This may be named as an undue approach to implementation of a normative act. Despite this fact, the Chamber states, that any term proposed by the state shall be fair.

Thus, consumers are not normatively restricted to employ a method of metering of consumed electricity, which is most acceptable to them. Despite this fact, the finding does not suffice to ascertain whether the impugned Act is constitutional.

VI. According to the article 5 of the impugned Act, employment of communal meters is carried out with the consent of consumers. In this case, in assessing the constitutionality of an impugned act, the Court shall identify the essence of normative coercion. It is evident from the impugned Act, that a consumer employs a communal meter exclusively if there is a written consent thereof. Apparently, employment of a communal meter can appear to be burdensome for some consumers. However, it shall be noted, that when a consumer gives consent, he acknowledges and takes the risk. It shall be regarded that when a legislator adopts a rule to regulate a positive relationship, it is intended for a bona fide consumer. The legislator presumes, that consumers employing communal meter will act conscientiously. Consumers themselves are guided by the same presumption. However, due to the impugned Act, even in the case of outwardly good faith, disproportionate burdening in electricity consumption is inevitable, as the Rule itself sets objective ground for putting the burden of one consumer on others.

Thus, in case of employment of a communal meter, on one hand, a consumer may carry extra burden due to a mala fide consumer and on the other hand, even if all the consumers act conscientiously, the extra burden is inevitable due to the normative rule on allocation of the burden related to consumption of goods. Consequently, the present rule on consumption of goods objectively causes unequal allocation of liability within one party of the relationship. Therefore, this rule on measurement of consumed electricity shall not be declared to be flawless.

The question raised is whether such a temporary normative rule shall persist? It would be unjustified had the consumer been a victim of coercion to employ a communal meter, which would have excluded a possibility of expression of consumers free will. Consent of a consumer referred to in a normative act, would lack any significance, if he were not granted a possibility to use alternative way for realization of his rights, in case he refused employment of a communal meter. Otherwise, a consumer would employ the communal meter not at its will, but due to the normative act. This situation would be detrimental to the freedom of civic turnover and would transform into fiction respect for free will of its participants.

It shall be regarded, that there are number of goods, which makes it objectively impossible to individualize a burden strictly proportionately to their consumption. Therefore consumers may agree that their liability will be disproportionate to their differing consumption.

However, even if this is carried out at free will of the parties, the state is still obliged to assess these facts of contractual relationships from the perspective of fairness and it shall prevent situations in which, consumers at their free will are made to take disproportionately grave risk. The risk shall be assessed (ascertained) within the lawful realm, as no one is obliged to determine the content of a contract after the presumable actions of mala fide counteragent. If this latter approach is taken, it may even disrupt civic turnover. In the present case, when assessing the employment of communal meters, the Court is normally guided by the content of its normative character. The subjective approach of a consumer may not be applied as basic criteria for assessment. Behavior of an addressee cannot change its substance. Disproportionate burden related to the employment of communal meters is even aggravated due to the acts of mala fide consumers. It was revealed in the course of litigation that consumers were concerned by this fact. In this situation one reason of violation of consumers’ rights is related to their non-conscientious acts; otherwise, parties to the agreement agree to carry the risk related to conscientious consumption.

Thus the disproportionate burden carried by a consumer is objectively determined not merely by the impugned Act, but also by the action of consumers. When a rule sets forth the possibility of certain actions, it does not mean that these acts shall be carried out unconscientiously. In contrast to traditional cases of contractual coercion, when the normatively defined terms cause unfair outcomes, in the present case the situation is aggravated by non-conscientious exploitation of the provided means. If there were not this latter practice, it is probable that disproportionate burdening that is present would be far less grave. It is evident from the discussions of the case that some consumers do not consume electricity economically and the outcomes caused by their non-conscientious actions are allocated among conscientious consumers. This fact also points to the isolation of a consumer from the agreement. When the agreement cannot achieve its goals, a consumer can terminate the agreement and alternatively realize its needs via installation of individual meters pursuant to article 6 of the impugned Act.

VII. In the present case, we have to deal with the specific situation of restriction of consumers’ rights. In this case, consumption of goods may entail unfavorable burdening of a consumer. The Claimants consider that this is the reason for invalidation of the impugned Act. This will raise a new question for the Court: how invalidation of the Act will affect consumers – will it cause more efficient protection of its rights, or on the contrary, will it reduce the guarantees for protection of these rights. The answer to this question depends on alternate measures that a state will implement in the present situation. It was ascertained during the trial, that it was practically impossible to propose better measures, than those set forth in the impugned Act. The responses of the Claimants also evidence that only individual meters are alternative measures to employment of communal meters for electricity, as it is stated in the impugned Act. The state actually promised to install individual meters gradually and proposed a rule envisaged in the impugned Act meanwhile.

The allegations of the Claimants, that if the impugned Act is invalidated, all consumers will be entitled to use individual meters that all of them have at present, is not persuasive for the Court. In respect to the statements of the Claimant, it shall be noted that the Court is not informed on the accuracy of this fact. Even if it is so, a meter shall be functioning in all cases. According to the information presented by the Representative of the Respondent, it is probable that a significant portion of these meters are malfunctioning. This fact was confirmed by the witness David Mikautidze. He stated that prior to installation of communal meters, certain portions of individual meters were not functioning. In this case if the meter does not appear functioning and the consumer cannot buy a new one, he may have no access to electricity. Right to use individual meters is available at present and a consumer can exercise it. Installation of communal meter will not obstruct him. The only effect of invalidation of the impugned Act will have is that a only one option will be available, to have a functioning individual metering device. If the impugned Act grants a freedom of choice, in case of its invalidation, he will not have this chance.

Thus, declaration of the impugned Act unconstitutional is not the optimal method for protection of consumers’ interests, who present weaker party, as that only flawless and most fair way is related to individual meters, which shall be installed to total population within the scope of the relevant project.

All the aforementioned oblige the state to exhaust all the normative efforts in order to establish the flawless rule for the protection of rights. The state obligation in this respect is terminated at the point of impossibility of its implementation.

VIII. Allegation of the Claimants, that their rights are violated due to their inability to choose Energy Company which would supply electricity, is not persuasive. They assert that JSC “United Distribution Energy Company of Georgia”, as the sole electricity supplier, leads monopolistic activities, due to which they automatically become its consumers.

The Chamber notes that a consumer presents a weak party of the contractual relationship in this case and he is protected from the strong party not via his freedom of choice of a supplier, but via guarantee that it cannot abuse its power. Each participant of a civic turnover, whether it is a formal or factual monopolist, whether it has a dominant position in the market or not, is obliged to propose to a consumer fair contractual terms. In the present case, due to the specificity of constitutional rights, it is groundless to look at the freedom of choice of the party to the contract in order to identify the violation of these rights. As the price and rule of measurement of electricity is normatively regulated, any Energy Company would be obliged to abide with these rules. Therefore it could not entail any significant change in consumers’ rights.

IX. The trial and materials of the case evidence that JSC “United Distribution Energy Company of Georgia” totally ignored the impugned resolution and violated its almost every article. Based on this fact, that Court considers that basic reason for discontent of consumers is related to the process of application of the impugned Act. Claimants, as well as representatives of the Respondent pointed to this fact. Moreover, the materials of the case evidence that the Respondent itself is main opponent in respect of abiding by the Energy Company with the rules of the impugned Act.

It is evident from the materials of the case, that hundreds of consumers applied with complaints to different establishments, including the Parliament of Georgia and Government of Georgia, GNERC, public defender office of consumers’ interests, Public Defender of Georgia, ordinary courts. In spite of this, in certain cases the situation had been aggravated instead of improved.

Failure to abide by the impugned Act by JSC “United Distribution Energy Company of Georgia” was considered by GNERC several times. GNERC adopted on this issue Decision (N11/1) dated July 15, 2005, Decision (N28/1) dated December 28, 2005, and Decision (N21/1) dated August 9, 2006. It is evident from the content of these decision, that the Energy Company did not take seriously the decision of GNERC. It was also confirmed that the Energy Company continues violation of the basic provisions of the impugned Act. It is clear from other materials of the case (Extracts from the Minutes No. 14 of the Session of GNERC dated 15 July, 2005 and the Minutes No. 21 of the Session of GNERC dated 9 August, 2006; the Act dated April 1, 2006 of Kutaisi Service Center of JSC “Georgian United Electricity Distribution Company” on Examination of the Implementation of “Temporary Rule of JSC “Georgian United Electricity Distribution Company” for Measurement of Electricity with the Collective Use Meters consumed by Customers without Individual Meters” approved by Resolution No.1 of GNERC dated January 17, 2006; Explanatory Note of the Public Defender of Consumers Rights on Process of Implementation of the Resolution No. 1 dated January 17, 2006 and Resolution N13 dated March 31, 2006 of the GNERC, etc”) that the Energy Company ignores the requirement of the impugned Act. The Energy Company does not take efforts to register individual meters and even if they function, it does not subtract electricity quotient fixed on it from the quotient fixed by communal meter. For example, one of the consumers, who has two bulbs and a TV was charged with 417 Lari according to the data fixed on the communal meter, while his individual meter fixed consumption of 126 watt-hour for four months period. Even if there is no written consent of a consumer the communal meters are still employed, which points to coercive application of the impugned Act to consumers; arrears are improperly charged, loss of electricity in the distribution net is not subtracted from the quantity of electricity fixed by communal meters; if several consumers fail to pay the charges, electricity is cut for all the consumers, etc.

Electricity cut on the grounds of non-payment of fees, regulated under article 10 of the impugned normative act, states, “To cut supply of electricity to a consumer on the grounds of nonpayment of charges shall not be conducted at night, on weekends, on official holidays or days before them.”

The Constitutional Court declares that the distribution Energy Company misinterpreted this rule, taking an incorrect approach, that groups, not individuals are its consumers and electricity is supplied and terminated to all of them. Moreover, if the electricity cut is carried out, in spite of the fact that majority of consumers have paid the fee, it is inadmissible and essentially contradicts the character of liability and moderate allocation of risks. Each consumer is an independent counterpart and each shall be independently liable for non-payment.

Pursuant to article 26, section 3 of the Law of Georgia on Electricity and Natural Gas, electricity may be cut if the consumer does not pay charges. In its Decision No.28/1 on Implementation and Execution of the Resolution of GNERC No.7 of April 6, 2005, and Resolution of GNERC No.18 of August 4, 2005, GNERC construed this article according to the Law and ordered JSC “Georgian United Electricity Distribution Company” to secure electricity cut for individual non-paying consumers. Thus the Energy Company is obliged to use lawful and available ways to individualize liability and not to hold the whole villages hostage. Such a collective liability may not be justified by the statement of a witness Zurab Bekaia, that individual liability increases costs. The Energy Company shall regard the fact that negative risks related to the impugned rules are not carried solely by a consumer. It is unlawful to transfer risk to another person. If somebody does not pay the electricity charges or steals the electricity in other unlawful way, the Energy Company is entitled to employ the legal sanctions against them.

It is evident from the aforementioned that Distribution Energy Company grossly ignored the requirements of the normative Act and continues to violate it, despite of several notices. This fact isolates one of the subjects of the normative act from its application. In this case, the very subject, determining the adoption of the normative act, violates itself almost all the provisions of this Act. This fact casts suspicions on the determination of the Energy Company to consider the interests of consumers and not to consider them just as means for recovering charges in arrears. Such an approach to implementation of a normative act and to consumers is essentially at odds with the state policy of energy security and the State’s goal of establishing regulated civic turnover. This is a bad example for other companies in the same field, in respect of which analogous normative acts were adopted. These actions make the Energy Company look more unconscientious than a consumer that is driven to act unconscientiously due to the utmost poverty.

In the present case, violation of the consumers’ rights is also caused by the fact that the impugned Act is not duly explained to the people. Without explanation, people could not form the opinion to use the most acceptable option. This fact contradicts the essential principle of protection of consumers’ rights, the obligation to provide the consumer with information.

The Court Chamber declares that the State is obliged to secure normative, as well as empirical order in the country. In the present case, it is obliged to save electricity civic turnover and to prevent the disorder that is present in the field of activity of this Energy Company.

X. The Constitutional Court states that there is a danger that the impugned Act will lose its temporary character. From the moment of application to the Constitutional Court up to this date GNERC prolonged its validity several times. The term of validity of the impugned Act points out, that after this term expires, the Act is invalidated and thus, the Energy Company cannot use the collective meter for the reasons set forth in this Act.

The Chamber deems that in the present case that the definite validity period of the impugned normative Act is set forth in order to create an illusion that the Act is of a temporary character and after expiration of the period, it will be invalidated; the Court cannot exclude that the irresponsible approach to the rulemaking process might be present here. The First Chamber of the Constitutional Court declared in its Decision (No.1/3/301) dated March 23, 2005 that it is a constitutional obligation of the rule maker to take a responsible approach to the rulemaking process. It was stated in the decision, that “...A normative act shall be adopted with due regard to all the necessary circumstances.”

It was evident from the litigation before the Court, that it is likely that validity period will be prolonged again. Disproportionate burden imposed on a consumer will be more painful, the longer the consumers will have to carry it. Moreover, even an admissible and necessary burden changes its qualities and transforms into inadmissible burden due to protraction of time.

Thus, the unreasonable prolongation of validity of a temporary normative act will result in violation of consumers’ rights. It also disrupts the legislative order, the significant quality of which is ability to confide in rulemaking will. Disruption of the order negatively affects the human lives and causes their estrangement from state institutions.

The Constitutional Court declares that the assessment of constitutionality of the impugned Act is based solely on the will expressed in it and not on the probability of its validity prolongation. In this case, the Court is obliged to notify GNERC on measures which will cause full transformation of the impugned Act, due to which it will lose temporary character and will pose real threat for violation of consumers’ rights.

Based on the aforementioned, the Constitutional Court considers that the Resolution No.1 of the Georgian National Energy Regulatory Commission (GNERC) dated January 17, 2006 “On Approval of the Temporary Rule of JSC “Georgian United Electricity Distribution Company” for Measurement of Electricity with the Collective Use Meters used by Customers without Individual Meters” does not violate requirements of article 30, section 2 of the Constitution of Georgia, as a temporary normative act, valid for a definite period of time.

Moreover, the Constitutional Court considers it to be of crucial importance and additionally underscores the following obligations of the competent bodies: on one hand, the content of this Act shall be reviewed from the perspective of consumers’ rights protection and recover the flaws, which were revealed during examination of the merits of the case. On the other hand, observance of the requirements of the normative Act by JSC “Georgian United Electricity Distribution Company” shall be duly controlled, as misapplication of the impugned Act, including ignorance of the pre-emptive right to employment of individual meters, causes the unlawful restrictions of consumers’ rights.

Taking all the abovementioned into consideration and pursuant to article 89, paragraph 1, clause “f” and paragraph 2 of the Constitution of Georgia, article 19, paragraph 1, clause “e”, article 21, paragraph 2, article 25, paragraph 3, article 39, paragraph 1, clause “a”, article 43, paragraph 2, 4, 7 and 8 of the Organic Law of Georgia on Constitutional Court of Georgia, article 32 and article 33 of the Law of Georgia on Constitutional Litigation,

The Constitutional Court of Georgia:

1. Dismisses the constitutional claim of Mr. Shalva Natelashvili and Mr. Akaki Mikadze versus Georgian National Energy Regulatory Commission on constitutionality of Resolution No.1 of the Georgian National Energy Regulatory Commission (GNERC) dated January 17, 2006 (amended on 29^th of October, 2006 with the Resolution No. 32 of the GNERC) “On Approval of the Temporary Rule of JSC “Georgian United Electricity Distribution Company” for Metering of Electricity with the Collective Use Meters Used by Customers without Individualized Meters” in respect of article 30, section 2 of the Constitution of Georgia.

2. Holds that Georgian National Energy Regulatory Commission shall ensure implementation of effective measures with consideration of the findings of the motivational part of this judgment in order to normatively reinforce the consumers’ rights, to duly define the rights and duties of the parties and to achieve their due execution.

3. Holds that Georgian National Energy Regulatory Company shall ensure that measures envisaged in section 2 of the Resolution Part of the Decision are carried out in reasonable time that would bring due effect within the scope of application of the Act.

4. Holds that the present judgment enters into force from the moment of its public announcement at the hearing of the Constitutional Court;

5. Holds that the present judgment is final and cannot be challenged or reviewed;

6. Holds that copies of the present judgment shall be sent to the Parties, the President of Georgia, the Government of Georgia, the Parliament of Georgia, the Supreme Court of Georgia and JSC “Georgian United Electricity Distribution Company”;

7. Holds the present judgment shall be published in “Legislative Bulletin of Georgia” within 15 days.

Konstantine Vardzelashvili (Chairman of the Hearing)

Besarion Zoidze (Judge Rapporteur)

Vakhtang Gvaramia