Electricity regulator chief calls for hike in power tariff

25/11/2014 06:49 AST

The last time electricity tariffs were raised for Saudi Arabia's residential consumers was in 2000. Taking into account currency inflation, consumers are in effect paying less for electricity than in 2000.

"Currently the government is paying huge subsidies, but it is going to everybody. The wealthy is getting more from it than the poor," Al-Shehri said.

According to ECRA figures presented at the conference, residential consumers use around 50 percent of power generated, but contribute only 31% of SEC's income. The difference is met by government subsidies.

"Our worry is that the dependence of the electricity industry on government support is getting larger and larger, and that situation is not sustainable," said Al-Shehri.

"I would like to start thinking of the future."

Al-Shehri also confirmed that a restructuring plan approved by both ECRA and the SEC to breakup the state owned utility would be carried out in early 2015 and will allow foreign investment.

"The SEC legacy generation capacity will be broken down into four companies. They will have the flexibility to go into partnership with investors, or to divest some of their power plants," Al-Shehri said.

"Many investors have shown interest (in the four generation companies) but they still have to see the real implementation of the rules and regulations, and make sure that they are transparent, clear, and stable."

The breakup would end the monopoly of state-owned SEC, formed in 2000 with the merger of existing regional power companies.

Restructuring is already underway, with a subsidiary, National Grid, currently responsible for transmission.

Al-Shehri confirmed that a distribution company to be formed in 2015 would also be broken-up in the future into further distribution companies to allow for improved services.

"We could have benchmarking and services closer to users," he said.

The SEC is 81 percent owned by the Saudi Government, with a 20 percent float on the Saudi stock exchange, Tadawul.

Saudi Gazette