Subsidy scrapped for 10,000 major power consumers from today

ENERGY EFFICIENCY DRIVE: Cost reflective tariffs come into force for large industrial, commercial and government consumers from Jan 1

Dec 31: Cost reflective tariffs (CRT) come into effect today for an estimated 10,000 government, commercial and industrial customers across the Sultanate, identified by electricity authorities as “large” power consumers.

This is in line with a decision by the Council of Ministers to lift longstanding subsidy on power supplied to major customers consuming more than 150 megawatt-hours (MWh) per annum. The landmark move was unveiled at a media briefing convened by the Authority for Electricity Regulation Oman (AER) in October.

The step underscores efforts by the government to roll back subsidies on certain utilities and services and thereby narrow the yawning gap between revenues and expenditure resulting from the steep fall in oil prices two years ago. This cost-cutting trend, among other austerity measures, is expected to be further reinforced when the 2017 State Budget is unveiled this week, say experts.

Importantly, the new Cost Reflective Tariff regime that comes into force today does not automatically translate into higher costs for these organisations, according to the Executive Director of the Authority for Electricity Regulation Oman.

The new tariff will be different for every hour of the day, thereby providing the targeted government, commercial and industrial customers with strong incentives to reduce overall consumption, Qais Saud al Zakwani said.

“The new tariff will reflect the actual cost of supplying electricity for every hour and provide a relatively small number of customers with strong incentives to reduce demand at times of system peak demand and return significant benefits in terms of reduced overall peak demand and the requirement of future investments,” Al Zakwani explained at the briefing last October.

With the scrapping of subsidy for large customers, electricity costs will now average 26-30 baizas/kilowatthour (bz/kWh) for low voltage