Electricity Subsidy in Oman - GCCIA 2 - 2. Hassan Taqi.pdf · Oman Power & Water Procurement...
Transcript of Electricity Subsidy in Oman - GCCIA 2 - 2. Hassan Taqi.pdf · Oman Power & Water Procurement...
Electricity Subsidy in Oman
Hassan Taqi
Authority for Electricity Regulation, Oman
GCCIA Conference – Abu Dhabi, UAE
17 December, 2015
Presentation Outline
� Overview
� Regulatory challenge
� Market structure
� Subsidy mechanism
� Analysis
� Movement in Subsidy
� Customer Tariffs vs Cost-Reflective Tariffs
� Subsidy Allocation by Customer Category
� Residential Subsidy
� Way Forward
� Actions
100
144
167
117113
100
2000 2013
General Price Index (1-9)
Food, Beverages & Tobacco
Water
Transport & Communication
Electricity
Movement in Prices...Index 2000 = 100
Source: MNE Monthly Statistical Bulletin & AER Supply data
100
328MIS Supply 2000 = 100
Nominal vs Real Tarifflower band of Residential Tariff – 10 baiza/kWh
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Baisa/kWh
Source: MNE Statistics, Authority
2000 2013
Nominal vs Real Tarifflower band of Residential Tariff – 10 baiza/kWh
10.0
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Baisa/kWh
Nominal Tariff
Source: MNE Statistics, Authority
2000 2013
Nominal vs Real Tarifflower band of Residential Tariff – 10 baiza/kWh
10.0
6.6
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Baisa/kWh
Nominal Tariff
Real terms Tariff
Source: MNE Statistics, Authority
2000 2013
Nominal vs Real Tarifflower band of Residential Tariff – 10 baiza/kWh
10.0
6.6
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Baisa/kWh
Nominal Tariff
Real terms Tariff
Source: MNE Statistics, Authority
2000 2013
Reduction in real prices in the face of upward cost pressures
Slide - 8 -
Problem: Competing Interests
Regulatory Authority
Maximize Profit
Minimize risk
Investors
Low prices
Security & quality of supply
Customers
Maximize privatization proceeds
Reduce sector subsidy
Economic development
Environmental interests
Employment objectives
Government
Statutory Obligations & Responsibilities
Presentation Outline
� Overview
� Regulatory challenge
� Market structure
� Subsidy mechanism
� Analysis
� Movement in Subsidy
� Customer Tariffs vs Cost-Reflective Tariffs
� Subsidy Allocation by Customer Category
� Residential Subsidy
� Way Forward
� Actions
� Conclusion
1. Main Interconnected System
2. Rural Systems
3. DhofarPower System
Oman Power & WaterProcurement Company SAOC
Oman Electricity Transmission Company SAOC
Al Rusail PC SAOG. 687MW
Wadi Al Jizzi PC SAOC. 325MW
UPC SAOG. 273MW
Al Kamil PC SAOG. 283MW
Al Ghubrah P&DC SAOC. 430MW
AQWA P&DC SAOG. 434MW
Sohar P&DC SAOG. 590MW
SMN Barka P&DC SAOG. 679MW
Al Batinah PC SAOG 745MW
Al Sawadi PC SAOG 750MW
Pheonix PC SAOG 2000MW
Muscat Electricity Distribution Company SAOC
8,689 GWh 248,625 Accts
Majan Electricity Company SAOC
6,703 GWh 186,605 Accts
Mazoon Electricity Company SAOC
5,706 GWh 340,923 Accts
Sembcorp Salalah SAOC 445MW
Dhofar Generation Company 273MW
Oman Electricity Transmission Company SAOC
Distribution & SupplyCompany
2,327 GWh 84,127 Accts
Generation/Desalination Transmission
Rural Areas Electricity Company SAOC
Distribution & Supply
703 GWh 30,904 Accts
Electricity Market Structure
87.7% of Total Supply
87.6% of all Accounts
3.4% of Total Supply
3.3% of all Accounts
8.8% of Total Supply
9.1% of all Accounts
Oman 2014:
Source: 2014 AER Annual Report
Oman Power & WaterProcurement Company SAOC
Presentation Outline
� Overview
� Regulatory challenge
� Market structure
� Subsidy mechanism
� Analysis
� Movement in Subsidy
� Customer Tariffs vs Cost-Reflective Tariffs
� Subsidy Allocation by Customer Category
� Residential Subsidy
� Way Forward
� Actions
� Conclusion
Wadi Jizzi Power Company SAOC
Al Ghubrah Power & Desalination Company SAOC
Others
Direction of payments
Muscat Electricity Distribution Company SAOC
Majan Electricity Company SAOC
Mazoon Electricity Company SAOCOman Electricity Transmission
Company SAOC
All intra sector transactions are: (i) regulated & (ii) fully cost reflective
Electricity Sector Transactions Main Interconnected System
United Power Company SAOG
Al Rusail Power Company SAOC
Al Kamil Power Company SAOG
ACWA Power BarkaSAOG
Sohar Power Company SAOG
SMN Barka SAOC
Oman Power & WaterProcurement Company SAOC
PWP pays Production Facilities for
• Capacity and Output in accordance with terms of PPA/PWPA
• Ancillary Services
Subsidy
Customer Revenue
Barka III (750MW)
Sohar II (750MW)
Sur IPP (2,000MW)
Discos pay PWP for
• bulk purchases of electricity charged at a cost reflective Bulk Supply Tariff (BST);
• Electricity BST includes PWP’scosts of electricity procurement activities
Discos pay OETC for
• Connection to OETC’s Transmission System (Distribution business)
• Use of OETC’s Transmission System (Supply business)
Single point of Subsidy injection
Electricity Subsidy
Subsidy = Economic cost of supply – Customer revenue
� Customer revenue insufficient to recover the full economic cost of electricity supply, therefore Subsidy required.
� Article (18): Ministry of Finance shall pay electricity subsidy calculated by the Authority to Licensed Suppliers.
� Five Licensed Suppliers : Muscat, Majan and Mazoon, RAEC and DPC
� Published in Authority Annual Reports: transparency and accountability .
Generation Transmission
& Dispatch
Distribution
& Supply
Total Economic
Cost of
Electricity
Supply
Revenue &
Subsidy
Licensed
Suppliers
Economic Costs and Subsidy
MIS 2014
RPI-X Price ControlsCompetition
Generation Transmission
& Dispatch
Distribution
& Supply
Total Economic
Cost of
Electricity
Supply
Revenue &
Subsidy
560 m RO
Licensed
Suppliers
Economic Costs and Subsidy
MIS 2014
347 m RO
68 m RO
145 m RO
RPI-X Price ControlsCompetition
Generation Transmission
& Dispatch
Distribution
& Supply
Total Economic
Cost of
Electricity
Supply
Revenue &
Subsidy
560 m RO
Licensed
Suppliers
Customer
Revenue
346 m RO
Economic Costs and Subsidy
MIS 2014
347 m RO
68 m RO
145 m RO
RPI-X Price ControlsCompetition
Generation Transmission
& Dispatch
Distribution
& Supply
Total Economic
Cost of
Electricity
Supply
Revenue &
Subsidy
Economic Costs and Subsidy
MIS 2014
347 m RO
68 m RO
145 m RO 560 m RO
Licensed
Suppliers
Customer
Revenue
346 m RO
Economic Subsidy
214 m RO
560 m RO
RPI-X Price ControlsCompetition
Presentation Outline
� Overview
� Regulatory challenge
� Market structure
� Subsidy mechanism
� Analysis
� Movement in Subsidy
� Customer Tariffs vs Cost-Reflective Tariffs
� Subsidy Allocation by Customer Category
� Residential Subsidy
� Way Forward
� Actions
� Conclusion
Movement in MIS Subsidy
2006-14
2006 2007 2008 2009 2010 2011 2012 2013 2014
Underlying Economic Subsidy Index
Underlying Subsidy per kWh Supplied Index
Movement in MIS Subsidy
2006-14
2006 2007 2008 2009 2010 2011 2012 2013 2014
100
243
Underlying Economic Subsidy Index
Underlying Subsidy per kWh Supplied Index
Movement in MIS Subsidy
2006-14
100 106 123
138 154
178 201
218 240
2006 2007 2008 2009 2010 2011 2012 2013 2014
GWh Supplied Index
100
243
Underlying Economic Subsidy Index
Underlying Subsidy per kWh Supplied Index
Movement in MIS Subsidy
2006-14
100 106 123
138 154
178 201
218 240
2006 2007 2008 2009 2010 2011 2012 2013 2014
GWh Supplied Index
100
243
101
Underlying Economic Subsidy Index
Underlying Subsidy per kWh Supplied Index
Movement in MIS Subsidy
2006-14
100 106 123
138 154
178 201
218 240
2006 2007 2008 2009 2010 2011 2012 2013 2014
GWh Supplied Index
100
243
101
Underlying Economic Subsidy Index
Underlying Subsidy per kWh Supplied Index
Growth in subsidy in line with supply growth
86.5
210.3
0.0
50.0
100.0
150.0
200.0
250.0
2006 2014
Underlying Economic Subsidy
Underlying Subsidy 2006 and 2014 comparison
86.5
210.3
9.4 9.5
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0.0
50.0
100.0
150.0
200.0
250.0
2006 2014
Underlying Economic Subsidy
Underlying Subsidy per kWh Supplied (bz/kWh)
Underlying Subsidy 2006 and 2014 comparison
Presentation Outline
� Overview
� Regulatory challenge
� Market structure
� Subsidy mechanism
� Analysis
� Movement in Subsidy
� Customer Tariffs vs Cost-Reflective Tariffs
� Subsidy Allocation by Customer Category
� Residential Subsidy
� Way Forward
� Actions
� Conclusion
Permitted Tariffs
Permitted Tariffs approved by the Council of Ministers
A: Permitted Tariffs for Electricity Supply
Industrial 1
Commercial
Ministry of Defence
0-3000 kWh 3001-5000 kWh 5001-7000 kWh 7001-10000 kWh above 10000 kWh
10 Bz / kWh 15 Bz / kWh 20 Bz / kWh 25 Bz / kWh 30 Bz / kWh
0-3000 kWh 3001-5000 kWh 5001-7000 kWh 7001-10000 kWh above 10000 kWh
10 Bz / kWh 15 Bz / kWh 20 Bz / kWh 25 Bz / kWh 30 Bz / kWh
0-3000 kWh 3001-5000 kWh 5001-7000 kWh
10 Bz / kWh 15 Bz / kWh 20 Bz / kWh
B: Permitted Tariff fees for Disconnection & Reconnect ion of accounts
Disconnection fee (all types of metered accounts): 7.500 Rial Omani
Reconnection fee (all types of metered accounts): 7.500 Rial Omani
Residential
Government
0-7000 kWh
Flat rate @ 20 Baiza per KWh
April to July: 24 Baiza per kWh
7001 kWh & above
Flat rate @ 20 Baiza per KWhMay to August: 24 Baiza per kWh
Tourism 2
1 Customers require a MOCI letter of recommendation and must maintain a power factor of least 0.9
2 Subject to Ministry of Tourism regulations and approval
above 7001 kWh
20 Bz / kWh
Agriculture & Fisheries10 Baiza per kWh 20 Baiza per kWh
Permitted Tariff Category
All Regions except Dhofar
Tariff Structure
September to April: 12 Baiza per kWh August to March: 12 Baiza perkWh
Dhofar Region
Customer Categories as per current Permitted Tariffs Schedule:
1. Residential
2. Industrial
3. Commercial
4. Agriculture & Fisheries
5. Tourism
6. Government
7. Ministry of Defence
Subsidy per Customer Category
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Residential Industrial Commercial Agric/Fisheries Tourism Government MoD/Special
Forces
bz/kWh by Customer Category
2013 Revenue/kWh
2013 cost/kWh
Revenue vs Cost per kWh by Customer category
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Residential Industrial Commercial Agric/Fisheries Tourism Government MoD/Special
Forces
bz/kWh by Customer Category
2013 Revenue/kWh
2013 cost/kWh
Revenue vs Cost per kWh by Customer category
Revenue vs Cost per kWh by Customer category
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Residential Industrial Commercial Agric/Fisheries Tourism Government MoD/Special
Forces
bz/kWh by Customer Category
2013 Revenue/kWh
2013 cost/kWh
Revenue vs Cost per kWh by Customer category
11.6
15.3
20.0
12.0
16.8
23.4
19.9
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Residential Industrial Commercial Agric/Fisheries Tourism Government MoD/Special
Forces
bz/kWh by Customer Category
2013 Revenue/kWh
2013 cost/kWh
Revenue vs Cost per kWh by Customer category
11.6
15.3
20.0
12.0
16.8
23.4
19.9
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Residential Industrial Commercial Agric/Fisheries Tourism Government MoD/Special
Forces
bz/kWh by Customer Category
2013 Revenue/kWh
2013 cost/kWh
Revenue from Residential customers is the lowest on average
per kWh (11.6 bz/kWh) and imply the highest Subsidy per kWh
Presentation Outline
� Overview
� Regulatory challenge
� Market structure
� Subsidy mechanism
� Analysis
� Movement in Subsidy
� Customer Tariffs vs Cost-Reflective Tariffs
� Subsidy Allocation by Customer Category
� Residential Subsidy
� Way Forward
� Actions
� Conclusion
Residential
73%
Industrial
10%
Commercial
12%
Agric/Fisheries
2%
Tourism
0.1%
Government
3%
MoD/Special
Forces
0.3%
Subsidy per Customer Category
Residential
73%
Industrial
10%
Commercial
12%
Agric/Fisheries
2%
Tourism
0.1%
Government
3%
MoD/Special
Forces
0.3%
Subsidy per Customer Category
Residential
73%
Industrial
10%
Commercial
12%
Agric/Fisheries
2%
Tourism
0.1%
Government
3%
MoD/Special
Forces
0.3%
Subsidy per Customer Category
Presentation Outline
� Overview
� Regulatory challenge
� Market structure
� Subsidy mechanism
� Analysis
� Movement in Subsidy
� Customer Tariffs vs Cost-Reflective Tariffs
� Subsidy Allocation by Customer Category
� Residential Subsidy
� Way Forward
� Actions
� Conclusion
Domestic Customer Demand Profiles & Subsidy2010 Consumption between 20,000 & 25,000 kWh
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
kWh per Month
2010
MEDC
MJEC
MZEC
RAEC
DPC
Source: Authority
Domestic Customer Demand Profiles & Subsidy2010 Consumption between 20,000 & 25,000 kWh
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Subsidy ROkWh per Month
2010
Subsidy (rhs)
MEDC
MJEC
MZEC
RAEC
DPC
Source: Authority
Average monthly Consumption: Muscat
0
50
100
150
200
250
300
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Between 0 & 5k
0
200
400
600
800
1,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Between 5k & 10k
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Between 10k & 15k
0
500
1,000
1,500
2,000
2,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Between 15k & 20k
0
500
1,000
1,500
2,000
2,500
3,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Between 20k & 25k
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Between 25k & 30k
Customer Accounts below 25,000 kWh p.a. Consumption
118,301
80,423
149,320
12,02731,946
159,457
103,767
178,992
14,409
39,341
MEDC Majan Mazoon RAEC DPC
Accounts > 25000kWh p.a.
Accounts < 25000kWh p.a.
Customer Consumption
Source: Authority, 2010
85% of total 2013 Residential consumption was within the
first block (0-3000 kWh) and therefore charged at 10 bz/kWh
Analysis of Residential Consumption
(2013 kWh Annual Consumption at 10 bz/kWh)
15%
85%
Residential Tariff Analysis
Block 1 Block 2 Block 3 Block 4 Block 5
kWh 0-3000 3001-5000 5001-7000 7001-10000 >10,000
Baisa/kWh 10 15 20 25 30
Residential Tariff Analysis
Block 1 Block 2 Block 3 Block 4 Block 5
kWh 0-3000 3001-5000 5001-7000 7001-10000 >10,000
Baisa/kWh 10 15 20 25 30
11.5 bz/kW
Average
Presentation Outline
� Overview
� Regulatory challenge
� Market structure
� Subsidy mechanism
� Analysis
� Movement in Subsidy
� Customer Tariffs vs Cost-Reflective Tariffs
� Subsidy Allocation by Customer Category
� Residential Subsidy
� Way Forward
� Actions
Actions
Actions
1. Introduction of Cost-Reflective Tariffs for Large Consumers: Industrial, Commercial & Government
Large Customers
Large Customers account for:
� Less than 1% of total accounts;
� But, more than 30% of total electricity supply;
� Cost-reflective tariffs expected to reduce Subsidy by about 6-8%;
� Important step in tariff reform process
Actions
1. Introduction of Cost-Reflective Tariffs for Large Consumers: Industrial, Commercial & Government
Actions
1. Introduction of Cost-Reflective Tariffs for Large Consumers: Industrial, Commercial & Government
2. Undertake a socio-economic impact study to assess the impact of utility tariff rises on Residential consumers
Actions
1. Introduction of Cost-Reflective Tariffs for Large Consumers: Industrial, Commercial & Government
2. Undertake a socio-economic impact study to assess the impact of utility tariff rises on Residential consumers
3. Revise the price of gas sold to electricity generation plants
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Residential Industrial Commercial Agric/Fisheries Tourism Government MoD/Special
Forces
bz/kWh by Customer Category
2013 Revenue/kWh
2013 cost/kWh
Revenue vs Cost per kWh by Customer category
Revenue vs Cost per kWh by Customer category
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Residential Industrial Commercial Agric/Fisheries Tourism Government MoD/Special
Forces
bz/kWh by Customer Category
2013 Revenue/kWh
2013 cost/kWh
2015 cost/kWh
Actions
1. Introduction of Cost-Reflective Tariffs for Large Consumers: Industrial, Commercial & Government
2. Undertake a socio-economic impact study to assess the impact of utility tariff rises on Residential consumers
3. Revise the price of gas sold to electricity generation plants
Actions
1. Introduction of Cost-Reflective Tariffs for Large Consumers: Industrial, Commercial & Government
2. Undertake a socio-economic impact study to assess the impact of utility tariff rises on Residential consumers
3. Revise the price of gas sold to electricity generation plants
4. Show actual cost of supply and subsidy on customer bills
Thank you for your kind attention