August 17, 2016

Muscat: State-owned Public Authority for Electricity and Water (PAEW) said that it is working along with Authority for Electricity Regulation and other agencies to introduce a fully cost-reflective tariff for large industrial consumers of electricity.

It is apparent that the government will introduce reforms that will have far-reaching implications on the economy as the authorities are planning to eliminate power subsidy for large industrial consumers. International Monetary Fund (IMF) has advised Oman government to introduce reforms aimed at cutting energy subsidies in a move to eliminate budget deficit amid sluggish oil prices.

"The ultimate aim of this is to ensure that the correct economic messages are given to large consumers - promoting the efficient use of energy. This work is linked with the wider issue of full-scale tariff reform across all consumer classes as advocated by the National Energy Strategy Study (NESS)," PAEW said in its latest annual report.

PAEW also led (on behalf of the Ministry of Finance) a major study examining the National Energy Strategy - the NESS study. This study, which started in 2014 and examined the development of the whole energy system in Oman up to 2040, was completed in 2015 and recommendations have been passed to the Ministry of Finance to progress within government. "One of the key recommendations of the NESS project was a reform of energy pricing to gradually eliminate subsidies over a number of years." Given the potential socio-economic impact of such a change, PAEW commissioned an international consultant - Maxwell Stamp - to examine the impacts of increases in utility pricing and recommend measures to protect the most vulnerable customer groups, said the PAEW report. This study completed at the end of 2015 and the recommendations have now been passed to the Ministry of Finance for consideration along with the NESS project.

PAEW report also added that in 2015, the Council of Financial Affairs and Energy Resources has approved a proposal from PAEW to allow the development of renewable energy projects where these are competitive with the Omani gas price in the international markets. The decision has now been passed on to AER for implementation and will allow the increasing use of renewable generation capacity.

© Times of Oman 2016