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Oman launches first electricity spot market in the Middle East

The Sultanate of Oman has formally launched an electricity spot market, the first in the Middle East, to increase the efficiency of power procurement as part of the goals of Oman Vision 2040.

The spot market will enable licensed generators for the first time to offer their surplus capacity at the most competitive rate.

It has also extended the timeframe of a planned redirecting of electricity subsidies for residential consumers to 10 years from 5 years, and capped power tariffs for the same category throughout 2022 at December 2021 levels.

The process required the merger of four electricity distribution companies by the Oman Investment Authority. It was also agreed to unify all accounts of the residential category so that the value of power consumption tariff in 2022 could fall into a first and a second class.

The electricity tariff for the residential category will be calculated as of January 1, 2022. The system of national subsidy granted to entitled categories continues to be applied as prescribed. A subscriber from the exempted categories has a right to select one account for which “additional subsidy” will apply.

As for the agricultural sector, the Cost Reflective Tariff has been cancelled (the non-subsidised tariff) for all subscribers. Instead, a new tariff will be applied.

The Cost Reflective Tariff has been reviewed in 2022 in support for economic recovery efforts and in consolidation of the national economy’s performance.

The general policies of the electricity sector seek to implement a programme for rechannelling the power subsidy to the deserving segments, which is part of the Medium-Term Fiscal Balance Plan (2020-2024).

The overall objective of the merger is to augment operational efficiency, minimize costs, and expedite the rate of power connectivity in rural areas via the basic grid.

This contributes to the reduction of carbon emissions, minimises dependence on diesel stations and makes ideal use of the expertise of the companies, while at the same time opening scopes for competition in the sector of supply and power connection services in different parts of the Sultanate.

The arrangements also made it possible to implement the smart meter readers, which upgrades the level of the service and the efficiency of electricity distribution.

Oman Observer

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