Cost Reflective Tariffs making large consumers energy efficient: AER

MUSCAT, DEC 23 – Cost Reflective Tariffs (CRT), which effectively do away with government subsidy on electricity consumed by large customers, are making a significant impact in driving efficiency in energy consumption in the Sultanate, according to the Authority for Electricity Regulation Oman (AER). An estimated 10,000 government, commercial and industrial customers across the Sultanate, identified by electricity authorities as “large” power consumers, are currently subject to Cost Reflective Tariffs (CRT) that came into force on January 1, 2017. It follows 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 revised tariffs have promoted awareness and action in terms of energy efficiency for these consumers,” said Bushra al Maskari (pictured), Senior Policy & Strategy Specialist at AER.
“We are really happy to see consumers coming to us and explaining with enthusiasm how they have been able to reduce their energy consumption. Some of them said they were surprised to realize that they could have done much more in reducing consumption even before the introduction of the new tariffs. So the increase in tariffs was necessary to raise awareness.”
Speaking at a seminar on the theme, ‘Energy Transition in Oman’, organised by the Embassy of the Kingdom of the Netherlands recently, Bushra listed Cost Reflective Tariffs as one of several steps taken by the regulator in support of the nation’s energy efficiency drive. The accent, however, is on building awareness through campaigns targeting all categories of consumers, including residential and commercial, she noted.
But achieving energy efficiency goals will require a comprehensive, all -encompassing strategy based on hard information on consumption behaviour and trends, Bushra stressed.

“The Authority wants to have in place a coherent and holistic policy for driving energy efficiency, rather than ad hoc initiatives. And to support this objective, we really support evidence-based policies for which we have started collecting a lot of data and information before formulating these policies. Data will help us prioritise areas that need to be focused on and ensure the best results.”
Data collection efforts aimed at creating a full-fledged energy efficiency framework began in 2016 and is ongoing, said Bushra. “We are collecting data that will help the Authority formulate policies across all sectors, including commercial, residential and government, evaluate consumption behaviour and awareness trends, and study what’s going on in Omani society, and so on.”
According to the Authority, while the Cost Reflective Tariffs scheme scraps government subsidy for large consumers, it does not automatically translate into higher electricity costs for these customers. Rather, it incentivises a shift in consumption from periods of overall peak system demand to non-peak demand — a move that also has the potential to significantly reduce the need for substantial investments in new generation capacity.
The new tariff varies for every hour of the day, thereby providing the targeted government, commercial and industrial customers with strong incentives to reduce overall consumption.

Conrad Prabhu