MUSCAT, JULY 1 – The Omani government’s subsidy to the electricity sector fell 8.3 per cent in 2017 to reach a value of RO 456 million, down from RO 497 million a year earlier — a decrease attributed in large part to Cost Reflective Tariffs (CRT) that came into force for large consumers last year.
According to figures released by Nama Group — the holding company of state-owned power procurement, generation, transmission, distribution and supply subsidiaries — the average subsidy per customer also declined 14 per cent to RO 398 in 2017, down from RO 463 in 2016.
“The reduction in subsidy per customer was largely attributable to the introduction of Cost Reflective Tariffs for certain categories of customers,” said Hassan Mohammed al Lawati, Chairman — Nama Group, in the Chairman’s Report for 2017.
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 long-standing subsidy on power supplied to major customers consuming more than 150 megawatt-hours (MWh) per annum.
CRT customers accounted for 34 per cent of the 32,277 gigawatt-hours (GWh) of electricity units that were consumed in 2017.
Their exclusion from subsidy coverage, effective from January last year, has resulted in significant savings to the government, according to the wholly government-owned holding company.
Of the five distribution and supply subsidiaries that receive government subsidy, the biggest beneficiary was Mazoon Electricity Company (MZEC), which accounted for a 32 per cent share (up from 30 per cent in 2016).
Muscat Electricity Distribution Company (MEDC), received a 22 per cent share in 2017 (down from 25 per cent in 2016).
The Rural Areas Electricity Company (RAECO), traditionally a major recipient of subsidy support because of the vast unconnected areas under its jurisdiction, collected a 20 per cent share.
Majan Electricity (18 per cent) and Dhofar Power Company (8 per cent) were also beneficiaries, according to Nama Group.
Overall, the subsidy provided by the government represented 41 per cent of total revenues of RO 1.123 billion earned by Nama Group in 2017, down from 43 per cent in 2016 (total revenues: RO 1.121 billion). Revenues from customers accounted for just 44 per cent of total earnings in 2017, up from 42 per cent in 2016, the holding company stated.