Oman’s Authority for Public Services Regulation (APSR), the entity tasked with regulating the electricity and related desalinated water sectors, among other sectors, says it is weighing steps to enable direct power sales by producers to large customers, bypassing Oman Power and Water Procurement Company (OPWP), currently the sole offtaker of electricity output under the sector law.
The move is part of a series of measures being mulled by the regulator to help further liberalise the electricity sector in the Sultanate, as well as drive competition among producers and other market players.
“The Authority believes that the market is ready for this liberalisation measure and will undertake a revision of the legal and regulatory framework to enable liberalisation of this measure’’, the regulator stated in its 2020 Annual Report released here last week.
Under the sector law, OPWP — member of Nama Group — is the sole procurer of new power generation and water desalination capacity, as well as the sole buyer of output from these producers. But in a move to encourage competition between different generators, as well as enable the utilisation of existing capacity that has fallen out of contract, the Authority is creating the groundwork to enable direct power sales between producers and consumers — an arrangement also known as ‘bilaterals’.
The Authority noted in the report that it considers the liberalisation measure to support direct electricity sales “ready for implementation subject to the government’s approval”. Its engagement with different stakeholders also elicited “positive feedback” from market players “who showed interest to explore the potential for bilateral agreements further”.
It announced that it has decided to initiate a project to start implementing the possibility of direct sales of electricity. “Direct sales are a means of introducing competition for access to eligible customers — typically the largest customers. In Oman, these would be all or some subset of the existing Cost Reflective Tariff (CRT) customers’’, it noted. CRT covers major government, industrial and commercial customers whose annual requirement is 100 megawatt-hours or more of electricity. They are subject to tariffs that are essentially subsidy-free.
Some technical issues will, however, have to be dealt with before direct power sales become a reality in Oman, according to the Authority. These pertain to, among other things, the need to ensure that physical connections, dispatch implications, metering data and settlement implications are suitably catered for. Additionally, there are “complex commercial and economic implications related to the price signals that direct sales proponents and eligible customers perceive”, it further noted.
In light of these considerations, the proposed project to explore the feasibility of direct power sales will be undertaken in phases, the Authority said. The goal is to ensure that the measure is economically feasibility and meets with regulatory and technical criteria, it added.
Earlier this year, the Ministry of Energy and Minerals — which is the policymaker for the electricity sector — said APSR is developing regulations to support a number of market liberalisation objectives, promote energy efficiency, and aid the transition away from CO2 emitting energy sources towards renewable and alternative energy sources.
The initiatives include new regulation authorising bilateral electricity deals between large consumers and generators; the mandatory appointment of Energy Efficiency Officers to oversee conservation measures by large consumers; and the planned introduction of a credit trading system to monetise energy efficiency gains.
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