Regulator to assess impact of higher power tariffs on large consumers

The Authority for Electricity Regulation Oman (AER) is preparing to commission a survey designed to study the impact of Cost-Reflective Tariffs (CRT) on large power consumers in the Sultanate.
The study will assess, among other things, customer responses to the first-ever changes in electricity tariffs in nearly 30 years. The exercise will also seek to examine the short-term and long-term measures adopted by the entities in question to offset the impact of higher electricity costs on their operations.
The survey comes over 18 months since Cost Reflective Tariffs were implemented for large industrial, commercial and government customers with effect from January 1, 2017.
The new tariffs, according to the power sector regulator, were introduced to “moderate and help manage expected increases in electricity subsidy as a result of: significant growth in electricity demand and the investment needed to supply it, increasing electricity intensity of consumption, the requirement to use more expensive alternatives to local natural gas, and certain technical deficiencies of existing Permitted Tariffs”.
Around 10,000 large customers with an electricity usage exceeding 150 MW-hours per year were subject to the new tariff system. It follows a decision by the Council of Ministers to scrap longstanding subsidy on power supplied to major customers. While accounting for less than one per cent of the sector’s total customer base, they still consume more than a third of total electricity units supplied to the nation’s two main grids.
As a first step, the Authority plans to enlist the services of a qualified consultant to undertake a survey of the consumer segments falling within the ambit of the revised tariff scheme. Interested parties have until October 7, 2018 to submit proposals detailing their methodologies for conducting the survey and the ensuing study.
Besides evaluating the broader impacts of Cost Reflective Tariffs on the targeted consumer segments, the study will also seek to assess whether the concept of CRT has been clearly understood by the customers in the first place. The tariff varies for every hour of the day, thereby providing the targeted government, commercial and industrial customers with strong incentives to reduce overall consumption.
Additionally, the study will look at challenges, if any, that were encountered by large customers in adopting Cost Reflective Tariffs. Electricity costs relative to total operating expenses will be examined as well.