SEC hikes power tariffs

9.6% increase for non-household users to cope with rising demand.

Households in Saudi Arabia will not be affected by the SEC price hikes.
Households in Saudi Arabia will not be affected by the SEC price hikes.

The Saudi Electricity Company will from July 1 charge government, industrial and commercial users higher rates for electricity, Reuters reported on Saturday. The price hike comes in response to a sustained increase in demand, requiring infrastructure investments of close to US$80bn.

The move will raise by 9.6 percent the average price of electricity sold to non-household users but it would still remain 3.5 percent below its actual production cost in the world's top oil exporter, Abdullah al-Shehry, governor of the Electricity and Co-generation Regulatory Authority, told reporters.

“Based on current global fuel price, the production cost of electricity is 0.372 riyals per killowatt per hour (kwh), while these new increases will raise the average tariff for all users to 0.137 riyals up from 0.125 riyals previously," Shehri said.
Water and Electricity Minister Abdullah al-Husayen said the annual growth in power demand meant the need to add 3,000 megawatts to the power generation capacity each year, which currently stands at 40,900 megawatts.

"This huge by all standards. Over the 2009-2018 period, the growth in power demand will require 300 billion riyals in investments," Husayen said.

Households account for 53 percent of power consumption in the desert kingdom and much of it is used for air-conditioning.

The SEC is forgoing a large amount of revenue by not including households in the rate hike. Private consumption accounts for 53 percent of energy use in the Kingdom.

"This move was expected, and should have taken place much earlier," comments Abhay Bhargava, industry manager at Frost&Sullivan. "The country has been focusing on constantly increasing its generation capacity, while the consumption too kept increasing, reflecting an underlying trend of wasteful/ careless consumption in the country where power is still highly subsidized compared to a large part of the world. It would be advisable for them to consider including households into a variable slab tariff at the least, if a unanimous hike has been discarded after consideration"



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