The need to sparingly use electricity is paramount as the government in Oman spends, on an average, RO332 per customer as annual subsidy on electricity bills of consumers in Muscat Governorate while in Dhahirah and North Batinah it can go up to RO437, and RO2814 in Musandam and Al Wusta.
The electricity sector benefited from RO601.8mn as support from the Ministry of Finance in 2019, of which RO441mn went to Main Interconnected System (MIS and required by MEDC, Majan and Mazoon), RO43.8mn to Dhofar Power System (DPS) and RO117mn to Rural Areas Electricity Company (RAEC).
In its forecast for 2020, the Authority for Electricity Regulation (AER) stated that the subsidy for MIS will be RO451mn, 2.3% higher than 2019, while it will be RO50mn for DPS, 14.2% higher than 2019, and RO104.2mn for RAEC or 10.9% lower than 2019.
At RO441mn, the subsidy for MIS reflects total economic costs of RO942.1mn and customer revenues of RO501.1mn. ‘MIS witnessed no growth in supply in 2019 over 2018, lower than anticipated when compared to recent annual average growth rates of approximately 5% (3-year average for 2015-2018). The general economic slowdown in 2019 and, to some extent, the impact of Cost Reflective Tariffs to large customers in 2017 are likely causes of this stunted growth,’ stated AER in its annual report.
Of the total MIS subsidies in 2019, MEDC, Majan and Mazoon accounted for 31%, 25% and 45% respectively. Mazoon’s got RO196.7mn as subsidy, with Majan receiving RO109.5mn and MEDC getting RO134.9mn.
In its forecast for MIS, AER stated that it is anticipated that 2020 will witness the first overall negative growth in supply since the restructuring of the electricity sector in 2005, a sharp fall from the decade after restructuring which saw consistent double-digit annual growth rates in supply. ‘Supply growth in 2020 is expected to decrease by 1.1% from 2019 outturn, mainly driven by the impact of the outbreak of the COVID-19 pandemic and the resulting downturn in the general economy.’
Dhofar Power System will also see a decline due to the economic slowdown and the COVID-19 pandemic. ‘The supply of units is expected to decrease by 4.7% whilst customer revenue will see an anticipated decrease of around 5.3%.’
Rural Areas Electricity Company systems will see its subsidies reduce to RO104.2mn, 10.9% lower than outturn subsidy in 2019. This is due to the expected slowdown where the supplied units for 2020 is projected to be 5% lower than 2019 for RAEC.
‘Combined with international fuel prices going down, an 18% decrease in RAEC’s fuel costs is also anticipated. The impact on RAEC’s 2020 subsidy is also due to the government’s decision regarding areas overseen by the Special Economic Zone Authority of Duqm (SEZAD) that form part of RAEC’s authorised area to be regulated by SEZAD. As a result, the costs, revenues and subsidy pertaining to SEZAD area are not accounted for in the calculation.’
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