Regulator sets to work

08 February 2002

Power sector deregulation is progressing smoothly in the wake of Fareed Zedan's appointment as governor of the Electricity Services Regulatory Authority (ESRA) in mid January. The new body is now preparing to implement new regulations governing the sector, and independent power projects (IPPs) are expected to get under way in the kingdom in 2002, Zedan told MEED on 4 February.

'To set up, we need to bring together a small nucleus of power experts,' said Zedan. 'Then we will start employing people. We're starting from scratch so we can select the people that we want on the basis of their job qualification. We know the public wants benefits now from the restructuring, but it will take time to get the right people and start to implement our plans.'

The body will have responsibility for recommending electricity tariffs, promoting investment, limiting monopolies, promoting competition, protecting investor and consumer rights and establishing quality codes for generation and transmission. It will also act as a consultant to the government.

ESRA will collaborate with the Industry & Electricity Ministry to establish complete regulations defining the restructured shape of the sector. 'The main players are now on the pitch and the referee has blown his whistle,' said Zedan. 'Depending on the implementation package we draw up with the ministry, different parts of the sector will be administered by the council of ministers, the ministry, ESRA and even by the Majlis al-Shura [consultative council].'

According to proposals already approved by the council of ministers, there must be a complete technical and legal separation between generation assets of Saudi Electricity Company (SEC)and the planned national grid. 'We are looking at the restructuring closely with SEC and the government,' said Zedan. 'We need to establish a culture of service provision and learn to be competitive in a way that comes from customer need. The sector will effectively have a single-buyer model for the next 10 years and that will allow the market to mature and the infrastructure to grow.'

The kingdom's landmark gas initiative has paved the way for some of the proposals, providing a blueprint for negotiations on the financial and legal regimes necessary for a deregulated market. 'We have developed a number of rules and regulations in the gas initiative that can be utilised in developing independent power projects to sell to the single buyer,' said Zedan. 'I would not be surprised to see invitations issued to implement IPPs and IWPPs [independent water and power projects] in the kingdom by the end of 2002.'

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