Riyadh studies plans to break up Saudi Electricity Company

17 March 2008
Saudi Arabia’s Supreme Economic Council is studying a three-phase restructuring plan for the kingdom’s electricity system that could lead to the division of the Saudi Electricity Company (SEC) into four or more power generation companies by 2010.

The energy industry restructuring programme (ERIP) also calls for the introduction of private capital into the kingdom’s transmission system and competition in the electricity distribution and customer service provision.

Once approved by the Supreme Economic Council, the ERIP could go immediately into effect without needing further approval from the cabinet or the consultative council, according to deputy governor of Saudi Arabia’s Electricity & Cogeneration Regulation Authority Abdullah Shehri.

The first phase of ERIP, to be completed in 2008-10, will involve unbundling SEC and introducing competition in power generation. The second phase, to be completed in 2010-13, calls for wholesale competition and phase three will introduce retail competition.

“In phase I of ERIP, we would like to see the establishment of at least four generating companies out of the SEC,” Shehri told MEED’s Middle East Power & Water conference in Abu Dhabi on 17 March. “We would like to see all of the (generation) assets moved to these companies so that they may go private by selling all or part of their assets.”

ERIP’s first phase also calls for the creation of a Saudi Power Procurement Company to take over from the Water & Electricity Company, a joint venture between the Saline Water Conversion Corporation (SWCC) and the SEC which was set up to buy electricity from the kingdom’s initial independent water and power plants (IWPPs).

Phase I also calls for the establishment of the Saudi Grid Company to own, operate and manage the kingdom’s electricity transmission system.

“We want to see the Saudi Grid Company owned by a strategic partner or using build and lease financing methods,” said Shehri said. “It will increase innovation, transfer of knowledge and know-how.”

“The second phase will involve increasing the size of the parallel market and establishing a spot market where all the prices will be announced on a daily basis,” said Shehri. “We would also like to see the creation of distribution companies owned by SEC or sold to the private sector.”

“The last stage of the plan is for a full wholesale electricity market in 2013-16,” said Shehri. “We are still looking at the way it will work, but the role of the principal buyer will diminish. The electricity market will then be based on competitive buying and selling.”

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