Saudi Arabia will implement new power tariffs starting from July 1, Saudi Minister for Electricity and Water Abdullah Bin Abdul-Rahman Al-Husayen told reporters on Saturday. Saudi Electricity said it expects around a SR3.2 billion ($853.3 million) rise in the power sector's annual revenues, due to the planned change in power tariffs. The change in power tariffs will be for government, commercial and industrial sector, the company said in a statement. The firm said it would earn average revenue of SR0.137 per KWH from SR0.125 after the tariff change. Saudi Electricity will raise tariffs for government, commercial and industrial users as of July 1, which would add SR3.2 billion ($853.3 million) to its annual revenues and boost its profitability. The move is aimed at coping with power demand growing at an annual 8 percent and requiring investments close to $80 billion in the 10 years to 2018. It 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 on Saturday. Shares in Saudi Electricity rose by up to 9.8 percent after the announcement. “Based on current global fuel price, the production cost of electricity is SR0.372 per kilowatt per hour (kwh), while these new increases will raise the average tariff for all users to SR0.137 up from SR0.125 previously,” Shehry said. Ali Saleh Al-Barrak, Saudi Electricity chief executive, said he expects the firm's revenues to add about SR1.6 billion in the second half of 2010 as a result of the increase. “It will have a very good impact on profitability,” Barrak told Reuters. “Revenues from electricity sales are not enough to cover operating costs and at the same time fund the investments required by the growth in demand,” Barrak added. 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 (3,000 megawatts) is huge by all standards. Over the 2009-2018 period, the growth in power demand will require SR300 billion in investments,” Husayen said. For the industrial sector, which accounts for 18 percent of the power consumption, the price of electricity will increase by between SR0.0125 and SR0.02 for one kilowatt per hour, depending on the size of the plants and the seasons. Saudi Electricity expects to earn SR1.04 billion each year from the rise in industrial electricity tariffs but the increase in electricity tariffs for the government will earn it SR1.4 billion, Husayen said. “The electricity bill accounts for 1 percent of the overall production cost for 90 percent of industrial firms ... this shows that the government continues to bear the burden for other sectors in the economy,” he said. The government granted the cash-strapped firm a SR15 billion soft loan in April to support its finances. Households account for 53 percent of power consumption in the Kingdom and much of it is used for air-conditioning.
