In December 2018, the Government issued Royal Decree 43/2018 (the Amending Law) amending certain provisions of the Law for the Regulation and Privatisation of the Electricity and Related Water Sector, which was promulgated by Royal Decree 78/2004 (the Sector Law). Although the Amending Law amends a substantial number of provisions of the Sector Law, it becomes apparent on a closer read that the main purpose of the majority of these amendments is to transfer the electricity-related policy-setting competencies from the Public Authority for Electricity and Water (PAEW) to the Ministry of Oil and Gas (MOG).
This amendment, we understand, is in line with the Government's objective to centralise energy-related policymaking in the Sultanate, through which the government aims to achieve better coordination and a more efficient allocation of the energy sources in the Sultanate. This policy direction is not unique to Oman and follows common regional practice as a number of governments in the region adopt a similar structure. For example, the United Arab Emirates' Ministry of Energy and Industry is the body entrusted with overseeing and deciding policy on petroleum, minerals, electricity supply and water security.
To complement this policy direction, the Government issued two other Royal Decrees on the same day as the Amending Law. The first changes the name of PAEW to the Public Authority for Water (RD 42/2018). The second (RD 40/2018) transfers to MOG all of PAEW's electricity-related competencies as set out in the law issuing PAEW's Regulations (RD 58/2009).This is an interesting development; it remains to be seen whether or not MOG will have the same policy views for the sector as PAEW.
Pursuant to the Amending Law, the Authority for Electricity Regulation – Oman (AER) is now required to submit its annual report to MOG (as opposed to PAEW) as well as to the Ministry of Finance (MOF). Further, MOG is now responsible for recommending members for the AER; this was previously done by PAEW in coordination with MOF.
AER's additional powers
In addition to assigning PAEW's electricity-related functions to MOG, the Amending Law provides AER with new powers. For example, it is AER (and not PAEW) that is now responsible for issuing Permitted Tariff Regulations, subject to the ultimate approval of the Council of Ministers.
Pursuant to the Amending Law, AER now has the power to issue regulations to encourage the production and sale of electricity using renewable energy sources. To achieve this, the Amending Law gives AER discretion to define terms, conditions, procedures and technical regulations. It is likely that this will help AER in implementing its renewables energy initiative, Sahim, which translates as "contribute". Sahim promotes the use of rooftop-mounted solar panels to generate electricity in homes as well as public and private facilities, to reduce the reliance on traditional sources of energy and, potentially, to produce a surplus of power that can feed into the network.
Additionally, the Amending Law amends Article 112(5)(f) of the Sector Law so that AER may oblige licensed suppliers to purchase output from auto-generators on behalf of the Oman Power and Water Procurement Company (OPWP). This is a change from the previous position, where the purchase of output from auto-generators was restricted to surplus output. Removing such restriction is likely to provide further support for the Sahim initiative, by providing a further source to support the national electricity network.
The Amending Law does not appear to make any significant changes in the regulatory framework of the electricity and related water sector, other than the new role for MOG. This is expected to be welcomed by industry players given the sector's successful track record in procuring independent power projects and substantial debt capital markets offerings. The Amending Law can be said to facilitate the government's new policy direction, which aims at increasing efficiency in the energy sector and ensuring the Government's ability to meet future energy demands. The amendments are likely to be welcomed by those interested in renewable energy as they are likely to provide support to the Government's renewable energy policy and its plans to diversify its energy sources, as evidenced in the state-owned power and water procurer's recent efforts to procure Oman's first large-scale solar IPP.
Note also that the release of tender documents for the privatisation of Oman's transmission operator and some or all of its distribution and supply businesses is understood to be imminent.