A strategic step to support the national economy
In a move aimed at enhancing the competitiveness of vital production sectors in Saudi Arabia, the Electricity Regulatory Authority announced a comprehensive revision of the "High-Consumption Electricity Tariff." Applications for this reduced tariff will be accepted in three phases, beginning next April, targeting industrial, commercial, and agricultural facilities that meet specific energy efficiency standards.
The general context within the Kingdom's Vision 2030
This initiative is an integral part of the Kingdom's Vision 2030, which aims to diversify the economic base and reduce dependence on oil. Energy price reforms are a cornerstone of this vision, as the country shifts from a blanket subsidy policy to a targeted subsidy system that rewards efficiency and incentivizes conservation. This approach aims to build a more sustainable and resilient economy, encouraging the growth and prosperity of non-oil sectors by reducing their operating costs, thereby enhancing their competitiveness in both domestic and international markets.
The importance of the initiative and its expected impact
These adjustments are expected to have a multifaceted positive impact. Domestically, the reduced tariff will lower production costs for factories, farms, and large companies, positively impacting final consumer prices and increasing company profitability, expansion capacity, and job creation. This mechanism also encourages establishments to adopt modern, more energy-efficient technologies, reducing waste and contributing to the stability of the national electricity grid. Internationally, providing a competitive energy-cost operating environment makes the Kingdom a more attractive destination for foreign direct investment in the industrial and manufacturing sectors.
Eligibility requirements and technical specifications
To ensure that support reaches those who truly need it and achieves the desired goals, the authority has established a set of precise conditions and controls. These conditions include:
- Electrical load factor: The annual electrical load factor of the facility must not be less than 80%, with emphasis that if it falls below 76%, it will result in immediate disqualification.
- Independent meters: The new legislation requires establishments to install independent electricity meters for eligible activities, to ensure the accuracy of consumption calculation and to separate it from any other ineligible activities.
- Financial data: Applicants must submit audited financial data showing the ratio of electricity costs to total operating costs, via a dedicated electronic portal to ensure transparency.
The authority warned against providing any misleading data, stressing that penalties could include retroactive billing and referring violators to the competent authorities.
Application and annual review mechanism
The draft outlines three application periods, running from April to October each year, to ensure a smooth process and accurate eligibility checks. Continued access to the tariff is contingent upon annual verification, conducted in January, during which the service provider reviews the beneficiary's compliance with technical requirements and approved energy efficiency standards. The amendments also provide flexibility for facilities wishing to withdraw from the tariff, while obligating them to pay any outstanding financial differences if they failed to meet the required load factor during the previous application period.
