What's The Electricity Market

The electricity sector in Oman is governed by the law for the Regulation and Privatisation of the Electricity and Related Water Sector (the Sector Law). The Sector Law was promulgated by Royal Decree 78/2004 and amended by Royal Decrees 59/2009 and 47/2013. The Sector Law establishes the duties and responsibilities of the entities involved in the market.

Before the introduction of the spot market, the procurement of electricity by PWP had been done through Power (and Water) Purchase Agreements (the P(W)PA) that are valid for a contracted period of 15 years for an IPP and 20 years for an IWP. Since the early plants got closer to the end of their terms, the question as what to do with them was raised. A study conducted concluded that the optimal way to move forward entails having a revised tendering process in addition to introducing the spot market.

Under the spot market, expiring plants are able to submit cost reflective offers for energy on a daily basis, and they are all paid the same price (System Marginal Price). The benefits of introducing the spot market include increasing the residual value of the plants after their contracts expire and ensuring that plants with higher efficiency are prioritised in dispatch.

Generators holding P(W)PA’s when the market operations are initiated are also required to submit offers into the market. However, they are settled and invoiced as per P(W)PAs.

The Market Rules provide details that regulate all parts of the spot market including the obligations on all entities involved in the spot market.

The Parties to the Market Rules are:

• the Generators;
• PWP in its capacity as Power Procurer;
• PWP in its capacity as Market Operator; and
• Oman Electricity Transmission Company

The Authority is not a Party to the Market Rules but is assigned certain functions under the Market Rules as prescribed under the Sector Law.