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To insure that supplies of electricity and desalinated water products provided to consumers in the Kingdom are: Adequate Reliable Of high quality, and Fairly priced.

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Electricity & Cogeneration Regulatory Anuthority 2014 Activities and Achievements Report 2013 - Riyadh 297x210mm 120 pages REDMEC 16583523 1. Electricity & Cogeneration Regulatory Authority- Reports-Saudi Arabia AZ 2. Dewey 1428-2329 2 TABLE OF CONTENTS

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ACTIVITIES AND ACHIEVEMENTS OF THE AUTHORITY IN 2013

August 2014

5 PART I

6 PART I

TABLE OF CONTENTS

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SubjectPage Subject Page

SUMMARY OF THE REPORT 11 Chapter 4: LAWS AND REGULATIONS 36 PART I 4-1 Updating the Electricity Law Project 36 General Background 4-2 Updating the “Provision of Electricity Service Manual”: 36 Chapter 1: THE SECTOR AND THE INDUSTRY 18 36 1-1 The Electricity and Water Desalination Sector 18 4-2-1 Reducing the Period for a New Service Connection 1-2 The Electricity and Water Desalination Industry 19 4-2-2 Changing the Billing Mode of Small Value Bills 37 1-2-1 The Electricity Industry 19 4-2-3 Connection and Consumption Agreements 37 4-2-4 Updating the Rules for Service Disconnection and 1-2-2 The Water Desalination Industry 19 37 Collection of Debts 4-3 Study to Evaluate Power Purchase Agreements from Inde- Chapter 2: OVERVIEW OF THE AUTHORITY 20 38 pendent Power Producers 2-1 The Authority’s Goals and Remit 20 4-4 Preparation of a Framework for Regulation of Electric- 38 2-2 Organizational Structure of the Authority 21 ity and Desalinated Water Production Using Atomic and Renewable Energy 4-5 Codes Supervision Committees: 39 PART II 4-5-1 The Saudi Transmission Code 39 ACTIVITIES AND ACHIEVEMENTS OF THE 4-5-2 The Saudi Distribution Code 39 AUTHORITY IN 2013 4-5-3 The Water Desalination Code 39 Chapter 1: CONSUMER CARE 26 1-1 Updating the (Provision of Electricity Service Manual) 26 Chapter 5: LICENSING 40 1-2 Dissemination of Information Regarding the Mechanism of 26 Submitting Complaints Electronically 5-1 Permits 41 1-3 Field Visits to Facilities of a Service Provider 26 5-2 Licenses 41 1-4 Enhancing the Consumers Complaints Handling System 27 5-3 Exemptions from Licensing 41 1-5 Review and Handling of Consumers Complaints 28 5-4 License Forms 41 1-6 Plan to Provide Plantations, Villages, Hamlets , and Urban 31 Settlements with Electricity Service Chapter 6: E LECTRICITY AND WATER DESALINA- (OHFWULFLW\%LOO3DUWLDO6XEVLG\WR%HQHÀFLDULHVRIWKH6RFLDO 42 TION PLANS Security System 31 6-1 Development of the Electricity Industry Restructuring 42 3URSRVDOWR([SDQGWKH&DWHJRULHVRI%HQHÀFLDULHVRIWKH 31 Plan Electricity Bill Partial Subsidy 6-2 Long Term Plan for Water Desalination and Electricity 45 Generation Projects, and Determination of their Fuel Needs 32 Chapter 2: SERVICE PROVIDERS AFFAIRS 6-3 Study of Water and Electricity Uses 45 2-1 “Service Providers Affairs” Department 32 Chapter 7: SERVICE QUALITY AND PERFOR MANCE 2-2 Electricity and Water Desalination Industry Accidents 32 46 MONITORING 2-3 Transgressions Against Service Providers Facilities 32 7-1 Auditing Licensees’ Performance KPIs 46 2-4 Handling Encroachments on the Electricity Lines Rights of Way 33 7-2 Plan for Enhancing Reliability of the Electricity Network 52 ,QFOXVLRQRI(&5$6HQLRU2IÀFHUVLQ6(&·V$XWRPDWLF$OHUW 7-3 Development of a Strategy for Smart Meters and Smart 33 54 System for Major Electricity Outages Grids in the Kingdom 7-4 Study of SEC's Financial and Accounting Performance 56 KPIs Chapter 3: TARIFFS 34 7-5 Electricity Interconnection with Regional Grids: 57 3-1 Charges for Use of the Transmission Network System 34 7-5-1 GCC Interconnection 57 3-2 Power Factor Improvement Incentives 34 7-5-2 Interconnection with the Arab Republic of Egypt 57

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SubjectPage Subject Page

Chapter 8: PUBLIC RELATIONS AND INFORMATION 58 PART IV 8-1 Second Publicity Campaign to Inform Consumers about 58 their Rights and Responsibilities THE ELECTRICITY AND WATER DESALINATION 8-2 The Electricity Industry Statistical Yearbook 58 INDUSTRY IN 2013 8-3 Advertising in the Blue Pages Directory of the Riyadh 74 58 Chapter 1: THE ELECTRICITY INDUSTRY Chamber of Commerce and Industry 1-1 Generation 74 8-4 Participation in Exhibitions Concurrent with Other Activities 59 8-5 Communications with the Media 59 1-2 Transmission 76 1-3 Distribution 76 Chapter 9: HUMAN RESOURCES AND FINANCIAL 82 AFFAIRS 60 1-4 Service Connection to Consumers 9-1 The Work Environment 60 1-5 Growth Trends in the Past Decade 84 9-2 Training and Scholarships 60 1-6 Fuel Types Used in Energy Production 85 9-3 Human Resources Development Project 61 9-4 Project for Measurement of the Authority’s Administra- 1-7 Energy Unit Cost 86 61 tive Performance 1-8 Government Subsidy to Reduce Electricity Sale Price to 86 9-5 ECRA’s Budget 61 Consumers 9-6 The General Reserve 63 1-9 Average Energy Unit Sale Price 87 Chapter 10: E-MANAGEMENT AND IT 64 10-1 E-Management 64 Chapter 2: THE ELECTRICITY TARIFF 88 10-2 “Murasalat” System 64 2-1 A Brief History of the Electricity Tariffs in the Kingdom 88 (OHFWURQLF&HUWLÀFDWLRQ 64 2-2 The Current Tariff 90 Chapter 11: OTHER ACTIVITIES 65 2-3 Residential Monthly Bill Data 94 11-1 Glossary of the Body of Knowledge on Infrastruc- ture Regulation 65 96 11-2 Cooperation with Regional and International Organizations 65 Chapter 3: WATER DESALINATION 11-3 Cooperation with King Abdulaziz City for Science and 3-1 Production of Desalinated Water 96 65 Technology 3-2 Transportation of Desalinated Water 99 11-4 Cooperation with King Abdullah Petroleum Studies and 65 Research Center (KAPSARC) 3-3 SWCC Annual Desalinated Water Production Capacity 100 3-4 Production Capacity Factor 100 PART III REPORT OF THE ELECTRICITY INDUSTRY 3-5 Electricity Generation in SWCC 100 DISPUTE RESOLUTION COMMITTEE 3-6 SWCC Restructuring Plan 100 Chapter 1: GENERAL BACKGROUND 68 1-1 Composition of the Committee 68 Chapter 4: PRIVATE SECTOR PARTICIPATION IN THE 1-2 Jurisdiction of the Committee 68 ELECTRICITY AND WATER DESALINATION 102 1-3 Modus Operandi of the Committee 68 INDUSTRY 4-1 The Electricity Industry 102 Chapter 2: ACTIVITIES OF THE COMMITTEE 69 4-2 The Water Desalination Industry 103 2-1 Cases Received by the Committee: 69 2-1-1 Cases on the Docket from Previous Years 69 APPENDIX 105 2-1-2 Cases Received by the Committee in 2013 69 AUTHORIZATIONS, LICENSES, AND EXEMPTIONS 2-2 Comparison with the Previous Year of Cases Received by 70 FROM LICENSING the Committee and Cases Resolved THE BOARD OF DIRECTORS 114 2-3 Analysis of Cases by Type of Complaint 71 EXECUTIVE MANAGEMENT 115

9 SUMMARYSUMMARY OF THETHE REPREPORTORT

10 SUMMARY OF THE REPORT

SUMMARY OF THE REPORT

11 This report consists of four parts: Part I: Contains a general background of the electricity and water desalination* sector in Saudi Arabia including a EULHIGHÀQLWLRQRILWVFRPSRQHQWVDQGDQRYHUYLHZRI7KH(OHFWULFLW\ &RJHQHUDWLRQ 5HJXODWRU\$XWKRU- SUMMARY OF ity (ECRA). Part II:$LPVFKLHÁ\WRJLYHDFRPSOHWHSLFWXUHRIWKH$XWKRULW\·VDFWLYLWLHVDQGDFKLHYHPHQWVLQ THE REPORT Part III: Reports the activities of the Electricity Industry Dispute Resolution Committee***in 2013. Part IV: Presents a description of the state of the electricity and water desalination industry**** in 2013, and other issues related to this industry.

7KHIROORZLQJLVDVXPPDU\RIWKHPRVWVLJQLÀFDQWDFWLYLWLHVDQGDFKLHYHPHQWVRIWKH$XWKRULW\LQWKHÀVFDO\HDU 2013 within the purview of its mandate, listed in the order appearing in Part II of this report:

Consumer Care Updating the “Provision of Electricity Service Manual”. Publishing a booklet explaining the procedure for submitting consumer complaints. 0DNLQJÀHOGYLVLWVWRVHUYLFHSURYLGHUVIDFLOLWLHVWRLQYHVWLJDWHFRQVXPHUFRPSODLQWV Enhancing the complaint handling system. Dealing with 452 consumer complaints regarding the Saudi Electricity Company (SEC) services, and resolving about 93% of those complaints. Continuing participation in the work of the committee responsible for the plan to connect electricity services to farms, villages, hamlets, and urban settlements. &RQWLQXLQJFRRSHUDWLRQZLWKWKH0LQLVWU\RI6RFLDO$IIDLUVWRLQFUHDVHWKHQXPEHURIEHQHÀFLDULHVRIWKHVRFLDO security system who receive electricity bill payment assistance.

* Water Desalination: The process of producing desalinated water without concomitant production of electricity or steam. ** Cogeneration: The simultaneous production of electricity and desalinated water (or steam, or both steam and desalinated water) used in other production processes. *** Electricity Industry Dispute Resolution Committee: A committee, independent of the Authority, formed by a Council of Ministers decision. **** The electricity and water desalination industry: Electricity services that Persons undertake or intend to undertake, which include electricity generation, cogeneration, transmission of electricity, its distribution, supply and trading; water desalination, its transportation to points of distribution, and trading in desalinated water. 12 Service Providers Affairs Creating a new “Department of Service Providers Affairs”. ,QYHVWLJDWLQJHOHFWULFLW\DFFLGHQWVWKDWUHVXOWHGLQÀYHIDWDOLWLHVLQVHUYLFHSURYLGHUIDFLOLWLHV 7DNLQJFKDUJHRILPSRVLQJÀQHVDQGDVVHVVLQJGDPDJHVFDXVHGE\WUDQVJUHVVLRQDJDLQVWIDFLOLWLHVRIWKHHOHFWULFLW\ SUMMARY OF service providers. THE REPORT Handling cases of encroachment on electricity lines rights of way. $GGLQJWKH$XWKRULW\·VVHQLRURIÀFHUVWRWKH6(&PDMRUHOHFWULFLW\RXWDJHVDXWRPDWLFDOHUWV\VWHP Tariffs Issuing a detailed schedule of costs for use of the electricity transmission network. Cooperating with the service providers to educate and inform those consumers affected by the decision regarding incentives to enhance the “power factor”. Issuing a Board decision with a recommendation to the Council of Ministers to set a tariff for peak load consump- tions. Codes and Regulations The team charged with reviewing and updating the Electricity Law, in which the Authority participated as an active member, has completed its task during the report year. In accordance with standard procedures, the Ministry of Water and Electricity is undertaking the responsibility of submitting the draft law to higher authorities for consideration of adoption. Updating “Provision of Electricity Service Manual”, that included: Reducing the electricity new service connection from sixty calendar days to thirty workdays. Changing the billing method for monthly bills that amount to less than SR100. Appending to the Manual the connection agreement and the consumption agreement. Requiring the service provider to register the electricity meter in the name of the actual consumer rather than the property owner. Consolidating all debts of a single consumer in one record. Undertaking a study to evaluate the power purchase agreements from the independent power producers (IPPs) and the independent water and power producers (IWPPs). Executing a study to develop a comprehensive regulatory framework for the codes, procedures, and license forms required for the electricity and water desalination projects that use atomic and renewable energy. 3XUVXDQWWRUHFRPPHQGDWLRQVRIWKH6DXGLHOHFWULFLW\WUDQVPLVVLRQFRGHVXSHUYLVLRQFRPPLWWHHDGRSWLQJÀYH amendments to several articles of the code and approving sixty six exceptions to some articles of the same code. 3XUVXDQW WR UHFRPPHQGDWLRQV RI WKH 6DXGL HOHFWULFLW\ GLVWULEXWLRQ FRGH VXSHUYLVLRQ FRPPLWWHH DGRSWLQJ ÀYH amendments to several articles of the code. Completing translation of the desalinated water code into Arabic by the code supervision committee.

13 Licensing %\WKHHQGRIWKHÀVFDO\HDUWKH$XWKRULW\LVVXHGWKHIROORZLQJSHUPLWVOLFHQVHVDQGH[HPSWLRQVIURP licensing: SUMMARY OF Seven permits for electricity generation, cogeneration, and water desalination. THE REPORT Thirty-eight licenses for electricity generation, transmission, trading, and distribution; cogeneration; water desalination; and ownership of an electricity network. Nineteen exemptions from licensing for power generation, cogeneration, and water desalination plants &RQWLQXLQJWKHZRUNRQSUHSDUDWLRQRIWKHÀQDOIRUPRIWKHSULQFLSDOEX\HUOLFHQVH Electricity and Water Desalination Plans Pursuing commitment of SEC to fully implement all parts of the Development of the Electricity Industry Restruc- turing Plan. Continuing work on the study of the long term plan for desalinated water and power generation projects, and their fuel needs. Constituting a work team to investigate typical types of water and electricity uses. Quality of Service and Performance Monitoring Auditing licensees performance KPIs and providing them with recommendations for improvement. Completing a plan to enhance reliability of the electricity network in the Kingdom. Developing a strategy for smart meters and smart grids in the Kingdom. 3XUVXLQJ6(&·VLPSOHPHQWDWLRQRIDSURJUDPRIÀQDQFLDODQGDFFRXQWLQJ.3,V Continuing participation in the work of the GCC electricity connection advisory and regulatory committee, and following up developments of the project for grid connection with the Arab Republic of Egypt. Public Relations and Information Undertaking preparation for the second TV, press, and other media campaign to educate and inform consumers about their rights and responsibilities. Publication of the 5th edition of the Electricity Industry Statistical Yearbook. Participating in several exhibitions held concurrently with conferences and symposia in order to disseminate information about the Authority. Holding TV interviews and publishing articles in newspapers to inform consumers about the importance of electricity and water conservation; and to answer the general public’s inquiries about the electricity and water desalination industry and its regulation.

14 Human Resources and Finances 7KHQXPEHURIEHQHÀFLDULHVRIWKHIUHHLQWHUHVWORDQSURJUDPIURPWKHHPSOR\HHVÀQHVDFFRXQWIURPWKHVWDUWRI the program till the end of the report year reached 52. They received loans totaling more than SR1.4 million. Work on the human resources (HR) development project continued. It included reviewing the organizational SUMMARY OF structure of the Authority, analyzing all staff positions, developing career paths, reviewing the procedure for em- THE REPORT SOR\HHV·SHUIRUPDQFHHYDOXDWLRQVDQGRWKHU+5SURFHGXUHV7KHSURMHFWLVH[SHFWHGWREHFRPSOHWHGLQWKHÀUVW quarter of 2014. Cooperation with the Public Administration Institute continued to implement a project for measuring the Author- ity’s administrative performance. Total income from licensing fees reached SR132.9 million. Total expenses for the year were SR121.8 million, of which SR20 million was allocated for construction of the Authority’s permanent headquarters building. E-Management and IT Replacing the staff desktop PCs with newer models, and replacing the network servers to reinforce the protection. system. &RPPHQFHPHQWRIZRUNWRXSGDWHWKHV\VWHPRIHOHFWURQLFZRUNÁRZ ,PSOHPHQWLQJGLJLWDOFHUWLÀFDWLRQLQ(&5$DQGDSSURYLQJLWVVWDWXVDVDQRIÀFLDOFHQWHUIRUGLJLWDOFHUWLÀFDWLRQ Other Activities Continuing work on translation of the Glossary of the Body of Knowledge on Infrastructure Regulation in collaboration with the Public Utilities Research Center (PURC) of the University of Florida, USA. Continuing cooperation with regional and international organizations in the areas of the Authority’s remit. Signing a memorandum of understanding (MoU) with King Abdulaziz City for Science and Technology (KACST) for cooperation to undertake studies and research in water and electricity. Signing a MoU with King Abdullah Petroleum Studies and Research Center (KAPSARC) to cooperate in carrying out studies, research, and information development.

15 SUMMARY OF THE REPORT

16 SUMMARY OF THE REPORT

PART I GENERAL BACKGROUND

17 CHAPTER 1 THE SECTOR AND THE INDUSTRY

1-1 The Electricity and Water Desalination Sector The electricity and water desalination sector* consists of the following components: Consumers: Natural or corporate persons who purchase products of the electricity and water desalination industry for their own use. Ministry of Water and Electricity: Has responsibility to propose public policies and draft plans and programs to develop the electricity and water desalination industry. Electricity & Cogeneration Regulatory Authority (ECRA): Regulates the industry and issues licenses to any person who engages in any of the activities of the electricity and water desalination industry. It also monitors performance of the licensees, sets rules and regulations that govern the relationships between the licensees, and between them and PART I the consumers. The following chapter contains details of the Authority’s goals, responsibilities, and areas of interest. Electricity and Water Desalination Industry: Composed of entities licensed by the Authority such as SEC, SWCC, Jubail and Yanbu Electricity and Water Utilities Company (MARAFIQ), and other entities as shown in this report to engage in any of the electricity activities, e.g. electricity generation, desalinated water or steam production (concomitant with generation of electricity), transportation of these products, their distribution to consumers, or trading in them.

* Some people confuse the term electricity and water desalination sector with the term electricity and water desalination industry and use both of them interchange- ably as synonyms. The correct use is that the sector includes the consumers, the Ministry, the Authority and the industry, while the industry is one component of the sector. 18 1-2 The Electricity and Water Desalination Industry The electricity and water desalination industry consists of two components: 1-2-1 The Electricity Industry At present, SEC is the dominant player in this industry, as will be shown in Part IV of this report. It is a joint stock company whose shares are publicly traded on the Saudi Capital Market. The Saudi Government along with Saudi Aramco jointly own more than 81% of SEC’s shares. The company is engaged in electricity generation, transportation*, and distribution. SWCC supplies a significant percentage of the energy sold by SEC. MARAFIQ supplies Yanbu industrial city with its needs for electricity and desalinated water as well as other services. There is also a number of independent generation plant owners who supply electricity to large consumers directly. PART I In the past few years a number of IPPs and IWPPs were built. Another group of these projects are currently under construction or under bidding. These projects sell their electricity production to SEC and their water production to SWCC. ECRA’s Board adopted a plan for the electricity industry restructuring development **. The plan envisages unbundling the current vertically integrated structure into independent entities for generation, transmission, and distribution. This is done to create an environment that will be attractive for private sector investment, will entice competition wherever possible, bolster transparency, and increase efficiency and specialization of management. It is obvious that competition will be most pronounced in the areas of generation and provision of service.

1-2-2 The Water Desalination Industry SWCC is the dominant entity in this area. Currently it is a government agency. However, a few years back it embarked on an ambitious program to privatize some of its operations. Preparation of the plans was completed and they were submitted to the higher government authorities for approval. Implementation of the restructuring plans will introduce competition, a practice hitherto unknown in this area. There are several IWPPs that have been completed and have began production, while a number are either under construction or in bidding. These projects will provide a significant portion of the Kingdom’s needs of desalinated water.

* In 2011 The National Electricity Transmission Company was established as a limited liability corporation, wholly owned by SEC, for the purpose of transmitting power from the generation stations to the distribution networks. ** See (The Electricity Industry Restructuring Development Plan) on page 42. 19 CHAPTER 2 OVERVIEW OF THE AUTHORITY

2-1 The Authority’s Goals and Remit 7KH(OHFWULFLW\ &RJHQHUDWLRQ5HJXODWRU\$XWKRULW\ (&5$ ZDVHVWDEOLVKHGLQ ZLWKWKHDLPRILQVXULQJWKDW consumers in the Kingdom obtain electricity supplies; and products of cogeneration and water desalination that are adequate, reliable, of high quality, and at reasonable prices. To carry out these objectives the Authority monitors the performance of service providers, within a regulatory framework that is consistent with the government’s laws, its decisions and policies, and the applicable standards in the King- dom as well as international best practices. The main goals of the Authority are: Protection of the public interest and the rights of consumers. Promotion of consumer oriented electricity, water desalination, and cogeneration services that protect the consumer’s PART I right of choice among competing service providers. Encouragement of private sector investors to participate and invest in the development of the Saudi electricity and water desalination industry, protecting their interests, and enabling them to realize fair economic returns on their investments. Formation of a clear, transparent, stable, and non-discriminatory regulatory framework for the electricity and water desalination industry. Creation of a favorable environment that encourages legitimate and fair competition among providers and suppliers of electricity and also in the water desalination industry.

The Electricity Law and the Authority’s Charter delineate the responsibilities entrusted to ECRA by the government to achieve its objectives. Specifically, these responsibilities cover four areas as follows: Supply Matters Issuing licenses for generation, transmission, distribution, retailing, and trading of electricity and cogeneration services as well as production, trading, and transportation of desalinated water; monitoring licensees’ compliance with their license requirements and conditions; development of unified regulatory accounting and reporting procedures for electricity, cogeneration, and desalination providers; coordination of the infrastructure of the electricity and water desalination industry, and development of the expansion plans of these industries. Consumer Issues Assessment of tariffs charged for supply of electricity, cogeneration, and water desalination services, periodic review of these tariffs, and when modification is needed, modifying whatever tariffs fall within its purview while for other tariffs submitting proposals to the government, protecting interests of stakeholders in the industry, investigating and resolving complaints by involved parties, and improving industry performance. Technical Issues Developing and issuing best practice codes and standards for the electricity and water desalination industry, insuring compliance of the licensees with these codes and standards, monitoring implementation of the industry development SODQVLQVXULQJDGHTXDF\RIWKH5 'DFWLYLWLHVRIWKHHOHFWULFLW\DQGZDWHUGHVDOLQDWLRQLQGXVWU\SURPRWLQJHQHUJ\ conservation measures in coordination with the Ministry of Water and Electricity (MoWE), and handling other rel- evant technical matters. Organizational and Administrative Tasks Defining public interest with regard to the electricity and water desalination industry, developing regulations for expansion of the infrastructure of the industry, encouraging private sector participation and investments, and issuing periodic reports to the Council of Ministers on costs and tariffs of electricity, cogeneration, and desalination services.

* The Authority was established by Council of Ministers Decision Number 236 issued on 13 November 2001. On 5 July 2004 the Council of Ministers, by Decision Number 163, assigned to the Authority the additional responsibility of regulating the cogeneration industry. Consequently, the Authority’s name was revised WRWKHFXUUHQWDSSHOODWLRQRI(OHFWULFLW\ &RJHQHUDWLRQ5HJXODWRU\$XWKRULW\ (&5$ 2Q0D\WKH&RXQFLORI0LQLVWHUVHQDFWHGDQHZFKDUWHUIRU the Authority through the Council’s Decision Number 154 that included addition of the regulation of production and transportation of desalinated water to the existing ECRA remit. 20 2-2 Organizational Structure of the Authority ECRA is a financially and administratively autonomous organization, supervised by a board of directors chaired by the Minister of Water and Electricity, with the Governor of the Authority as deputy chair, six members from senior govern- PHQWRIILFLDOVUHSUHVHQWLQJWKHPLQLVWULHVRI:DWHU (OHFWULFLW\)LQDQFH3HWUROHXP 0LQHUDO5HVRXUFHV&RPPHUFH ,QGXVWU\(FRQRP\ 3ODQQLQJDQG6:&&DQGILYHPHPEHUVVHOHFWHGRQWKHLURZQPHULWV7KHVHFWLRQHQWLWOHG “The Board of Directors and Executive Management”, (page 113) shows the composition of the Board in 2013. As per Article 7 of the Authority’s Charter, the board is the ultimate authority to supervise ECRA’s affairs; adopt policies and plans for its operations; pursue implementation of laws, regulations, and directives related to public policies and the approved plans of the electricity industry and the cogeneration and water desalination projects. The Authority is headed by the Governor who is appointed by a Royal Order at the ministerial rank of “Distinguished Grade”. He is the chief executive and operating officer of the Authority. PART I The Governor is assisted by three vice-governors, and a number of permanent and temporary advisors and consultants.

The following departments report directly to the Governor: Information technology: Oversees procurement of all ECRA’s needs of IT hardware and software; and has responsibility for their maintenance, updating, and security at all times. Public Relations and Information: Maintains communication with the press and other media outlets to disseminate ECRA news and information, coordinates press interviews for the Authority’s official spokesmen, prepares informa- tional materials about the Authority, and oversees execution of public relations campaigns. Internal Auditing Unit: Undertakes means and measures to protect cash and other assets; insures accuracy and com- pleteness of financial and procedural data, and accounting records; insures effectiveness and adequacy of administrative and financial operations in order to optimize the use of available resources and guarantees compliance with the rules, instructions, policies and approved plans of the Authority that will allow it to achieve its objectives efficiently and sys- tematically, while at the same time assuring integrity and effectiveness of the internal auditing regime.

Each vice-governor heads a sector of ECRA’s operations as follows: Vice-Governor for Consumers and Service Providers Affairs Supervises the following departments: Consumer Care: handles documentation of consumers’ rights and responsibilities, investigates their complaints and claims of violations by service providers, prepares cases for referral to the Electricity Industry Dispute Resolution Com- mittee, and periodically reviews causes of consumers’ complaints and disputes in order to suggest appropriate rules and procedures to resolve them. Service Providers Affairs: handles documentation of service providers’ rights and obligations, reviews disputes and claims of violations by a service provider against another or against the Authority, prepares cases for referral to the Electricity Industry Dispute Resolution Committee, and periodically reviews causes of service providers’ complaints and disputes in order to suggest appropriate rules and procedures to resolve them.

21 Vice-Governor for Regulatory Affairs Oversees the following departments: Technical Affairs: prepares technical studies dealing with regulating the electricity and water desalination industry, develops rules to insure provision of reliable and efficient services, prepares standards of performance for licensees, and oversees their compliance with these standards. Legal and Licensing Affairs: receives applications for authorizations, licenses, and exemptions from licensing; oversees compliance of licensees with the requirements and conditions of the Law and their licenses; prepares contracts and agreements; drafts and reviews proposed rules, procedures, regulations, and forms used for the industry; and represents the Authority and defends it in litigations and courts. Economics and Tariff Affairs: conducts studies on the economics of the electricity and water desalination industry; PART I prepares studies for tariff reviews; develops indicators and incentives for consumers and service providers to encourage conservation and improve performance; and maintains the Electricity National Register and updates its contents periodically.

Vice-Governor for Support Services Oversees the following departments dealing with the Authority’s internal and back-office operations: Financial Affairs: includes accounting, purchasing, and storehouse. Human Resources: handles personnel affairs, employment, training and scholarship programs, health insurance, business travel and personnel services. Administrative Support: includes mail services, reproduction, photocopying and binding, document scanning, transportation, central archives, and office refreshment services. 3URSHUW\0DQDJHPHQW2IÀFH Oversees office furniture and equipment, space utilization, building maintenance, janitorial services, and building security.

The structure of the organization chart of the Authority is shown in Figure (1).

22 Figure (1): Organization chart of the Authority

Board of Directors

Governor's OfÀce Governor IT PART I

Internal Auditing Public Relations & Information Consultants External Auditor

Vice-Governor, Vice-Governor, Vice-Governor, Regulatory Affairs Consumers and Service Support Services Providers Affairs

Consumer Care Service Providers

Legal & Licensing Economics & Tariffs

Technical Affairs

Finance HR

Property Administrative Management Support

23 TABLE OF CONTENTS

24 TABLE OF CONTENTS

PART II ACTIVITIES AND ACHIEVEMENTS OF THE AUTHORITY IN 2013

25 CHAPTER 1 CONSUMER CARE

Based on its mission to insure that electricity and desalinated water supplies are adequate, of high quality, with high reliability, and available at reasonable economic costs; the Authority adopted an approach to the execution of its responsibilities that balances consumer rights and the legitimate interests of the service providers in order to maximize the public interest while at the same time be consistent with the requirements of the Development of the Electricity Industry Restructuring Plan which aims to create an environment that encourages the private sector to participate in the development of the electricity and water desalination industry.

During the report year, the most significant activities of the Authority in the area of fostering the interests of consumers and protecting their rights included the following:

1-1 Updating “Provision of Electricity Service Manual” During the report year the Authority updated the “Provision of Electricity Service Manual” which regulates the relationship between the consumer and the service provider and defines the procedures for providing the service to all categories of consumers. Section 4-2 of Chapter 4 in Part, II (page 36), gives details for the most salient updated points of the manual.

1-2 Dissemination of Information Regarding the Mechanism of Submitting Complaints Electronically In the report year, the Authority published a booklet that illustrates how to electronically submit consumer complaints regarding the electricity service. The Authority also placed ads in several newspapers to announce the release of a PART II computer program that permits a consumer to lodge his complaint and follow its progress within the Authority’s departments and outside them.

1-3 Field Visits to Facilities of a Service Provider Field visits are one of the most important means of interaction with the public and staff of service providers. Through these visits, the Authority is able to observe conditions at firsthand, and insure accuracy of the periodic reports submitted by service providers. The field visit locations are determined through statistical analysis of consumer complaints as well as through information gleaned from special studies that indicate trouble areas. During the year 2013 ECRA staff carried out several site visits to service providers as shown in Table 1. During the visits, staff met with consumers in the customers service offices. The staff also held meetings with the personnel in these offices to discuss customers' complaints, learn firsthand some of the difficulties faced by the service providers, determine the necessary steps to enhance customer service, and increase performance of the distribution network. The visits also included getting assurance regarding the system of managing the service providers’ contractors; and evaluating their performance and their supervision in order to verify their compliance with operational requirements and on the job safety and security while working in proximity to electrical networks.

26 7DEOH 6XPPDU\RIÀHOGYLVLWVE\(&5$VWDIIWRVHUYLFHSURYLGHUVLWHV

Location of the Visit Visit Goals 1- Investigating the frequent power outages in Hayel Hayel Electricty Regional Region, discussing their causes, and how to alleviate Headquarters them. 9LVLWLQJWKHHPHUJHQF\RIÀFHVWROHDUQDERXWWKHLUWHFK- nical and equipment capabilities.

Namass Service Bureau In situ investigation of several consumer complaints.

SEC Electricity Meters Reviewing and auditing of the modus operandi of the Maintenance and Calibration workshop, and auditing the tasks it undertakes in order to Workshop insure compliance with ECRA requirements.

SEC Jeddah Administrative Investigation of several consumer complaints regarding Headquarters the method of bill calculation. PART II SEC Riyadh Administrative Investigation and review of several consumer complaints Headquarters

Jubail and Yanbu Electricity and Water Utilities Company Investigating the tariff applied to the company’s buildings (MARAFIQ) – Jubail site and facilities.

1-4 Enhancing the Consumers Complaints Handling System Consumer care is at the top of ECRA’s priorities to insure that the service is of the highest quality, sufficient quantity, highly reliable, and priced fairly. The Authority continually strives to improve consumer services especially those concerning lodging of complaints. During the report year, the Authority introduced several enhancements to the system of filing complaints electronically. Among the most salient improvements are the following: Developing the procedure of sending SMS messages to the consumer to advise him of the status and progress of his complaint. Adding a section on frequently asked questions (FAQ). The Authority continued its efforts to disseminate information to the public and make it aware of the process of filing complaints through the system (See Section 1-2 in Chapter 1 of Part II, page 26). The Authority’s staff also assisted consumers who did not have computer access to file complaints on their behalf.

27 1-5 Review and Handling of Consumers Complaints The Authority works continuously to improve the quality and reliability of the electricity service offered to consumers through a program to measure the service providers’ performance using approved measures (KPIs). See Section 7-1 of Chapter 7 in this Part II on page 46). It also carries out analytical and statistical studies of complaints regarding the quality of service which are submitted to MoWE, the Authority, the service provider, or published in the media.

In order to attain the highest levels of consumer satisfaction with the service, ECRA pays particular attention to consumer complaints It regards this as one of the most important channels to measure the quality of electricity service.

The Authority exerts concentrated efforts to define the causes of complaints and resolve them to achieve the goal of improving the service and reach a high level of consumer satisfaction through the following measures: 3HUIRUPLQJWHFKQLFDODQGOHJDODQDO\VHVRIWKHFRPSODLQWVWRÀQGRXWWKHURRWFDXVHVXQGHUO\LQJWKHPDQGZRUN on resolving them. ,QWHUDFWLQJZLWKWKHVHUYLFHSURYLGHUVWRRYHUFRPHWKHGLIÀFXOWLHVWKDWPD\KLQGHUUHVROXWLRQRIWKHSUREOHPVDQG PDNHÀHOGYLVLWV²LIQHFHVVDU\LQDWWHPSWLQJWRUHDFKVDWLVIDFWRU\VROXWLRQV Insuring effectiveness of the service providers’ procedures to handle complaints, and introducing enhancements to the “Provision of Electricity Service Manual” or performance KPIs – as needed. Utilizing results of complaint studies in designing public relations campaigns carried out by the Authority. PART II During the report year, the Authority received 452 complaints concerning various aspects of the electricity service offered by SEC. The complaints are listed according to the SEC business sector (Figure 2) in which the complaint originated.

Figure (2): SEC business sectors

Western Sector Hayel Madinah Dammam Arabian Buraidah Gulf Riyadh Makkah Central Eastern Sector Jeddah Taif Sector Red Al-Baha Southern Sector Sea Najran Abha Jazan Farasan Islands

Arabian Sea

28 Table 2 shows the number of complaints categorized by complaint type and the sector where it originated. By the end of the report year, the Authority resolved 93% of these complaints; the remainder are still under study, review, and follow up.

7DEOH&RPSODLQWVUHFHLYHGE\(&5$LQFODVVLÀHGE\W\SH and SEC business sector where they originated

The SEC Business Sector Where the Complaint Originated Complaint Type Total Eastern Central Western Southern

Service Connection 6 41 31 20 98

Billing and Tariffs 54 23 96 14 187

Removal of Cables 5 8 13 19 45 Service Outage 2 20 25 29 76 PART II Quality of Service 1 2 2 5 10

Other Complaints 7 6 15 8 36

Toral 75 100 182 95 452

Studying the information in the table: The total number of complaints received in 2013 decreased markedly, by 32%, compared to the previous year. The number of billing complaints jumped 43% from the previous year. Most of these complaints originated in the Western Sector. Upon study of this issue, it became evident that SEC had increased its use of computer programs to audit the bills and examine the meters physically in situ. As a result of this effort, the company was able to determine if the meters were malfunctioning or they had been tampered with. Subsequent corrective measures lead to a rise in this type of complaint. Complaints concerning new service connections rose by approximately 11% compared to the previous year. This type of complaint included the following: Complaints of delay in getting the connection. Complaints regarding the cost of the service connection. Complaints of property owners who do not possess titles to their lots. The number of complaints regarding service outages decreased substantially, by almost 80%, compared with the previous year. Most of these complaints originated in the Southern or Western sectors.

29 The category labeled “Other Complaints” in Table 2 includes complaints regarding requests for transfer of meters to other locations, establishing emergency centers, objecting to the value of compensation for eminent domain actions connected with the rights of way for electricity lines, trenching in front of houses, and other such complaints.

Figure (3) shows the percentage distri- Figure (3): Percentage distribution of the types of bution of the various complaints. It is complaints evident from the chart that complaints

about tariffs and billing represent about Quality of Service 2% 40% of the total, while complaints Other Complaints about service connections represent 8% Srvice about 22%. Service Connections Disruptions 22% 17%

Relocation of Substations and Relocation of Billings and Tariffs Transformers CablesCompensation and Requests 7% for 41% 3% PART II

Viewing complaints by the SEC busi- Figure (4): Percentage distribution of complaints by ness sector from which they originated the SEC sector where they originated (Figure 4), it is clear that most of the complaints, almost 40%, were in the western sector.

Central Sector Eastern Sector 22% 17%

Southern Sector 21% Western Sector 40%

30 Western Sector complaints are attributed mainly to problems of billings and tariffs as was explained in the preceding paragraphs, while complaints from the Central Sector were mostly caused by service connection delays. The complaints of the Southern Sector were largely caused by service outages which are attributed to the following: The major portion of the electricity network in the Southern Sector is composed of overhead lines and thus it is negatively impacted by adverse weather conditions. The sector network serves many scattered and widely separated villages and hamlets that require long overhead lines to provide the service. These locations are in rather inaccessible mountainous regions that make maintenance operations very tenuous, and resumption of service in case of disruption takes a very long time.

During the report year, the Authority continued its efforts with SEC to deal with the problems which were revealed in the study of causes of power outages especially in electricity transmission and distribution operations. See Section 7-2 (page 52) that deals with the electricity service in general and tardiness of service connections. Based on the information derived from measurement and auditing of performance KPIs (Section 7-1 page 46), the Authority pursues with SEC implementation of the recommendations that delineated the service performance improvement procedures. The Authority pointed out to SEC that implementation of many of these recommendations does not necessarily require investments of large amounts of capital. ECRA expects that its diligent pursuance of these issues with SEC will result in mitigation and resolution of these problems and complaints. PART II

1-6 Plan to Provide Plantations, Villages, Hamlets , and Urban Settlements with Electricity Service A standing committee composed of members from MoWE, ECRA, and SEC continually updates the plan to connect the electricity service to all approved plantations, villages, hamlets, and urban settlements throughout the Kingdom. Implementation of the plan is self-financed by SEC. As of the end of the fiscal year 2013, 80% of the plan was completed. In the report year, the committee continued its work and commenced work to develop a new quinquennial plan for the years 2015-2019.

(OHFWULFLW\%LOO3DUWLDO6XEVLG\WR%HQHÀFLDULHVRIWKH6RFLDO6HFXULW\6\VWHP Pursuant to the agreement for cooperation between ECRA and the Ministry of Social Affairs (MoSA), the Authority during the report year continued the work of following up and development of the program of partial subsidy of the electricity bills for beneficiaries of the social security program which was launched on July 23, 2009. During the report year the number of electricity meters of beneficiaries covered by the program increased from around 270,000 to around 350,000. Work is still in progress with MoSA and other government agencies to increase this number to a half million meters in the next few years.

3URSRVDOWR([SDQGWKH&DWHJRULHVRI%HQHÀFLDULHVRIWKH(OHFWULFLW\%LOO3DUWLDO6XEVLG\ During the report year, the Authority took advantage of the experience it gained from the program with MoSA for partial subsidy of the electricity bill for beneficiaries of the social security system to develop a proposal to provide similar assistance to another class of low-income citizens for whom there exist clear and verifiable evidence of their limited monthly incomes. The proposal was submitted to higher authorities for consideration. This effort by ECRA stemmed from its responsibility to foster the public interest and put government subsidy to the electricity industry on rational basis by directing it to the really needy categories. This process will make it possible in future to develop rational tariffs that maintain the balance between social considerations and the electricity industry need for adequate income to insure its sustainability, without the need for subsidy from the public treasury. The ration- alized tariffs also encourage conservation practices.

5HFLSLHQWVRIWKHVRFLDOVHFXULW\V\VWHPEHQHÀWVLQWKH.LQJGRPDUHWKHORZLQFRPHIDPLOLHVDQGLQFOXGHRUSKDQVZLGRZHGRUGLYRUFHGZRPHQIDPLOLHVRI persons in the penal system, and those without a provider. At the time of the report this group numbered around 700,000 recipients, representing about 10% of residential electricity consumers. 31 CHAPTER 2 SERVICE PROVIDERS AFFAIRS

2-1 “Service Providers Affairs” Department The Development of the Electricity Industry Restructuring Plan* envisions the existence of a large number of entities (the so-called service providers) that are active in the various aspects of this industry, i.e., generation, transmission, distribution, or service provision. As steps to implement the plan accelerate, the number of entities licensed to undertake electricity activities has grown. ECRA realized from the beginning the need for a department that will promote the needs of the service providers and advance issues and matters of interest to them. In particular, the department will focus on the following areas: Documenting the rights and responsibilities of the service providers. Pursuing violations against the service providers’ facilities, and investigating disputes between service providers with a view to resolving them. Overseeing adherence of the service providers to the conditions of their licenses and requirements of the Development of the Electricity Industry Restructuring Plan. Investigating electricity and water desalination industry accidents. During the report year, a director of the department along with several staff members were appointed.

2-2 Electricity and Water Desalination Industry Accidents In 2013, there were seven accidents in the electricity industry that seriously affected the safety of personnel and prop- PART II erty. The accidents resulted in four fatalities and seven injuries to SEC’s and its contractors’ staff. The Authority reviewed and audited details of these mishaps and informed SEC about the measures it must undertake to avoid repetition of such accidents. It also pursued with the company an effort to insure implementation of previous recommendations which required it to establish and put into action a comprehensive safety program.

2-3 Transgression against the Service Providers Facilities ,QWKH0LQLVWHURI:DWHU (OHFWULFLW\LVVXHGDQH[HFXWLYHRUGHUUDWLI\LQJWKH%\ODZVRI5XOHVRI$IIDGDYLWVDQG Estimation of Costs of Repairs, Compensations, and Determination of Penalties for Breaches against Service Providers Facilities. The bylaws were issued in compliance with requirments of the “Protection of Public Utilities Law”. The ministerial order included delegation to ECRA’s Governor powers, in conformity with the bylaws, to impose fines, cost of repairs, and compensation for damages resulting from infringement against facilities of the electricity utility. In order to determine the most appropriate mechanisms to carry out these resposibilities, the Authority organized three workshops with SEC to discuss procedures to investigate cases of agression against the company’s facilities. The Au- thority also formed the “Committee for Review of Complaints and Violations Involving Transgressions against Service 3URYLGHUV)DFLOLWLHVDQGFKDUJHGLWZLWKWKHUHVSRVLELOLW\RILQYHVWLJDWLQJYLRODWLRQVDQGDGMXFDWLQJWKHP Shortly after it was formed, the committee commenced reviewing cases of violations and transgressions against service providers facilities that were transferred to it by SEC. The number of cases thus transferred was 4,834 divided into two main categories: Tampering with meters 2284 cases. Transgression on the network or facilities 2550 cases.

* See Section 6-1 the “Development of the electricity industry restructuring plan”, page 42. 32 Table (3) shows details of transgressions in each SEC business sector.

Table (3): Number of breaches against facilities of SEC in each business sector in 2013

Breaches Meter Business Sector against Network Tampering Total or Facilities Eastern 501 234 735 Central 520 595 1115 Western 920 735 1655 Southern 609 720 1329 Total 2550 2284 4834 PART II

2-4 Handling Encroachments on the Electricity Lines Rights of Way In the past few years, the Authority observed an increase in the number of cases of encroachments on the electricity transmission and distribution lines, especially encroachments caused by growth of trees in agricultural areas. Such encroachments adversely affect the safety and reliability of the electricity network. The Authority dealt with this issue through update of the “Provision of Electricity Service Manual”* where a clause was inserted to prohibit such encroachments. The clause also included statements to the effect that the service provider has the right to compel the offender to remedy the encroachment or bear the costs of rectification himself.

,QFOXVLRQRI(&5$6HQLRU2IÀFHUVLQ6(&·V$XWRPDWLF$OHUW6\VWHPIRU0DMRU(OHFWULFLW\2XWDJHV During the report year, ECRA reached an agreement with SEC to include the Authority’s senior officers in the company’s alert system list for major electricity outages. It is expected that this arrangement will allow better communication between the Authority and the company in the areas of service recovery to consumers and enable the Authority to deal more effectively with complaints regarding electricity service outages.

* See Section “4-2 Updating “Provision of Electricity Service Manual”, page 36. 33 CHAPTER 3 TARIFFS Among ECRA’s primary concerns are that tariffs must be cost reflective, fair and affordable to end-users, and at the same time they enable the service providers to cover their costs and receive a fair economic return on their investments. In order to achieve these objectives, ECRA’s responsibilities include the following: Developing a methodology for tariff setting and for periodic review of the adopted tariffs. Designing and preparing a tariff structure. Developing an overall tariff policy statement for the Kingdom. Developing a comprehensive system to collect financial and operational data from all service providers in the King- dom. Developing a comprehensive cost accounting system in order to assess service providers’ costs which ultimately affect the tariff paid by consumers.

On the other hand, the efficient use of the available energy sources, depletion of resources and protection of the environment, as well as economic factors require that all countries must embrace policies which are sustainable for the future. Thus, ECRA is keen that the tariffs in the Kingdom must reflect those concerns by providing consumers with incentives to improve their utilization of the electricity system, and apply conservation measures that reduce their costs while at the same time they improve the efficiency of the power system. ECRA’s tariff activities in 2013 were as follows: PART II 3-1 Charges for Use of the Transmission Network System One of ECRA’s main responsibilities is to develop restructuring of the electricity industry. Paragraph 2 of Article 11 of the Electricity Law states that one of ECRA’s charges is the responsibility to “Enable any Licensee, as required, to connect to and use transmission and distribution systems owned by other Licensees on a non-discriminatory basis…” To discharge this responsibility, the Authority issued in the report year a detailed schedule listing the charges of using the transmission network. The schedule is to be effective as of the start 2014. In developing the schedule, consideration was made of optimizing the use of generation and transmission network assets, and insuring accessibility and use by all licensees on a non-discriminatory basis.

3-2 Power Factor Improvement Incentives Improvements of the equipment power factor* by the consumer result in reduction of power losses in the public network, thus leading to an increase in available capacities that makes it possible to provide the service to new consumers without the need for additional investment by the service provider or an increase of the transmission and distribution networks capacities.

The data collected by the Authority from a sample of industrial consumers in the Kingdom indicated that an improvement in the power factor** from the current levels (0.75, on average) to 0.85 will lead to liberating generation capacities*** estimated at 1000MW (1GW). The benefits of this action include: a saving of investment in generation alone of not less than SR4 billion, savings of other investment costs that would have been required to enhance the transmission and transportation networks, as well as savings in costs of fuels and operation, and reducing the energy loss in the network.

But improvements in the power factor require the consumer to make substantial investments to acquire equipment that produces reactive power in his premises. Therefore, it is necessary to offer him incentives to entice him to make the needed investments. According to international practices, the incentives for improving the power factor are usually offered through tariffs. They are designed so that the consumer recovers his investment in a short period of time. So, in the long run, he realizes sizable savings. The consumer and the service provider, thus, gain.

7KH3RZHU)DFWRULVGHÀQHGDVWKHUDWLRRIWKHUHDOSRZHUXVHGE\WKHFRQVXPHUWRWKHDSSDUHQWSRZHU 7KHDSSDUHQWSRZHULVWKHVXPRIWKHUHDOSRZHUDQGWKH reactive power which the consumer imports from or exports to the public network, depending on his type of consumption). ** Improvements in the power factor result from having the consumer produce his needs for reactive power on his premises, at his own expense, in return for suitable incentives for him, rather than importing the reactive power from the public network. *** The liberation of generation capacities results from the fact that the service provider does not to provide the consumer with reactive power when the latter gener- DWHVLWKLPVHOI3URYLGLQJUHDFWLYHSRZHUE\WKHVHUYLFHSURYLGHUUHSUHVHQWVDQXQMXVWLÀHGDGGLWLRQDOEXUGHQRQWKHSXEOLFQHWZRUNWKDWKLQGHUVLWVDELOLW\WRFDUU\ larger quantities of real power. It also increases power losses in the transmission and distribution networks. The international practice is for each consumer to import as little reactive power as possible. 34 In accordance with international practices, ECRA’s board adopted a decision in 2013 for a program of incentives to improve the power factor which included the following provisions: The decision shall be applicable to any non-residential consumer (i.e., industrial, commercial, and government consumers) connected to a transmission or distribution network and whose contracted load exceeds 1 megavolt ampere (MVA). Such a consumer shall be required to attain a power factor of not less than than 0.85. A tariff of SR 0.5/kVArh of additional reactive power shall be applied when the monthly consumption of reactive power exceeds 62% of real power (This percentage of consumption is equivalent to a power factor less than 0.85). This tariff shall come into force 18 months after publication of the decision in the official gazette. In all cases, the tariff shall not be applied until six experimental cycles of billings have been executed for a customer in order to demonstrate to him the costs of the reactive power. After passage of five Hijri years, commencing on November 16, 2012, the minimum permissible limit for the power factor shall be 0.90. Then ten Hijri years henceforth the minimum will be 0.95.

During the report year, the Authority, in cooperation with the service providers, embarked on a publicity campaign to make the consumers affected by the decision aware of its implications to them, in preparation for commencing implementation of the decision as of May 1, 2014.

PART II

(QHUJ\LVHQHUJ\LQHIÀFLHQW*DVNHW ** (K. Far.s): The unit of measurement of energy Gasket, where var = volts x amps.

35 CHAPTER 4 LAWS AND REGULATIONS

In the area of laws and regulations, the Authority’s activities in 2013 included the following: 8SGDWLQJWKH(OHFWULFLW\/DZ3URMHFW The Electricity Law was issued in 2005, and a minor amendment to it was made in 2010. Pursuant to a Royal Directive to review and update all the Kingdom’s laws, a team of specialists was formed in 2012 by the Ministry of Water and Electricity (MoWE). The team included members from ECRA. The charge of the team was to review the Electricity Law with the aim of making major revisions that reflect the past experience of working under the current law, incorporating the latest developments in the field in keeping with international best practices in the electricity and water desalination industry. The revisions are also aimed at incorporating requirements of the electricity and water desalination industry, especially with regard to regulations concerning water desalination, and the use of atomic and renewable energy in electricity generation and water desalination. During the report year, the team completed its work. MoWE will submit the draft law in 2014 to the appropriate authorities for consideration in accordance with standard procedures.

4-2 Updating the “Provision of Electricity Service Manual” During the report year, the Authority undertook updating the “Provision of Electricity Service Manual” which regulates the relationship between the consumer and the service provider and outlines the procedures for providing service to all categories of consumers. The update included a digest of the lessons ECRA gained from implementing previous editions of the manual, and PART II results of statistical and field studies of consumers and service providers’ complaints and suggestions. The update also included best regional and international practices. The most salient updates of the manual in the aspects concerning the consumer may be summarized in the following: 4-2-1 Reducing the Period for a New Service Connection The period for connecting new service was reduced from 60 calendar days to 30 workdays (which means a reduction of 30%). This reduction came as a result of studies of the analysis of consumers’ complaints, data gleaned from auditing the service providers’ performance KPIs, study of international practices, and taking into consideration the abilities and responsibilities of the service provider.

The objective of the reduction was to improve quality of service and increase consumer satisfaction. The Authority considers this reduction a step in a phased process to reach its ultimate goal of setting a ceiling of twenty workdays for a new service connection.

4-2-2 Changing the Billing Mode of Small Value Bills Analytical studies of monthly electricity consumption bills showed that the value of a large number of these bills does not exceed SR100. Issuing these bills and delivering them to consumers constitutes a great burden on the service providers that result in unnecessary expenses, thus negatively impacting financial performance, and consequently affecting the service providers' performance of their duties towards consumers.

36 In order to deal with this issue of bills whose values do not exceed SR100 monthly, the manual contained approval of the following actions: Making the bills available in all the various collection outlets. Billing the consumer through the electronic collection system “Sadad”*. Making the bills available through the service providers’ internet site. Delivering the bills through an SMS to the consumers’ mobile phone. The manual carried statements emphasizing that all classes of consumers continue to benefit from the “consumption blocks system”.

4-2-3 Connection and Consumption Agreements A special appendix to the manual contained two agreements: one for the electricity service connection and the other for electricity consumption. The two documents define the responsibilities to be carried out by the consumer and by the service provider. They govern the relationship between them unequivocally. They also provide the opportunity to inform those requesting new service of the necessary connection requirements. The Authority placed advertisements in local newspapers soliciting public comments on the documents prior to their adoption and inclusion in the manual.

4-2-4 Updating the Rules for Service Disconnection and Collection of Debts In addition to the modifications delineated in the preceding sections, the manual included clarifications and amendments, among which tackling two issues that have been, for a long time, the subject of suffering by both the consumer PART II and the service provider: The first is the name under which the electricity meter is registered. The service provider used to register the meter in the name of the property owner. This practice created many difficulties for the property owners and the service providers to collect energy consumption debts, either because of the delinquency of tenants in paying costs of the electricity service or by failure to pay when they move out of the rented property. The second problem is possession of some consumers of more than one meter. The service provider used to record the consumption costs of each meter as a separate and independent indebtedness. The Authority dealt with these two issues in the manual update in the following manner: Advising the service provider to register the meter in the name of the actual consumer, rather than the name of the property owner. Recording debts of all meters registered in the name of a consumer as a single indebtedness and adding up the debts of all meters together in one record. Undoubtedly, these actions will assist in reducing meter tampering and complaints arising from this problem, achiev- ing the goal of controlling the issue of providing the service and disconnecting it in accordance with the provisions of the manual, and protecting the property owners from the consequences of tenants failure to pay electricity bills before moving out.

* SADAD Payment System is the Electronic Bill Presentment and Payment (EBPP) system established by the Saudi Arabian Monetary Agency (SAMA) to be the national (EBPP) service provider for the Kingdom of Saudi Arabia (KSA). 37 4-3 Study to Evaluate Power Purchase Agreements from Independent Power Producers The Authority is keenly interested in maximizing the benefits of private sector participation in the electricity and water desalination industry. Currently, it is engaged in an effort to define a methodology for this participation built on a scientific, clear, and transparent basis that can guarantee optimum participation in generation. The Authority hired an international consulting firm, with expertise in finance and regulation, to prepare a study on how to maximize the benefits of participation of the IPPs and IWPPs, and make the participation compatible with the Kingdom’s policies of moving toward a competitive electricity market, while at the same time still preserving an attractive environment for investments. The study focused on taking advantage of regional and international experiences. It also concentrated on analyzing the generation system to determine optimum capacities; determining the types of technologies that the independent power producers can use and the effect of these technologies on competition. Furthermore, the study dealt with defining the various alternatives to mitigate the possible risks that may hinder arriving, in the near future, at an electricity market capable of sustainable competition. The most important outcomes of the study included emphasis on the importance of independence of both the “principal buyer” and the transmission company. They also included the development of a clear roadmap to arrive at a competitive electricity market; and the inclusion in future agreements of provisions that achieve, with the passage of time, reduction of the quantities contracted for with the independent producers in order to expand the capacities available for competition in the market. The agreements would also include the provision that the amounts of decreased capacities increase with gradual progress towards reaching the competitive market. PART II To increase the efficiency of fuel utilization and the margin of competition among the various producers, the study emphasized the importance of pricing fuels on the basis of “opportunity cost” instead of the current subsidized prices, and developing a clear mechanism to give subsidies directly to the distribution and the service provision activities. The action to redirect subsidies guarantees shielding the consumer from effects of any changes in fuel prices, while at the same time it allows the electricity generation and transmission activities to operate on a commercial basis which helps conservation of fuel consumption, increases efficiency of the electricity system, and creates a reasonable degree of competition among the generation plants.

4-4 Preparation of a Framework for Regulation of Electricity and Desalinated Water Production Using Atomic and Renewable Energy During the report year, the Authority commenced preparation of a study to develop regulations, procedures, and license forms for projects using atomic and renewable energy for production of electricity and water desalination. The Authority, in a spirit of cooperation with King Abdullah City for Atomic and Renewable Energy (K.A.CARE), undertook this study to develop a regulatory framework for the activities of electricity generation, cogeneration, and water desalination production using atomic and renewable energy. The study is aimed at defining the boundaries of the Authority responsibilities as the regulator of matters concerning projects using atomic and renewable energy for production of electricity and water desalination, and the extent of convergence or divergence with the responsibilities of (K.A.CARE) in view of regional and international experiences in this field. It also aims at preparing regulations for electricity and water desalination activities that are connected with atomic and renewable energy insofar as they fall within ECRA’s remit. The regulations will be prepared either through amendments to the existing laws and regulations, or through drafting new ones. The study outlined proposals for the changes that are required to be made to the Electricity Law, its Implementing Regulations, the Saudi Transmission Code, and other related regulations issued by ECRA. Work is still in progress on making license forms for the systems of electricity generation, desalinated water production, and trading in products of electricity and desalinated water for projects that use atomic and renewable energy to produce electricity and desalinated water. The work also includes preparing the requirements and conditions for obtaining licenses for these types of activities. The study is expected to be completed in the second quarter of 2014.

38 4-5 Codes Supervision Committees: Each code supervision committee undertakes periodic review and update of the code under its supervision to insure its compatibility with technical, economic, and legal developments in its industry. The committee charges include studying licensees’ requests for exemptions from certain code provisions and submitting its recommendations to the Authority. They also include proposing changes to the code. Membership of the committee is composed of ECRA’s staff and licensees’ representatives.

4-5-1 The Saudi Transmission Code In 2013, the committee held four meetings, made five recommendations for modifications to some of the code articles, and recommended sixty six exceptions from the code articles. The Authority’s Board accepted all recommendations. Also during the same year a member representing K.A.CARE joined the committee to cover issues regarding connecting sources using atomic and renewable energy to the electricity grid.

4-5-2 The Saudi Distribution Code The committee holds its meetings quarterly. During the report year, the committee submitted five recommendations for modifications to code articles which were approved by the Board.

4-5-3 The Water Desalination Code The committee held three meetings during the report year. It completed translation of the water desalination code from English into Arabic, built a database for SWCC’s desalinated water transportation lines, started work to add PART II transportation lines of other producers, and began development of detailed regulations to implement the code and pursue compliance with it.

39 CHAPTER 5 LICENSING

The Electricity Law and the Charter of the Authority require that any person engaged in any of the following activities has a valid license issued by the Authority in order to legally conduct his activities in Saudi Arabia: Generation, transmission, distribution, trading, retail, export or import of electricity; Cogeneration or trading in cogeneration products; and Water desalination, its transportation to the points of distribution, or trading in desalinated water.

The objectives of the licensing process are to streamline the development of the electricity and water desalination industry and monitor the quality and reliability of the services which are of paramount importance to the consumers as well as to the national economy as a whole.

The Authority issues licenses and monitors licensees’ performance, and takes appropriate measures to enforce the provisions of the Electricity Law on violators of the license conditions and requirements to protect public interest.

The Authority also requires licensees to comply with technical, legal, and environmental protection requirements. The licensing framework covers requirements and conditions for each type of license, details of rights, duties and obligations of licensees, and details of monitoring procedures. The Electricity Law and its Implementing Regulations require that all procedures and the basis of monetary charges be as transparent as possible.

PART II ECRA’s website (www.ecra.gov.sa) contains forms to request authorizations and licenses for activities in electricity generation, transmission, retailing, trading and distribution; as well as activities in cogeneration and water desalination and its transportation to the distribution points. The website also includes a listing of all licenses issued by the Authority, and the rules adopted by ECRA’s Board of Directors for calculating license fees.

(OHFWULFDODFWLYLW\$FFRUGLQJWRWKHGHÀQLWLRQVFRQWDLQHGLQWKHHOHFWULFLW\V\VWHPPHDQVDQ\DFWLYLW\RIWKHDFWLYLWLHVFRQWDLQHGLQWKHLQGXVWU\HOHFWULFLW\DQGZDWHU desalination. 40 In 2013 the Authority completed the following tasks in the area of licensing:

5-1 Permits In pursuit of its objectives to encourage investment in the electricity and water desalination industry, the Authority issues permits to interested parties to allow them to commence preliminary preparation work (including feasibility studies, planning, and technical investigations) before they start actual activities.

In 2013 the Authority issued 7 permits distributed as follows (Table 28, page 106): Two permits for electricity generation. Three permits for cogeneration. Two permits for water desalination. These permits were issued to six entities.

5-2 Licenses Licenses are issued at least 30 days before construction commences. In 2013 the Authority issued, or reissued (renewed) 38 licenses (Table 29, page 107) as follows: Thirteen licenses for electricity generation. Nine licenses for cogeneration. Five licenses for water desalination. PART II Two licenses for electricity transmission. One license for transportation of desalinated water. Two licenses for electricity distribution and retailing. Two licenses for trading in electricity. Three licenses for trading in desalinated water. One license to own an electricity transmission network. These licenses were issued to 30 entities.

5-3 Exemptions from Licensing The Electricity Law specifies that no person may undertake any electricity activity without a valid license from the Authority. The Implementing Regulations of the Law allow for exempting a licensee from the licensing requirement if the generation plant is not connected to a transmission network or a distribution network and all its output is exclusively used by the owner of the plant. The exemption also applies to a transmission network and a distribution network under similar conditions. By the end of 2013 ECRA issued, or renewed 19 exemptions from licensing (Table 30, page 110) as follows: Thirteen exemptions for generation plants. Five exemptions for cogeneration plants. One exemption for a desalination plant. These exemptions were issued to seventeen entities.

5-4 License Forms In 2013, the authority continued discussion with SEC regarding the final form of the Principal Buyer’s license since his activity is closely tied to the Development of the Electricity Industry Restructuring Plan that is being implemented by the company. The license form is expected to be submitted to ECRA’s Board in 2014 for approval.

41 CHAPTER 6 ELECTRICITY AND WATER DESALINATION PLANS

During 2011 ECRA’s activities included work on the following plans for the electricity and water desalination industry.

6-1 Development of the Electricity Industry Restructuring Plan The Development of the Electricity Industry Restructuring Plan approved by ECRA’s Board outlines the major steps for unbundling the main activities of the industry (i.e., generation, transmission, and distribution) and moving it from the current vertically integrated structure (Figure 5) into an environment of competitiveness on an economic basis through the following steps:

Figure (5): Current organizational structure of the Creation of an independent trans- electricity industry in the Kingdom. mission company that maintains an open and unbiased policy of access Saudi Electricity Company to the transmission system for use (SEC) by all producers and large consumers without discrimination. Generation Creation of a special entity known Generationn Generatioon (Otherher Entities) (SWCC) as the “Principal Buyer”, to man- (SEC) age the electricity industry income, PART II and enter into clear and transparent contracts with all service providers Transmissionn (in the areas of generation, transmission, and distribution), which are reviewed and approved by ECRA. The Principal Buyer is responsible Distribution for overseeing that all parties abide by the contracts. Designing a clear, transparent, and fair electricity “wheeling” tariff for the transmission system. Creation of several competing entities in the field of generation. Consumersr Introducing competition in wholesale electricity services to the distribution companies and large consumers. In the long run, introducing competition in the field of distribution and service provision to consumers.

42 Figure (6) shows the organizational structure of the industry in the first phase of implementation of the plan.

Figure (6): Structure of the electricity industry after completion of Phase I of the restructuring plan

Saudi Electricity Company

Independent Generation Cogeneration Independent Independent Cogeneration Generation Generation

Cogeneration Generation Generation Generation PART II Cogeneration Independent Independent Company Company Company Generation Generation Cogeneration

Transmission

Distribution Distribution Distribution company company company

Consumers Consumers Consumers

Through ECRA’s efforts in the past few years to pursue implementation of the plan, SEC established the National Electricity Transmission Company (NETC), a limited liability company wholly owned by SEC (the holding company). NETC commenced operations in 2012.

43 In 2013 ECRA continued discussion with SEC regarding the plan’s implementation timetable. The following milestones were achieved: SEC committed to undertake the following: Establish the independent electricity system operator in 2014 who will be responsible for the load control centers, operation of the network on an economic basis, and maintaining the security of supplies. Establish four generation companies wholly owned by SEC, which will commence operation one by one se- quentially in 2014. Establish a distribution company that will commence operations in 2014, and develop plans to eventually break it up into several local distribution companies in order to bolster competition and increase the efficiency of providing the service to consumers. SEC reported that it completed defining the tasks of the special unit, within the holding company, that will carry out the role of the principal buyer as well as completing definition of its organizational structure and writing the draft of the agreement that will be signed between all the new companies and the holding company. This unit is expected to start its activities in 2014. The Authority has formulated a structure, which was approved by its Board, for the charges to use the transmission system. In spite of the obvious delays in implementing the restructuring plan from the approved timetable, it is expected that with the completion of the steps outlined above the first phase of restructuring, which represents unbundling of PART II activities, will be concluded in the near future. During the report year, the Authority commenced a study to develop a roadmap for the move to a competitive electricity market. The study includes evaluation of the current state of the electricity industry; and setting the requirements for transition to the second phase of the plan, which entails opening competition in the wholesale market and establishing the parallel market. Furthermore, it includes setting the required conditions for transitioning to the third (last) phase of the restructuring plan, which is formation of the competitive electricity market. The situation then will be characterized by the existence of several companies competing in generation, several distribution companies, and a number of service providers (Figure 7). There will also be a spot market for electricity trading as well as a parallel market for bilateral supply and trading in electrical energy.

Figure (7): Electricity industry structure after full implementation of the plan

Saudi Electricity Company

Independent Cogeneration Cogeneration Generation Generation Generation Generation Company Company Company

Independent Independent Independent Generation Generation Generation Cogeneration Cogeneration Cogeneration Principle Buyer

Transmission

Service Service Service Service Provider Provider Provider Provider

Saudi Electricity Company

Distribution Distribution Distribution Company Company Company

Consumers Consumers Consumers Consumers Consumers Consumers Consumers

44 /RQJ7HUP3ODQIRU:DWHU'HVDOLQDWLRQDQG(OHFWULFLW\*HQHUDWLRQ3URMHFWVDQG'HWHUPLQDWLRQRIWKHLU Fuel Needs During the report year, the Authority, in cooperation with the Ministry of Petroleum and Mineral Resources, MoWE, SWCC, Saudi Aramco, SEC, and the National Water Company (NWC) commenced a study to develop a long-term plan for the electricity generation and water desalination projects, and to determine their fuel needs for the period from 2016 to 2040. The scope of the study includes determination of the demand for electricity and water, development of a plan to create a high efficiency system to produce and transport electricity and desalinated water, and determination of the system’s fuel needs. The study takes into consideration all sources of energy, the most appropriate technologies that promote economizing production costs, increasing efficiency of fuel utilization, and minimizing environmental impacts of electricity generation and water desalination production. The study also takes into consideration introduction of the use of atomic and renewable energy for production of electricity and water desalination, and the effect of using these technologies on the plans for electricity and desalinated water production using traditional fuels. The study will determine the share of each source of energy in meeting demand for electricity and water, the appropriate transportation means to minimize costs and enhance security of supply, the locations for building the new plants, and the most appropriate technology for each site of electricity generation or desalinated water production. These determinations will all be based on running economic analyses of various alternative scenarios. The study is being carried out by a team of experts from the various constituencies of interest along with a group of local and international consultants. During the report year the team continued its work on the study which is expected to be completed in the first quarter PART II of 2015.

6-3 Study of Water and Electricity Uses The Authority has a keen interest in improving the efficiency of providing the services of electricity and water desalination, raising the efficiency of their long term planning, and determining the costs of providing their services to the various categories of consumers. Carrying out these tasks requires undertaking studies to obtain detailed data concerning uses of water and electricity in order to develop programs for their demand-side management and set their demand priorities. The study aims to provide the following information:

Purposes of Using Electricity and Water: This includes proportions of use for the following purposes: Using water for laundry, dishwashing, personal hygiene, toilet flushing, house yard washing, garden irrigation, and industrial purposes. Using electricity for lighting, air-conditioning, and heating. Areas of Usage: To determine proportions of electricity and water use in cities, towns, villages, hamlets, and urban settlements. Types of Use: To determine proportions of electricity and water use in residential areas, hotels, industrial plants, commercial es- tablishments, and government buildings. Time of Use: To determine the daily weekly, monthly, and seasonal patterns of use of both water and electricity.

During 2013 the Authority created a work team composed of members of its staff and representatives of the Ministry RI3HWUROHXP 0LQHUDO5HVRXUFHV0R:(6:&&6(&6DXGL$UDPFRDQG1:&WRXQGHUWDNHWKLVVWXG\7KH objectives of the study are determining the types of electricity and water use, obtaining detailed information regarding the consumption patterns and trends in the various regions of the Kingdom through the use of accurate measurements of consumption and through development of mathematical and statistical models for use in predicting future loads and for developing programs for demand-side management on an accurate scientific basis.

The team drafted a scope of work for the study, and sent invitations for consultants specialized in this work. The experimental portion of the work is expected to be completed in 2014. The first phase of the study aims to develop the methodology that will be applied to the remaining regions of the Kingdom. The study is expected to continue till the end of 2015. 45 CHAPTER 7 SERVICE QUALITY AND PERFORMANCE MONITORING

One of ECRA’s main responsibilities is monitoring the performance of licensees to insure that the following objectives are achieved: Quality and reliability of service. Commitment of licensees to undertake the following: Compliance with the Electricity Law, and conditions and requirements of the licenses to protect the public interest. Compliance with technical regulations (such as the codes and manuals) issued by the Authority. Responding to consumers’ complaints and handling them in a reasonable time span. Reducing the number and extent of service outages. Expeditious restoration of service when outages do occur, and Continual investment to provide service to new customers.

In order to achieve these goals the Authority prepared key performance indicators (KPIs) and standards for every electricity activity which all service providers must meet at a minimum. A financial incentives program* based on the KPIs was also developed so that service providers whose performance exceeds the set standards are rewarded, while financial penalties are assessed from those who underperform them.

In 2013, the Authority performed the following activities in the area of quality of service, and performance monitoring: PART II 7-1 Auditing Licensees’ Performance KPIs In the past few years, the Authority developed a system for the electricity industry performance KPIs that enables it to effectively monitor the performance of entities that have been licensed to work in the areas of electricity generation, transmission and distribution. The basic aim of these indicators is to determine the performance level that the electricity industry must reach in order for its service to consumers to rise to the levels of the industrially developed countries. Furthermore, these KPIs will have technical and regulatory importance once the competitive electricity market is established. The Authority selected 26 performance KPIs for the various electricity industry activities (generation, transmission, distribution, customer service). In 2013, the Authority audited the performance KPIs data for 2012 at the level of branches for five licensed entities.

* The ÀQDQFLDOLQFHQWLYHVSURJUDP has not been activated yet. 46 To verify the accuracy of data and correctness of the recording procedures, a team of ECRA staff made 22 visits to business locations of licensed entities as shown in Table 4. The Authority issued a report on the results of auditing that included recommendations to improve those activities whose performance level was less than the minimum acceptable. Table (4): Sites where electricity industry activities performance KPIs were audited

Number of No. Licensed Entity/ Licensed Activity Sites 1 SEC – Generation 4 2 National Electricity Transmission Company – Transmission 2 3 SEC – Distribution 4 4 SEC – Customer Service 4 Power and Water Utility Company for Jubail and Yanbu 5 1 (MARAFIQ) – Generation Power and Water Utility Company for Jubail and Yanbu 6 1 (MARAFIQ) – Transmission Power and Water Utility Company for Jubail and Yanbu PART II 7 1 (MARAFIQ) – Distribution Power and Water Utility Company for Jubail and Yanbu 8 1 (MARAFIQ) – Customer Service 9 Saudi Aramco – Generation 1 10 SWCC- Generation 2 11 5DELJK(OHFWULFLW\ :DWHU&RPSDQ\²*HQHUDWLRQ 1 Total Number of Sites Visited 22

The reports were sent to the licensees. They were informed of ECRA’s recommendations for actions to be taken to improve the process of calculating the performance indicators. The auditing results were also published on the Author- ity’s website. The Authority reviews the licensees’ compliance with the recommendations during the annual auditing to insure their implementation. ECRA will continue annual auditing of data for the various sites for information and to explain the basis on which the indicators were formulated, how the data can be collected, and how the indicators can be calculated. The outcomes of auditing the performance KPIs varied between the licensees. Some were good; some were acceptable; some needed development; and some were wrong. The errors were attributed to various difficulties such as misunder- standing of some indicators, incomplete data, lack of raw data records, and similar difficulties that the Authority is working on remedying.

Figure (8) shows results of measuring the availability factor*, which indicates the availability of licensees' generation plants** to generate electricity during the years 2010-2012

* The availability factor of a power plant is the amount of time that it is able to produce electricity over a certain period, divided by the amount of the time in the period. ** At the present time, there are three types of electricity generation plants in the Kingdom: Simple Cycle Plants:$W\SHRIHOHFWULFLW\JHQHUDWLRQSODQWWKDWXVHVJDVÀUHGWXUELQHVZKHUHWKHJDVSURGXFHGIURPEXUQLQJWKHIXHOLVXVHGWRWXUQWKHWXUELQHV The advantage of this type of plant is the ability of the generator to reach its maximum capacity quickly after start. Thus, this type is used usually to meet peak demand. %XLOGLQJDSODQWRIWKLVW\SHLVFRQVLGHUHGOHVVH[SHQVLYHWKDQWKHRWKHUW\SHV+RZHYHULWVHIÀFLHQF\LVORZUDQJLQJEHWZHHQ Steam Cycle Plants: A type of generation plant where fuel is used to turn water to steam. The steam is then used to turn the generation turbines. Combined Cycle Plants:,QWKLVW\SHRISODQWDJDVWXUELQHLVXVHGWRJHQHUDWHHOHFWULFLW\ WKHÀUVWF\FOH DQGWKHH[KDXVWKHDWLVUHF\FOHGDQGXVHGWRUXQDVWHDP WXUELQHWRJHQHUDWHHOHFWULFLW\ WKHVHFRQGF\FOH 7KLVW\SHRISODQWKDVDKLJKUDWHRIIXHOHIÀFLHQF\LQWKHUDQJHRI 47 Figure (8): Results of measurements of the availability factor for the years 2010-2012

Fiscal Year 2010 Fiscal Year 2011 Fiscal Year 2012

100%

Target (Max 85%)

PART II 90%

80% Availability Factor (%) Factor Availability

70%

60% SWCC Saudi Aramco SEC-Steam Cycle SEC-Simple Cycle SEC-Combined Cycle MARFIQ-Simple Cycle Jubail Water & Electricity Water Jubail MARFIQ-Combined Cycle Shuqaiq Water & Electricity Water Shuqaiq Shuaibah Water & Electricity Water Shuaibah Rabigh Arabian Water & Electricity Water Arabian Rabigh

48 Figure (9-A) indicates the average time of electricity outage (in minutes) for SEC clients in the main regions and cities of the Kingdom in the years 2010-2012, while figure (9-B) illustrates the average number of outages during the same period.

Figure (9-A): Average time of outages (in minutes) for each consumer in the years 2010-2012

Fiscal Year 2010 Fiscal Year 2011 Fiscal Year 2012

1100 1050 1000 950 900 PART II 850 800 750 700 650 600 550 500 450 (minutes) 400 350 300 250

Average Time of Interruption Time Average 200 150 100 50 0 Taif Asir Jawf Ahsa Baha Jazan Kharj Hayel Tabuk Qasim Najran Jeddah Makkah Madinah Dawadmi Dammam Riyadh City Riyadh Region Average Time of Time Average Northern Borders (Saudi Electricity Company) interuuption for the Kingdom

49 Figure (9-B): Average number of electricity service outages per consumer annualy for the years 2010-2012

Fiscal Year 2010 Fiscal Year 2011 Fiscal Year 2012 25

20 PART II

10 Number of Interruptions Number

0 Taif Asir Jawf Baha Ahsa Jazan Kharj Hayel Tabuk Qasim Najran Jeddah Makkah Madinah Dawadmi Dammam Riyadh City Riyadh Region Average Time of Time Average Northern Borders interuuption for the Kingdom

50 Figure (10) shows the unsupplied power index* for the years 2010-2012.

Figure (10): Usupplied power index 2010-2012

0.009 0.008 0.007 National Electricity Transmission Company 0.006 MARAFIQ 0.005 0.004 0.003 Target (Maximum 0.0008) 0.002 0.001

0 2010 2011 2012 PART II

This index reflects the reliability of the transmission network. When the value of the index increases, lost power increases due to outages in the various components of the transmission network. Thus, the consumer confidence in the reliability of the service decreases, while a decrease in the value of the index signals improvement of the service. It is evident from the figure the continued decline in the value of the index for both MARFIQ and NETC service providers since the Authority began tracking it as a KPI. This clearly which indicates improvement of the service performance. Results of the KPIs indicated great variation of the service performance level between regions. While the desired target was achieved in some of the regions for some of the KPIs, it is still well below the desired level in others (Figure 9). To overcome this difficulty and resolve it, the Authority prepared a plan to enhance reliability of the electricity network in the Kingdom as described in the following section.

* The unsupplied power index: The percentage of lost power, measured in kW, as a result of power outages in the network throughout the year to the total power carried by the network during the same period. 51 7-2 Plan for Enhancing Reliability of the Electricity Network To insure that electricity service is secure and reliable, the Authority formed a work team which included members from MoWE, SEC, and that National Electricity Transmission Company to draft a plan to enhance reliability of the electricity network in the Kingdom, particularly in the areas where the performance KPIs indicated that the service level was inadequate. To define the possible areas of improvements, the team carried out the following tasks: Statistical Analysis Which included the following: Reviewing the KPIs data, and analyzing them statistically. Reviewing the outages reports, and determining their recurring causes. Determining the worst performing regions and sites. Evaluating Network Assets Which included the following: Making field visits to view the network assets. Reviewing maintenance procedures and volume of work. Reviewing the specifications and construction. PART II Studying the Network Operating Methods and Operational Requirements Which included the following: Reviewing the control centers procedures and outages response. Reviewing the protection system. Meeting the responsible staff. Studying adequacy of the required manpower and equipment. Reviewing Network Planning Methods Which included the following: Method of demand forecast and load control. Standards of planning, security of supplies, and emergencies. Replacement and assets life-cycle policy. Evaluation and execution of new projects.

Analysis of outages data showed that over 50% of the outage times were attributable to about 500 feeders* that connect the distribution substations with the consumers. This number of feeders represents about 5% of the total number of feeders in the SEC network, i.e. 5% of the feeders cause more than 50% of the outages.

* Feeder: A branch line to transmit electricity from a main line to a substation for distribution to consumers. 52 The study determined the highest ten causes of electricity outages in the SEC distribution network which impacted its consumers (Table 5).

Table (5): Principal causes of electricity outages and percentages of outage times in 2012

Total Time for Outages Cause of Outage Percentage of Total Exceeding Five Minutes Outage time (in minutes) Maintenance 158,441,248 16% Field Work (such as making connections for new customers) 148,521,340 15% Network Improvements 29,395,754 3%

Repairs 25,111,642 2%

Transient Damages 183,412,797 18% PART II Cable Damages due to Connection Failures 61,661,611 6% Cable Deteriorations 55,446,729 5% Cable Impairments Caused by Third Parties 49,604,770 5% Ignited Terminals 30,957,154 3%

Connections Failures 23,601,590 2%

Other Causes 250,159,610 25%

Total 1,016,314,245 100%

These causes were derived from the performance KPIs data for 2012 and also from the daily reports of the SEC distribution offices. Study of the table shows the following: 36% of the total outage times resulted from scheduled maintenance, connection to new customers, network improvements, or repairs. 18% of the total outage times Kingdom-wise resulted from transient damages. This percentage may be as high as 50% in the Southern sector and in some counties such as Dawadmi and Taif. 19% of the total Kingdom-wide outages times resulted from cable impairments caused by third parties, connection failures, and ignited terminals. The percentage is higher in the cities such as Riyadh, Jeddah, and Dammam. Causes of transmission network outages varied between equipment failures, problems of protection systems, weather conditions, damages caused by third parties, and human errors.

The plan included several administrative and technical recommendations which the Authority expects to be implemented by SEC and the National Electricity Transmission Company at two levels: Short range, not exceeding one year. Medium range, not exceeding three years.

53 The plan recommendations can be classified as follows: Firstly: Recommendations to Improve Administrative Procedures, Resource Management, and Supervise Contractors These recommendations do not require large capital investments because they are of an administrative nature and include: Prequalification of contractors, and continuous evaluation of their performance. Reviewing the procedures and requirements of resource planning. Determining the required manpower for supervision of projects. Management of materiel and in-store inventory auditing. Development of electricity networks inspection processes and their automation.

6HFRQGO\5HFRPPHQGDWLRQV5HODWHGWR0DQDJHPHQWRI6FKHGXOHG2XWDJHVDQG0RGLÀFDWLRQVWR:RUN3UDF- tices These recommendations include: Using mobile generators to shorten the outage times. Increasing coordination between various company departments to execute maintenance, improvements, and new connections jobs to reduce the number of scheduled outages. PART II Thirdly: Recommendations for Review of the Protection Systems, and Connection Points between Transmis- sion and Distribution Networks The study demonstrated the importance of reviewing the overhead distribution network protection system, expediting installation of autoreclosers and sectionalizers, and training personnel how to use them properly.

Fourthly: Development of Regulatory Standards and Policies for Building Plans The study showed the need to develop standards for supply security that take into consideration reliability of the electricity network. It also showed the need to include these standards in the transmission and distribution codes, and monitor compliance with them. Furthermore, the study emphasized the importance of developing a clear policy for replacement of old equipment. One of the plan requirements is submittal of periodic reports to the Authority regarding implementation of the recommendations within a framework of monitoring that was prepared to insure implementation of the recommendations and track the level of performance KPI improvements for the electricity service provision.

'HYHORSPHQWRID6WUDWHJ\IRU6PDUW0HWHUVDQG6PDUW*ULGVLQWKH.LQJGRP During the report year, the Authority developed a national strategy for smart meters and smart grids. Work on the plan started by determining the challenges facing the electricity industry in the Kingdom. The work included reviewing the available smart meters and smart grids technologies in order to evaluate their suitability for the Kingdom’s electricity industry and consumers. The study also covered their contribution to overcoming the electricity industry’s challenges, and determining the basic functional requirements of smart meters. The main result of the study was drawing up a roadmap with clear milestones to implement the smart grid in the Kingdom. The strategy was built to achieve four main purposes: Improving the reliability of the network and the quality of service, increasing the efficiency of operation and realizing better utilization of assets. Reducing complaints arising out of issuing the electricity bills, issuing them in a timely manner and reducing the cost of reading more than seven million meters monthly. Enabling the renewable energy sources and facilitating their integration into the electricity system. Providing additional services to consumers and increasing the efficiency and conservation of electricity consumption.

* The Study for Development of a Strategy for Smart Meters and Smart Grids can be viewed on ECRA’s website: http://www.ecra.gov.sa/documents/Studies/Strategy%20Report_FINAL.pdf. 54 Undoubtedly, the smart grids will bring many benefits as shown in Figure (11), which summarizes the benefits of installation of smart meters and smart grids for consumers, the national economy, the Authority, and operators of the electricity system.

)LJXUH %HQHÀWVRI6PDUW*ULGWR,QWHUHVWHG3DUWLHV

Development of the electricity industry The Regulator IIncreasingncreasin reliability of the electricity grid

Variety of generation Enriching consumer experience Development of smart industry National Economy Service Providers Enhancing innovation Variety of services

Reduction of operational costs PART II Operators of Transmission Consumers/Generation Multiplicity of choices Decrease in energy losses and Distribution Networks Optimum management and Effective consumption management control of the network

The results of the study indicated that implementation of the strategy has a high economic return resulting from direct benefits related to the transmission and distribution network operators’ initiatives. There are also indirect benefits that result from the increased efficiency of the electricity system operation due to activation of the opportunity of load shifting during peak times. This contributes to reducing the demand for increased generation capacities, saving fuels, enhancing the opportunities to export electricity to outside markets, and reducing greenhouse gas emissions. Table 6 illustrates the net direct and indirect benefits that will accrue from installation of smart meters and smart grids.

7DEOH 'LUHFWDQGLQGLUHFWEHQHÀWVWKDWZLOODFFUXH from installing smart grids and smart meters

Value of Net Direct Value of Net Indirect Installed System %HQHÀWV %HQHÀWV (SR Billion) (SR Billion) Smart Grid 2.2 12

Smart Meters 1.6 102

55 The strategy adopted a roadmap consisting of four phases to be implemented in the next decade. Phase I: This phase begins by formation of a supervising committee composed of members from the interested parties. The committee will be responsible for monitoring progress of execution of the smart meters and smart grid programs, measuring the benefits of completed works, proposing corrective measures, and developing technical work groups capable of managing the project.

Phase II: This phase deals with creating the designs and completing the pilot smart meters installation projects.

Phase III: This is the phase that precedes launching of installation of smart meters throughout the Kingdom. Groups of meters will be installed in remote areas and towns where the infrastructure will be tested and the load shifting program will be activated.

Phase IV: Kingdom-wide complete installation of smart meters and smart grids.

7-4 Study of SEC's Financial and Accounting Performance KPIs One of ECRA’s responsibilities is to enable the licensees to operate efficiently in order to recover their expenses and PART II realize reasonable returns on the capital invested in the regulated activities. To insure achievement of this charge, ECRA relies on KPIs to monitor and evaluate the licensee’s financial and accounting performance. Chief among these KPIs are the following: Profitability measures. Financial liquidity. Operational efficiency. Production, debt collection, and financial management efficiencies.

These KPIs are compared to the KPIs achieved by regional and international companies operating in comparable environments. The comparison affords the Authority the opportunity to propose suitable corrective measures which the licensee is requited to implement in order to reduce his costs and improve service to the consumer without impacting the licensee's financial position or his fair returns.

A study conducted by ECRA, a few years back, of SEC capital and operational costs which indicated that the company’s operational costs in generation and transmission are considered within the reasonable limits of regional and international companies that operate in comparable environments, while the operational costs of the distribution network were considered high by the same comparisons. The increase in the operational costs of distribution were attributed to the company’s low capital investment in the distribution activity, and its dependence on dilapidated networks and assets which are costly to operate.

56 During the year under consideration, ECRA’s follow-up efforts with SEC to implement the KPIs for the operational costs of the company’s distribution network showed some improvements. The costs decreased from SR0.0174/kWh in 2009 to SR0.0170/kWh in 2013. This decrease in the cost of a kWh amounts to a saving in the operational costs of the distribution network of about SR110 million annually.

7-5 Electricity Interconnection with Regional Grids: Electricity interconnection projects between various grids aim to increase the rate of utilization, raise the degree of security of supply in each system, reduce costs as a result of the ability to share operational reserves and production capacities, and facilitate free trade of excess capacities between the interconnected systems. At present, the electricity system in Saudi Arabia is interconnected with the systems of the GCC states*. Work is in progress to interconnect the Saudi grid with that of the Arab Republic of Egypt.

7-5-1 GCC Interconnection The GCC states established an organization called the “Gulf Cooperation Council Interconnection Authority” to build DQGRSHUDWHWKHJULGLQWHUFRQQHFWLRQSURMHFWRIWKHPHPEHUVWDWHV$FRPPLWWHHFDOOHGWKH´$GYLVRU\ 5HJXODWRU\ Gulf Interconnection Committee” was also formed to monitor performance of this Authority. The committee submits its recommendations to the GCC‘s “Electricity and Water Cooperation Committee” which is composed of the ministers of water and electricity of the member states. The project was completed and commenced operations in 2011. All grids of the GCC states are thus interconnected. During the report year, ECRA continued its active membership in the project’s advisory and regulatory committee. PART II

7-5-2 Interconnection with the Arab Republic of Egypt A few years back, the Kingdom of Saudi Arabia and the Arab Republic of Egypt commissioned a study to prepare for interconnection of their two grids. Studies of the project feasibility and surveys of the marine zone between the two countries were completed. In 2013, the two countries signed the general agreement of the project at the ministerial level. The two primary electricity companies in the two countries signed the technical and commercial agreements for the project.

* The Gulf Cooperation Council (GCC) consists of the following states: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. 57 CHAPTER 8 PUBLIC RELATIONS AND INFORMATION

In 2013, the Authority carried out a number of activities to publicize and inform the public about its efforts to achieve the objectives for which it was created. The focus of these activites was to disseminate information about the Authority's resposiibilities which include protection of the public interest, promotion of the electricity and water desalination services with particular emphasis on customer care and protection of his interests, encouraging participation of private sector investors in the development of the electricity and water desalination industry, and creation of a suitable environment that encourages legitimate and fair competition between producers as well as between providers of these services.

The Authority’s activities in this area in the report year included the following: 8-1 Second Publicity Campaign to Inform Consumers about their Rights and Responsibilities During the report year, the Authority began preparations to carry out a second publicity campaign to inform members of the general public about their rights vis-à-vis service providers and their responsibilities towards them. The campaign will emphasize the following aspects: Insuring that the consumer obtains his rights. That the data contained in the electricity bill is clear and accurate. The means of communications with the Authority in case of dispute with a service provider. Following certain procedures that facilitate continuity of service.

The campaign will carry the slogan “working for you ……protecting your rights”. It will be launched in the first quarter PART II of 2014 and will be run for one month.

8-2 The Electricity Industry Statistical Yearbook During the report year, the Authority published the fifth edition of the Electricity Industry Statistical Yearbook. This edition includes the most important data and statistics that reflect the various aspects of the electricity and water desalination industry in 2013 and comparisons with previous years. The booklet also includes detailed information about the peak loads, and important economic indicators such as consumption index and comparisons with other countries. The data and information contained in the booklet help interested persons locally, regionally, and internationally to obtain accurate and up-to-date information about the electricity and water desalination industry in the Kingdom, and its progress.

8-3 Advertising in the Blue Pages Directory of the Riyadh Chamber of Commerce and Industry In an attempt to reach investors, the Authority in 2013 placed two advertisements in the Blue Pages Directory of the Riyadh Chamber of Commerce and Industry aimed at giving information about the Authority, and the available investment opportunities in the energy sector in the Kingdom. The Blue Pages Directory of the Riyadh Chamber of Commerce and Industry is the largest commercial/industrial directory and only one of its type in the Kingdom. It is considered an important reference for data and information regarding the Saudi market. Paper and electronic copies (CDs) of the directory are distributed to government agencies, private businesses, and public institutions. It is also distributed to foreign embassies and to people attending activities and exhibition in which the chamber participates.

58 8-4 Participation in Exhibitions Concurrent with other Activities In 2013, the Authority participated in three exhibitions that were held in conjunction with other activities by having kiosks where publications are displayed and distributed, short films shown, and small mementos distributed. A staff member is always present in the kiosk to answer visitors’ queries. The activities were: The exhibition accompanying the ninth edition of the Saudi International Water and Electricity Forum held in Dhah- ran 12-18 April 2013. Smart Grids Conference held in Jeddah 24-26 November 2013. The Saudi Water and Energy Forum and Exhibition held in Jeddah 1-3 December 2013.

8-5 Communications with the Media Within the framework of the Authority’s efforts to disseminate information about its responsibilities to regulate the electricity and water desalination industry, it interacted with various media outlets and organizations by holding TV interviews to answer questions raised by members of the press corps or the general public. The most important of these activities were: An interview with the Director General of ECRA's Technical Affairs Department broadcast by the Saudi TV channel Al Ekhbariya on its program “Windows” on April 2, 2013. An interview with the Authority’s Governor broadcast by the Saudi TV channel Al Eqtisadiah on its program “A Guest and an Issue” on April 27, 2013. A statement by the Governor regarding growth of electricity consumption broadcast by the private TV channel Al PART II Arabia on May 4, 2013. An interview with the Governor broadcast by the private TV channel Al Arabia on June 9, 2013 within the context of a report on the GCC grid interconnection. An interview with the Governor broadcast by the Saudi TV channel Al Ekhbariya on its program “Circles” on June 30, 2013. An interview with the Governor in the context of the Saudi TV channel Al Eqtisadiah’s coverage of the Smart Grid Conference activities broadcast on November 21, 2013.

59 CHAPTER 9 HUMAN RESOURCES AND FINANCIAL AFFAIRS

9-1 The Work Environment An important issue for the Authority is to develop a suitable work environment for its personnel that facilitates performance of their jobs at the highest level of efficiency. The issue includes caring for the physical environment of the workplace, working as a one-team approach, keeping communications channels open at all levels of the organization. It also includes caring for the employees' personal affairs that may impact their job performance. The Authority had previously coordinated with the Ministry of Labor regarding development of a program that facilitates using funds available in the employees penalties account for giving needy employees small interst free loans or, in some cases, giving them grants, and financing employees get-togethers and some social functions. In 2013, the maximum loan limit per employee was increased to SR60,000. Since the start of the programs, 52 employees took advantage of it, receiving loans totaling SR1,414,250. The program also financed several social and recrea- tional functions that were attended by the Authority’s employees and senior officers.

9-2 Training and Scholarships The Authority gives special attention to the development of human resources. Each new employee participates in a program that is designed to inform him of the Authority’s approach to work. In particular, the “Employee Manual” contains important information about the employees responsibilities, rights, and the work procedures. Selection of the training program depends on the nature of the employee's job, and the program is executed according to a systematic plan that indicates his actual training needs. PART II In 2013, fifty employees participated in various short training programs. One employee was sent abroad for a training program of long duration.

The Authority also offered many of its employees the opportunity to pursue high school education, undergraduate studies at Saudi universities, and graduate studies leading to master’s degrees at Saudi and foreign universities. Twelve employees joined the program in 2013. Thus the total number of participants in the program reached 34.

60 +XPDQ5HVRXUFHV'HYHORSPHQW3URMHFW At the end of 2012, the Authority commissioned a consulting office to prepare a study of human resources development. The scope of the work included the following: Reviewing the organization chart of the Authority, and proposing appropriate modifications. Reviewing the functions of each department, its responsibilities, its organization chart, its classification, and determining its manpower needs. Reviewing the job positions structure of each department, its classification, its job descriptions, and proposing needed modifications or improvements. Analyzing all existing positions, developing career paths, tying the career paths to training, and designing a plan for staff replacement and succession. Comprehensively analyzing the capabilities of the existing staff, determining their training needs, devising a comprehensive training plan, reviewing the implementation mechanism, and measuring the return on training. Reviewing the procedures for employee evaluations and the evaluation forms, as well as reviewing the promotions procedures currently in use, their conditions, and their forms. Reviewing the incentives and allowances, and proposing appropriate changes. Developing human resources manuals.

The study was expected to be completed at the end of 2013. However, due to the Authority’s need for a comprehensive review of the study’s draft reports, work on the study was extended for additional three months. It is now expected that PART II the work will be completed by the end of the first quarter of 2014.

3URMHFWIRU0HDVXUHPHQWRIWKH$XWKRULW\·V$GPLQLVWUDWLYH3HUIRUPDQFH In 2011, a forum was held at the Public Administration Institute on measuring performance of government agencies. The participants reviewed several local and international experiences. One of the recommendations was that government agencies adopt, in coordination with the Center for Measurement of Government Agencies’ Performance of the Institute, a comprehensive and specific methodology to measure their performance. The recommendation further proposed that the agencies develop their bylaws and codes to conform to the requirements of the performance measuring system; link the strategic and operational levels with human resources when the measurement system is applied; and state objectives in measurable forms. The Authority responded positively to this recommendation. In 2012 it formed, jointly with the Center, a work team to implement a balanced performance measuring system.

The team worked diligently to complete a sizable number of the project tasks. These tasks included training a number of ECRA staff at the Public Administration Institute on the project requirements, conducting interviews with members of the Authority’s senior officers, organizing four workshops on performance measuring for the authority’s officials, developing a form for the final strategic link, and determining activities and deliverables. The project continues, and it is expected to remain active for the next few years until all its objectives are achieved.

9-5 ECRA’s Budget According to Article 13 of the Authority’s charter, its financial resources consist of the licensing remuneration, pay- ments received for services rendered to service providers and others, and fines levied from violators.

The licensing remuneration is set by rules adopted by the Board of the Authority. The rules were established on the basis of collecting sufficient funds to cover the annual financial needs of the Authority. They take into consideration the nature of work of the licensee (cogeneration, generation of electricity, its transmission, distribution, or trading; and water desalination, its transportation, or trading), the relative contribution of each activity to the financing of the Au- thority, and the size of the licensee's activity.

61 Table (8) shows comparisons of the Authority's income in 2013 with that of the previous year while Table (7) shows the comparisons of its expenditures.

Table (7): Revenue comparison for 2013 with the previous year (Amounts in thousands of Saudi Riyals)

Source 2013 2012

Saudi Electricity Co. 73^570* 104,520** National Transmission Company 31^538*** 0 Saline Water Conversion Corp. 11^784 11Ǆ902 Tihamah Energy Generation Ltd. Co. 1^103 1Ǆ154 Saudi Aramco 1^138 1Ǆ021 Rabigh Arabian Water & Electricity Co. 1^070 1Ǆ105 PART II Jubail Power Co. 227 238 MARAFIQ 1^956 1Ǆ963 Shuaibah Water and Electricity Co. 2^617 2Ǆ684 Shuqaiq Water and Electricity Co. 1^210 1Ǆ256 Jubail Water and Electricity Co. 3^802 3Ǆ936 Saudi Cement Co. 196 201 Bawarij International Water Desalination Ltd. Co. 94 95 Power Energy Equipment Rentals Co. 49 19 Shuaibah Expansion Project Co. 282 285 Water and Electricity Co., Ltd. 590 590 Water and Electricity Supply Co. 853 852 Rabigh Electricity Co. 572t 0 General Contracting Co. (Al-Olayyan) 105 81 Abdul Aziz and Abdullah Kanoo Co. 38 30 Energy Alternative Solutions Co. 55 55 Rakaa Energy and Water Co., Ltd. 3 3 Twairqi Energy Co. 50 53 Nour Energy Co. 8 4 Total 132^910 132Ǆ046

* This sum represents remuneration for licensing the company’s activities in generation and distribution only. ** This sum represents remuneration for licensing the company to undertake generation, transmission, and distribution activities. 7KLVLVWKHÀUVW\HDURIRSHUDWLRQIRUWKHFRPSDQ\ 7KLVLVWKHÀUVW\HDURIFRPPHUFLDORSHUDWLRQVRIWKHFRPSDQ\·VSODQW 62 Table (8): Comparison of approved budget allocations and actual expenditures in 2013 with the previous year (Amounts in thousands of Saudi Riyals)

2013 2012 Source Approved $FWXDOO\6SHQW Approved $FWXDOO\6SHQW 6DODULHVZDJHVDQGEHQHÀWV 44Ǆ06039Ǆ387 41Ǆ762 37Ǆ702 6RFLDOVHFXULW\ 3Ǆ8063Ǆ755 3Ǆ616 3Ǆ297 (QGRIVHUYLFHUHPXQHUDWLRQ 3Ǆ5533Ǆ502 3Ǆ032 2Ǆ935 +HDOWKLQVXUDQFH 3Ǆ9493Ǆ580 3Ǆ604 3Ǆ187 Training and scholarships 2Ǆ6542Ǆ517 3Ǆ792 2Ǆ240 6WXGLHVDQGFRQVXOWDWLRQV 18Ǆ42517Ǆ147 16Ǆ569 14Ǆ287 2SHUDWLRQDOH[SHQVHV 23,35119,458 27,226 24,086 &DSLWDOH[SHQVHV 3,6152,775 2,720 605 $OORFDWLRQIRUDSHUPDQHQW 20,00020 000 20 000 PART II KHDGTXDUWHUVEXLOGLQJ Ǆ Ǆ 20Ǆ000 $PRXQWVUHIXQGHGWR 9,7259,725 9,725 9,725 VRPHOLFHQVHHV 7RWDO 133,138 121,846 132,046 118,064

9-6 The General Reserve The Authority's charter permits it to retain a reserve equal to twice its expenditures for the preceding year. At the end of 2013, the accumulated value of the cash reserve held by ECRA reached SR 65,645,987.00. In addition, there is a special reserve for the costs of building the Authority’s permanent headquarters building in which SR60,000,000.00 was accumulated by the end of 2013.

63 CHAPTER 10 E-MANAGEMENT AND IT

10-1 E-Management During 2013, ECRA continued development of IT applications needed by its administrative support operations such as consumer care, financial affairs, purchasing, personnel, public relations and information, and administrative communications. During the report year, the Authority updated all staff PCs and the operating system to Windows 8, replaced the old programs and servers with newer versions and equipment with higher capacities. The email system was also updated, and its capacity increased. The internal network security was bolstered with newer equipment and software to strengthen protection and foil hack- ing and espionage attempts.

10-2 “Murasalat” System For the past three years, ECRA has been using an administrative communications system, called “Murasalat”, for handling internal and external document flow. The program permits receipt of a document, processing it, transferring it to others, and following it up electronically; providing, thus, a complete electronic environment. During the report year, the Authority invited bids from firms specializing in this field to update the program or provide an alternative to meet ECRA’s increasing demands and keep au courant with developments in the IT arena.

(OHFWURQLF&HUWLÀFDWLRQ PART II During the report year, the Authority worked, in collaboration with the National Digital Certification Center, on a project to install digital certification in ECRA. The project provides the ability to encrypt ECRA’s staff email messages sent within the Authority and outside it. The digital signature can also be used to authenticate internal documents. On completion of the project, ECRA became an approved center of digital certification.

64 CHAPTER 11 OTHER ACTIVITIES

11-1 Glossary of the Body of Knowledge on Infrastructure Regulation In cooperation with the Public Utilities Research Center (PURC) of the University of Florida, USA, the Authority undertook to translate into Arabic the Glossary of the Body of Knowledge on Infrastructure Regulation that was developed by the center.

The glossary contains most of the technical terms dealing with operation, management, and regulation of public utilities. Workers in the field of utility regulation, and decision and policy makers in the Arab world will benefit from the translation.

PURC is one of the oustanding research centers in the world in the field of research in public utility management and regulation. It cooperated with regulators in several countries to translate the book into the major world languages and publish it on the internet for use as reference by researchers, students, and workers in this field.

Translating the book into Arabic is undoubtedly an important step in tranfering knowledge to the Arabic speaker and enhancing the use of the Arabic language and adapting it to serve as a vehicle for modern science and technology.

In 2013, ECRA continued work on this project, which is expected to be completed in 2014.

11-2 Cooperation with Regional and International Organizations ECRA is amember of the GCC Electricity Regulators Forum, and the Arab Electricity Regulators Forum which is PART II under the umbrella of the Arab League. During the report year, the Authority continued its active membership in both organizations. Since 2009, the Authority has become an associate member of the Energy Regional Regulators Association (ERRA), which includes energy regulators from Eastern Europe and Central Asia. During 2013 ECRA continued participation in the activities of ERRA, and sent several staff members to attend its training programs and workshops to learn and see first hand international practices in energy regulation. The year 2013 also saw continued cooperation between the Authority and the National Association of Regulatory Util- ity Commissioners (NARUC) of the USA. Cooperation covered learning about US practices in licensing, monitoring regulatory compliance, tariff structures, monitoring and evaluation of licensees' performance, consumer care, best practices and methods for long term electricity system planning, implementation of smart grids, and plans for incorporation of renewable energy sources in the electricty network.

11-3 Cooperation with King Abdul Aziz City for Science and Technology In order to promote cooperation in the fields of information development, studies, and research; the Authority signed a memorandum of understanding (MoU) with King Abdul Aziz City for Science & Technology (KACST). The objective of the MoU is to undertake studies, research, and joint projects; publish research findings and disseminate them to the largest possible number of experts. Cooperation will concentrate on studies and field investigations related to the energy sector, and offer consultations in the areas of codes, legislations, standards, and specifications related to the electrical energy system.

11-4 Cooperation with King Abdullah Center for Petroleum Studies & Research 'XULQJWKH\HDURIWKHUHSRUWWKH$XWKRULW\VLJQHGDQ0R8ZLWKWKH.LQJ$EXGXOODK&HQWHUIRU3HWUROHXP6WXGLHV Research. The MoU included collaboration of researchers from ECRA and the center to undertake research projects, publish their findings so that the largest audience may benefit from them, and undertake scientific works and research of global value.

The MoU also included copperation to develop the local research expertise of the staffs of both organizations, exchange of expertise in the scientific and research fields, creating an environment conducive to facilitating development of innovation and creativity skills, exchanging information and statistical data to carry out research, and laying the foundation for technical cooperation and consolidating the data to avoid duplication of efforts in the areas of statistcal information.

65 PART III

66 PART III REPORT OF THE ELECTRICITY INDUSTRY PART III DISPUTE RESOLUTION COMMITTEE

67 CHAPTER 1 GENERAL BACKGROUND Dispute resolution is one of the important responsibilities of ECRA. Disputes include consumer complaints against service providers as well as disputes among licensees. In all cases the policy of ECRA is to resolve the dispute through negotiation and mediation between the parties. If the mediation effort does not yield satisfactory resolution, the dispute is referred to the Electricity Industry Dispute Resolution Committee. In accordance with the Electricity Law, the Electricity Industry Dispute Resolution Committee is an entity independent of ECRA, formed by the Council of Ministers. It consists of six members: three legal experts, two experts in the electricity industry, and a financial expert. Membership in the committee is for three years, renewable. 1-1 Composition of the Committee On November 9, 2006 the committee was constituted by CMD 211 as follows: Dr. Mohammad A. M. Marzoogi Chair Dr Samir A. H. Al-Baiyat Member Mr. Youssef M. A. Al-Mubarak Member Dr. Anwar H. A. Mufti Member Mr. Fahad M. S. Al-Issa Member Dr. Ayoub M. A. Al-Jarbou Member The terms of service for the committee chair and members were renewed twice, each time for three year, the latest renewal being on 3 September 2012. 1-2 Jurisdiction of the Committee Article Thirteen of the Electricity Law specifies the charges of the committee to rule on the following: Disputes, complaints, and violations arising in the electricity industry. Disputes among and between licensees. Disputes between a licensee and one or more consumers. Any violation of the Electricity Law, its Implementing Regulations, or the Charter of the Authority. The committee exercises its charges without prejudice to any other means of dispute resolution indicated by the agreements in force between the parties to the dispute. PART III It should be noted that although the committee's jurisdiction includes ruling on disputes between ECRA and licensees, the Electricity Law allows for settling such disputes through arbitration. Article Fifteen of the Law outlines the penalties that may be imposed on violators of its Articles, its Implementing Regulations, or the Charter of the Authority. Article Fifteen also gives ECRA the authority to place the activities of any violator under guardianship, but such action must be submitted urgently to the committee within a period not exceeding thirty days. 1-3 Modus Operandi of the Committee The Electricity Law covers certain important aspects of the modus operandi of the committee. Article Thirteen states that decisions are taken by a majority of votes, and in the case of a tie the side with which the chair votes carries. The article also mandates that the reasoning for all decisions must be stated, that decisions must be read in public sessions, that the committee shall not refrain from making a ruling on grounds of the absence of textual statements under the Law covering the dispute at hand, but must in such cases refer to the common law of the Kingdom. The Law subjects decisions of the committee to review by the Court of Grievances. Anyone subject to a ruling by the committee may appeal the ruling to the Court of Grievances within sixty days of the date he is notified of the ruling. If he does not appeal within the specified period, the ruling becomes final. The Law states that the bylaws of the committee are to be issued by ECRA's Board. They were indeed issued as Ap- pendix (1) to the Implementing Regulations of the Electricity Law pertaining to the Duties of the Authority by Board Decision Number 3/11/27 on 15/4/1427AH (13/5/2006).

68 CHAPTER 2 ACTIVITIES OF THE COMMITTEE

2-1 Cases Received by the Committee: The Committee considered the cases received during 2013 as well as cases pending from the previous year, a total of 211. It decided to follow a written memorandum form of litigation whereby each party is provided with copies of the memoranda and documents submitted by the other party. He is then requested to submit his response prior to the committee session in which the case is to be considered. During the session all outstanding issues are addressed and closing arguments are made.

The cases considered in 2013 were as follows: 2-1-1 Cases on the Docket from Previous Years Ninety-three cases were pending from 2012. The committee ruled on all of them except for 15 cases which were still under consideration pending submittal of some documents and other requirements which had not been met at the end of the year.

2-1-2 Cases Received by the Committee in 2013 In 2013 the committee received 118 cases. It issued rulings in 16 of those cases, while some of the remaining are in advanced stages of adjudication pending issuance of rulings, and the remaining group will require some time to complete submittal of documents and hearing arguments of litigants in order to reach rulings.

PART III

69 Table (9) shows the status of the cases considered by the committee in 2013.

Table (9): Cases on the docket of the Committee in 2013

Number of Cases Category Under review In chamber Closed Total Violations Related to the Electricity Industry 3 3 2 8 Disputes Related to the Electricity Industry 91 20 92 203 Total 94 23 94 211

2-2 Comparison with the Previous Year: Cases Received by the Committee and Cases Resolved Table (10) shows a comparisons with the previous year of the number of cases received by the committee and the number it finalized in 2013.

Table (10): Number of cases received by the Committee and the number PART III ÀQDOL]HG&RPSDULVRQRIZLWKWKHSUHYLRXV\HDU

Cases 2012 2013

Number of Cases Received 76 62

Number of Cases Finalized 118 94

70 2-3 Analysis of Cases by Type of Complaint An analysis of the cases received by the committee in 2012 and 2013, reveals that most cases involve requests that can be classified as shown in Table (11).

7DEOH &ODVVLÀFDWLRQRIFDVHVE\W\SHRIFRPSODLQW

Type of Request 2013 2012 Total

Payment of rent for using real estate property for electrical equipment 43 57 100 Compensation for lands allocated by eminent domain action as right of way or paths for electrical equipment 14 32 46 Relocation of a distribution line 19 10 29 Relocation of a transmission line 8 17 25 Compensation for damages resulting from electrical equipment 15 5 20 Compensation for mental anguish, and physical damages 9 5 14 Removal of a transformer/electricity box 5510 Compensation for failure to connect electricity service 4610 Compensation for disconnection of electrical services and the damages resulting from the disconnection 54 9 Refund of amounts paid to licensee 36 9 Making the consumer pay for consumption costs 53 8 7DNLQJDOLFHQVHHRIÀFLDOWRWDVNIRUIDLOXUHWRIROORZDSSURYHGSURFHGXUHV 42 6 &RPSHQVDWLRQIRUÀQDQFLDOORVVHVGXHWRÀUHLQDQHOHFWULFLW\PHWHUWUDQVIRUPHU 33 6 Compensation for injuries resulting from the electric current 23 5 PART III Removal of an electrical room 23 5 ,PSRVLQJDÀQHRQWKHOLFHQVHHIRUFRPPLWWLQJDYLRODWLRQ 40 4 Compensation for drop in real estate property value due to presence of electrical equipment on the premises 31 4 Relocation of a substation 22 4 Relocation of a buried cable 13 4 Enforcement of an eminent domain action 04 4 Service connection 30 3 Rescind surcharges on the electricity bill 30 3 Relieve from payment of penalty for meter tampering 21 3 Granting an additional meter 12 3 Vacating an executive order 03 3 Relieve from payment for consumption of past periods 20 2 Paying the licensee for supply of electrical equipment 11 2 Recalculation of the amount of electricity bills 11 2 Imposing a penalty on a licensee for tardiness in implementing an Authority decision 02 2 Relieve from paying a penalty for cutting a cable 10 1 Voiding a license to build a power station 10 1 Objection to enforcement of the obligation to provide a site to house electrical equipment 01 1 Expropriation of the remainder of a property that was subject to an eminent domain action because the remainder became useless 01 1 71 PART IV

72 PART IV THE ELECTRICITY AND WATER DESALINATION INDUSTRY IN 2013

PART IV

73 CHAPTER 1 THE ELECTRICITY INDUSTRY

The Saudi electricity system is the largest in the Arab world, where peak load in 2013 reached 53,864 MW. The following is a brief description of this system.

1-1 Generation Generation capacity by the licensed entities in the Kingdom in 2013 reached 69,761 MW*. Of this total capacity, SEC owned 74%, SWCC 7%, and ownership of the remainder was distributed among several licensees as shown in Table (12).

Table (12): Capacities of generation units of licensed entities

Producing Entity No. of plants Capacity (MW) Saudi Electricity Co. (SEC) 46 51,525

Saline Water Conversion Corporation (SWCC)** 6 5,018

Jubail Water and Electricity Co. 1 2,875

Shuaibah Water and Electricity Co. 1 1,191 Saudi Aramco 6 1,189

Tihamah Power Generation Co. 4 1,083 (MARAFIQ)- Yanbu 1 1,589

Shuqaiq Water and Electricity Co. 1 1,020 Rabigh Electricity Co. 1 1,320

Rabigh Water and Electricity Co. 1 600 PART IV Saudi Cement Co. 2 223 Jubail Power Co. 1 250 Twairgi Power Co. 163

Dharma Electricity Company 1 1,756

Aman Modern Energy Co. 359

Total 76 69,761***

* All data appearing in this section of the report has been obtained from SEC, excepting data for generation where it was obtained from the Authority’s licensing records. ** Cogeneration plants only. *** This total represents the nominal capacities as per the licenses. The total of the available capacities was 58,462MW. 74 Figure (12) shows the distribution of gen- Figure (12): Distribution of generation capacities eration percentages between the licensed among producers entities.

Jubail Water & SWCC Electricity 7% 4%

Other Producers 15%

SEC 74%

Figure (13) shows distribution of genera- Figure (13): Distribution of electricity generation tion capacities in the four SEC business capacities in the SEC business sectors sectors*.

Southern 8%

Eastern 37% Western PART IV 33%

Central 22%

* SEC's business sectors are shown in Figure (2) page 28. 75 1-2 Transmission The National Electricity Transmission Company (NETC)* is responsible for planning the transmission system in the Kingdom, and for building and operating it. This responsibility covers all components of the system at all voltages higher than 110kV throughout the Kingdom except for Yanbu Industrial City where MARAFIQ is responsible for transmission.

Transmission from the generation plants to the consumption areas is carried through high voltage overhead lines that have a total length of 50,016 km and underground lines that have a total length of 4,302 km.

The national transmission network consists of transformer stations; connection and disconnection stations; transmission lines at the high voltages of 110, 115, and 132kV; and transmission lines at the very high voltages of 230 and 380 kV. SEC is currently carrying out preliminary studies to build a 500 kV DC line connecting Riyadh with Jeddah. The completion of this line will thus complete the construction of a unified national network. In the meantime construction is underway of a national control center for the electricity system which will enhance the capabilities of the National Electricity Transmission Company to manage the national system from east to west and from north to south. It will also allow coordination of the activities of the regional control centers that are operating currently in the SEC Eastern, Central, Western and Southern sectors.

1-3 Distribution Currently SEC has a monopoly also of electricity distribution to consumers in the Kingdom (with the exception of two areas operated by MARAFIQ in Jubail and Yanbu). The distribution network consists of 237,244 km of overhead lines and 228,257 km of underground lines. In 2013, SEC delivered a total of 256,688 GWh of energy, an increase of 6.8% over the previous year. The number of customers increased over the same period by 6.1% to 7,142,816. Table (13) shows the distribution of customers classified by consumption type and quantity.

Table (13)**: Distribution of consumers Kingdom-wide based on type of consumption and the quantities of their consumption

Type Number of Consumption Percent of total PART IV subscribers (MWh) consumption

Residential 5Ǆ685Ǆ355 126Ǆ112Ǆ997 48.0%

Commercial 1Ǆ151Ǆ546 38Ǆ882Ǆ158 14.8%

Government 228Ǆ268 32Ǆ125Ǆ513 12.2%

Industrial 8Ǆ586 55Ǆ636Ǆ325 21.2%

Others 85Ǆ613 9Ǆ928Ǆ017 3.8%

Total 7Ǆ159Ǆ368 262Ǆ685Ǆ011 100%

* NETC is an independent company, wholly owned by SEC. It was established in 2012. ** Data in this table is for SEC and MARAFIQ. 76 As evident from Figure (14), the residential sec- Figure (14): Distribution of consumption tor consumes half of the total electricity sold, of by class Kingdom-wide which 70% is attributed to air-conditioning.

Government Commercial 12% 15% Industrial 21%

Residential 48%

Others 4%

Consumption is about equal at around 30% in Figure (15): Distribution of consumption each of the Eastern, Central, and Western busi- among SEC business sectors ness sectors while consumption in the Southern business sector amounts to about a quarter of the quantity consumed in the other sectors (Fig- ure 15). Western 31%

Central 29%

Western PART IV Southern 31% 9%

77 The distribution of consumption among the various categories shows a marked regional varia- Figure (16): Distribution of consumption tion. Industrial consumption dominates in the in the Eastern business sector Eastern business sector where it reaches 48% of the total consumption of the sector (Figure 16).

Residential 30% Other Commercial 4% 10% Government 8%

Industrial 48%

In the other business sectors, residential con- Figure (17): Distribution of consumption sumption is dominant. In the Central business sector, it is 52% (Figure 17). in the Central business sector

Government 18% Industrial 8% Other Commercial 5% 17%

PART IV Residential 52%

78 In the Western business sector, residential con- Figure (18): Distribution of consump- sumption is around 60% (Figure 18). tion in the Western business sector

Others Industrial Government 2% 8% 12%

Commercial 19%

Residential 59%

The residential use share reaches a maximum Figure (19): Distribution of consump- in the Southern business sector where it is 65% tion in the Southern business sector (Figure 19).

Others Industrial 4% 4%

Government 14%

Commercial 14% Residential PART IV 65%

79 The distribution of residential and commercial consumption in 2013 in the business sectors (Figure 20) reflects the relative population densities in these sectors. The larger government consumption in the Central business sector is attributed to the location of the Kingdom’s capital in that area. The presence of the two major industrial giants, Saudi Aramco and SABIC, in the Eastern business sector explains the high industrial consumption of this sector.

Figure (20): Comparison of consumption patterns in the SEC business sectors

Eastern Central Western Southern 50

(GWh) 20

Amount of consumption 0 Residential Commercial Government Industrial others

Consumption pattern

PART IV

80 Figures for electricity generation from various sources, total quantity of electricity sold by SEC, and total energy loss of the entire SEC system are shown in Table (14).

Table (14): Energy production, sale, and losses

Quantity of electric energy (GWh)

2013 2012

Energy generated at SEC plants* 198Ǆ891 207Ǆ131

Energy sent from SEC plants 192Ǆ329 200Ǆ305

Energy imported from SWCC 14Ǆ597 14Ǆ102

Energy imported from other producers 70Ǆ520 50Ǆ432

Total Energy carried by the transmission system** 277Ǆ446 264Ǆ853

Total Energy sold 256Ǆ688 240Ǆ288 Total energy loss*** in the transmission and 20Ǆ758 24Ǆ565 distribution systems

Percent of electricity consumed in SEC Plants 3.3% 3.3%

Loss in the entire SEC system 7.48% 9Ǆ27%

PART IV

7KLVÀJXUHLQFOXGHVHQHUJ\JHQHUDWHGE\UHQWHGXQLWV SXUFKDVHGHQHUJ\ ** The energy carried by the transmission system includes amounts imported from the GCC grid interconnection system. *** Energy loss = Energy input to the transmission system – Energy sold 81 1-4 Service Connections to Consumers The beginning of 2013 witnessed an improvement on the service connection front. The cumulative number of requests for service connections that the company was not able to fulfill decreased substantially compared to the previous year. The number of requests for the year under consideration also decreased as shown in table (15).

Table (15): Comparison of SEC’s customer requests for service connections in the past three years

Fiscal Year

2013 2012 2011

Cumulative number of requests for service connections from previous years that were pending 40Ǆ77054Ǆ049 53Ǆ092

Requests received by SEC during the year 149Ǆ520155Ǆ589 155Ǆ318

Total number of requests 190Ǆ290209Ǆ638 208Ǆ410

1XPEHURIUHTXHVWVIXOÀOOHGGXULQJWKH\HDU 144Ǆ910153Ǆ293 136Ǆ320

3HUFHQWDJHRIUHTXHVWIXOÀOOPHQW 76.2% 73Ǆ1% 65.4%

PART IV

82 Figure (21) shows changes in the number of connection requests handled by SEC in the past three years, and the num- bers actually fulfilled.

Figure (21): Total number of connection requests handled by 6(&DQGWKHQXPEHUDFWXDOO\IXOÀOOHGLQWKHSDVWWKUHH\HDUV

250Ǆ000 Total number of connection requests

200Ǆ000

150Ǆ000

1XPEHURIUHTXHVWVIXOÀOOHG 100Ǆ000 Number of Requests

50Ǆ000

0 2011 2012 2013 Year

The rate of fulfillment of connection requests continued to improve, increasing from 73% in 2012 to more than 76% in 2013 (Figure 22).

)LJXUH 3HUFHQWDJHRIUHTXHVWVIXOÀOOHG PART IV in the past three years

78% 76% 74% 72% 70% 68% 66% 64% )XOÀOOPHQWSHUFHQWDJH 62% 60% 2011 2012 2013

Figure (23): Growth of the number of consumers (2004-2013)

7.5 7.0 6.5 6.0 5.5

(in millions) 5.0 4.5

Number of consumers Number 4.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Energy sales during the same period increased by 77.8% from 144,385 GWh in 2004 to 256,687 GWh in 2013 (Figure 24).

PART IV Figure (24): Growth of energy sales (2004-2013)

280 260 240 220 200 180

(in 1000 GWh) 160

Energy Sales 140 120 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year

84 Peak demand increased by 93.4% from 27,847 MW in 2004 to 53,864 MW in 2013 (Figure 25).

Figure (25): Growth of peak demand (2004-2013)

55 50 45 40 (GW) 35 30 Peak Demand 25 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

1-6 Fuel Types Used in Energy Production Natural gas and crude oil were used as fuels to produce some 75% of the energy in 2013 (Figure 26). The other fuels used were diesel, and heavy fuel oil (HFO).

Figure (26): Fuel types used in electricity production in 2013 PART IV

Heavy Fuel Oils 10% Diesel 15% Natural Gas 46%

Crude Oil 29%

85 1-7 Energy Unit Cost In 2013 SEC’s average energy unit (kWh) cost of production, transportation, and distribution was SR0.152. The costs include operational and capital costs, fuel, purchased energy, and depreciation costs (Figure 27).

Figure (27): Distribution of average energy unit cost

Capital expenses 14% Depreciation Fuels 30% costs 15%

Purchased Operational energy costs Expenses 17% 24%

1-8 Government Subsidy to Reduce Electricity Sale Price to Consumers The energy unit cost price calculated in the preceding section was calculated using the fuel prices actually paid by SEC and other electricity generation entities. These prices were much less than the world market prices. The difference between the fuel prices paid by the electricity producers in the Kingdom and international prices represents part of the government subsidy to reduce the consumer electricity bill. To get an idea about the size of this subsidy, Table 16 shows a comparison between the fuel prices paid by the electricity producers in the Kingdom and the international fuel prices, using BTU as a standard of measurement since fuels of different types are used in electricity production.

Table (16): Comparisons of fuel prices paid by the electricity producers in the Kingdom with international prices PART IV Price Fuel Type (US$/million BTU) Paid by the Kingdom’s International Electricity Producers Heavy fuel oil 0.43 15.43

Gas 0.75 9.04

Diesel 0.67 21.67

Crude oil 0.73 19.26

Without this subsidy which is estimated, in 2013, to be around SR150 billion, the average energy unit cost in 2013 would have been about SR 0.80/kWh.

86 1-9 Average Energy Unit Sale Price In spite of the tremendous amount of government subsidy for electricity production in the form of extremely low fuel prices, as demonstrated in the preceding section, as well as the soft loans the government grants to SEC, the average unit price collected by SEC from consumers in 2013 is still below the cost of production. The average unit price collected was SR 0.141/kWh (Figure 28).

Figure (28): Comparison of the electricity unit cost with the unit price collected

0.85

0.80

0.75

0.70

0.65

0.60

0.55

0.50

0.45 (SR/kWh) Price 0.40

0.35

0.30

0.25 PART IV 0.20

0.15

0.10

0.5

0.0 Collected Price Cost using fuel prices Cost calculated using paid by the Kingdom's international fuel prices electricity producers

87 CHAPTER 2 THE ELECTRICITY TARIFF

One of the most important concerns of ECRA is that tariffs are designed so that they are cost reflective, fair and affordable to end-users, their structure is easy to implement, and that income collected by the industry in accordance with these tariffs meets its revenue requirements. In order to achieve these aims ECRA’s concerns include: Developing a methodology for tariff setting and for periodic review of the adopted tariffs. Designing and preparing a tariff structure. Developing an overall tariff policy statement for the Kingdom. Preparing a standardized financial reporting system to be utilized by all licensed service providers. Developing a comprehensive system to collect financial and operational data from all service providers in the King- dom. Developing a comprehensive cost accounting system in order to assess service providers’ costs which ultimately affect the tariff paid by consumers.

ECRA is also keen that tariffs reflect the government concerns with regard to use of available energy sources efficiently, and depletion of resources and protection of the environment, as well as economic factors. Thus, ECRA strives to insure that tariffs in the Kingdom reflect those concerns by providing consumers with incentives to improve their utilization of the electricity system, and apply conservation measures that reduce their costs while at the same time they improve the efficiency of the power system.

2-1 A Brief History of Electricity Tariffs in the Kingdom In the early years of introduction of electricity services in the Kingdom, prices of these services varied from one producer to another, depending on his cost of production. In 1954 the government decided to set electricity prices to be affordable to consumers. For example, the price in Jeddah was thus reduced from SR 0.55 per kWh to SR 0.325 per kWh. Prices were also set in Makkah and Taif at levels that guaranteed reasonable returns to the private owners of the utilities. In March 22, 1960 a new electricity tariff was issued by Council of Ministers Decision (CMD) 174 which set the prices as shown in Table (17),

7DEOH (OHFWULFLW\SULFHVLQPDMRUFLWLHVSHU&0'RI

All Consumers, Except Mosques (in SR/kWh ) City Mosques First 100 More than First four hours More than four (SR/kWh) PART IV kWh kWh 100 after sunset hours after sunset Jeddah 0.24 0.21 0.24 0.18 0.18

Makkah 0.30 0.25 0.30 0.17 0.15

Madinah 0.30 0.25 0.30 0.18 0.15

Khobar 0.30 0.25 0.26 0.17 0.15

Dammam 0.30 0.25 0.26 0.17 0.15

Beginning on November 18, 1963 the tariff prices were reduced and unified throughout the Kingdom by CMD 421 issued on October 22, 1963. The reductions were 12% percent for Jeddah, 30% for Makkah, and 40% for Taif. Con- comitant with these reductions, the Government guaranteed the private utilities subsidies that covered their operating costs and a reasonable margin of profit. Further reductions in Jeddah were made in 1969 by the Saudi National Electric Power Company, the utility operator in the city, which reduced the rate from SR0.24 to SR0.20 per kWh.

* Historical information in this chapter is drawn from the book (The Evolution of Electricity during a Hundred Years: 1319-1419AH) issued by the Deputy Ministry of Electricity, Ministry of Industry and Electricity - Riyadh. 88 On January 17, 1972 the tariff saw further reductions via CMD 1099. The prices were as shown in Table 18.

Table (18): Electricity prices in various cities as per CMD 1099 of January 17, 1972

City Non-industrial consumption Industrial consumption (SR/kWh) (SR/kWh) Jeddah 0.14 0.13 Makkah 0.20 0.18 Taif 0.20 0.18 Madinah 0.20 0.18 Yanbu 0.25 0.20 Dammam 0.14 0.10

The CMD included two provisions: $EROLVKLQJWKHPHWHUUHQWDQGFKDUJLQJLQVWHDGDIL[HGPRQWKO\VHUYLFHIHHRI65IRUQRQLQGXVWULDOFRQVXPHUV and SR 20.00 for industrial consumers. Providing annual subsidies to the utility companies if they failed to make profits. The subsidies were designed to guarantee the companies a profit margin of 7%.

On August 16, 1973 the government decreed reduction of the tariff by 50-60% in 16 smaller towns in the Kingdom that fixed the rate at SR 0.18 per kWh for industrial consumption and SR 0.20 per kWh for all other consumption. The subsidies for companies operating in these towns were set to allow for a profit margin of 10% to encourage investment in electricity services in these regions.

On August 9, 1974 CMD 1020 set the tariff for industrial consumption at SR 0.05 per kWh, and SR 0.07 per kWh for all other consumption. The CMD also raised the guaranteed profit margin* to 15% and provided for credit facilities and loans through the Saudi Industrial Development Fund to electricity operating companies. PART IV On October 16, 1984, the Government adopted a block tariff that increased with increasing consumption. The prices were as shown in Table (19). Table (19) Electricity tariff adopted on November 23, 1984

Monthly Consumption Non-industrial consumption Industrial consumption "Block" (kWh) (SR/kWh) (SR/kWh) 1-1,000 0.07

1,001-2,000 0.10 0.05

> 2,000 0.15

In the following fifteen years 1985-2000 two modifications were made to this tariff that included enlargement of the EORFNVH[SDQVLRQRIWKHFODVVHVRIEHQHILFLDULHVDQGUHGXFWLRQRIWKHWDULIIV$IHHRI65N:KZDVDGGHGWRFRQ- sumption above 2000 kWh to establish a fund for electricity projects needed on an urgent or emergency basis.

2YHUWKH\HDUVWKDWWKHJRYHUQPHQWJXDUDQWHHGDFHUWDLQSURÀWPDUJLQWKLVPDUJLQYDULHGEHWZHHQDQG 89 2-2 The Current Tariff In 1995 the Ministry of Industry and Electricity undertook a comprehensive study of the electricity sector in the King- dom that culminated in the Council of Ministers Decision 169, which mandated total overhaul and restructuring of the entire sector. The decision also included approval of a new tariff (Table 20) starting on April 4, 2000.

Table (20): Tariff as of April 4, 2000

Monthly Consumption Residential, Commercial, Agricultural, Charitable Industrial (kWh) Government (SR/kWh) Societies (SR/kWh) (SR/kWh) 1-2,000 0.05 0.10 2,001-4,000 0.10

4,001-5,000 0.13

5,001-6,000 0.18 0.12 6,001-7,000 0.23

7,001-8,0000.28 0.12

8,001-9,000 0.32

9,001-10Ǆ000 0.36

> 10Ǆ000 0.38

The tariff was later modified by CMD 170 on October 10, 2000 to the tariff shown in Table (21) which became effective October 28, 2000.

Table (21): Tariff approved by CMD 170 as of October 28, 2000 PART IV Agricultural, Mosques, Industrial, Medical Facilities, Monthly Consumption Residential, Commercial, Charitable Societies Private Educational (kWh) Government (SR/kWh) (SR/kWh) Institutions (SR/kWh)

1-2,000 0.05 0.05

2,001-4,000 0.10 0.10 4,001-5,000 0.12 5,001-6,000 0.12 6,001-7,000 0.15

7,001-8,0000.20 0.12

8,001-9,000 0.22

9,001-10Ǆ000 0.24

> 10Ǆ000 0.26 90 This tariff remained in effect for approximately ten years. The residential tariff and those for agricultural uses, mosques, and charitable societies remained unchanged till the present time (Table 22).

Table (22): Residential, Agricultural, Mosques, and Charitable Organizations Tariffs, Unchanged, as per CMD170

Agricultural, Mosques, and Residential Consumption Tariff Charitable Societies Tariffs

Monthly Consumption Tariff Monthly Consumption Tariff (kWh) (SR/kWh) (kWh) (SR/kWh)

1-2,000 0.05 1-2,000 0.05

2,001-4,000 0.10 2,001-5,000 0.10

4,001-5,000 > 10Ǆ000 0.12 0.12 5,001-6,000

6,001-7,000 0.15

7,001-8,000 0.20

8,001-9,000 0.22

9,001-10Ǆ000 0.24

> 10Ǆ000 0.26

On July 1, 2010, a new tariff for government, commercial, and industrial consumption came into force. It was adopted PART IV by a decision of ECRA's Board, utilizing the authority delegated to it by the Council of Ministers to set tariffs for non- residential consumption (i.e., government, commercial, and industrial consumption) with an upper limit of SR0.26/ kWh. As per the aforementioned Board decision, the commercial and government tariff became as shown in Table 23.

Table (23): Commercial and Government Tariffs, As of July 1, 2010

Commercial Consumption Tariff Government Consumption Tariff

Monthly Consumption Tariff Monthly Consumption Tariff (kWh) (SR/kWh) (kWh) (SR/kWh)

1-4,000 0.12 Any quantity 0.26

4,001-8,000 0.20

More than 8,000 0.26 91 The industrial consumption tariff became as shown in Table 24.

Table (24): Industrial Consumption Tariff Effective as of July 1, 2010

I- Tariff for the period from October 1 to April 30

Tariff Consumer Type (SR/kWh)

Small (Plant with contracted load not exceeding 1,000 kVA) 0.12

Large (Plant with contracted load exceeding 1,000 kVA) 0.14

II- Time of Use Tariff (for industrial consumers using digital meters) Applicable from May 1 to September 30

Consumption Time Tariff Consumption Days (Consumption Hours) (SR/kWh)

00:00-08:00 0.10

08:00-12:00 0.15 Saturday - Thursday 12:00-17:00 0.26

17:00-24:00 0.15

00:00-09:00 0.10 Friday 09:00-24:00 0.15

PART IV III- Seasonal Tariff (for industrial consumers using electromechanical meters) Applicable from May 1 to September 30

(SR/kWh) 0.15

92 To give an idea of the progression of tariffs in the Kingdom since 1950, Figure (29) illustrates the progression of the tariff for the first 100 kWh of residential consumption in the City of Jeddah as an example.

)LJXUH &KDQJHRIWDULIISHUN:KRIWKHÀUVWN:KRIUHVLGHQWLDO consumption in the City of Jeddah from 1950 to the present

0.60

0.50

0.40 0.30

Tariff 0.20 (SR/kwh) 0.10 0.0 1950 1960 1970 1980 1990 2000 2010 Year

In general, the electricity tariff in the Kingdom is one of the least expensive in the world as can be observed from com- paring it with the approved tariffs in a large number of countries for which up-to-date data is available in the internet*. The maximum value for the tariff in the Kingdom is less than the fixed tariff for all the countries shown in Figure (30-A) except Uzbekistan.

Figure (30-A): Comparison of the upper limit of the tariff in the Kingdom ZLWKWKHÀ[HGWDULIILQDQXPEHURIFRXQWULHVDURXQGWKHZRUOG

2.00 1.80 1.60 PART IV 1.40 1.20 Tariff ceiling in the Kingdom 1.00 (SR/kWh) Tariff 0.80 0.60 0.40 0.20 0.0 Italy Spain Chile Latvia Brazil Tonga France Tuvalu Ireland Mexico Finland Norway Guyana Sweden Bulgaria Jamaica Portugal Moldova Belgium Hungary Paraguay Romania Denmark Germany Lithuania Colombia Argentina Uzbekistan Sinngapore Philippines Switzerland Netherlands Saudi Arabia Saudi New Zealamd New United Kingdom

* Data were taken from the following site: http://en.wikipedia.org/wiki/electricity_tariff. 93 The same result is obtained when comparison is made with tariffs that range between a maximum and a minimum. It is evidently clear that the maximum and the minimum of the tariff in the Kingdom are lower than all the countries shown in Table (30-B), except Surinam and Bhutan.

Figure (30-B): Comparison of the tariff range in the Kingdom with a number of countries around the world

Min Max

2.00

1.50 Kingdom's maximum tariff

Tariff 1.00 (SR/kWh) Kingdom's minimum tariff

0.50

0.0 Iran USA India Tahiti Nepal China Dubai Serbia Jordan Russia Turkey Bhutan Taiwan Iceland Nigeria Vanuatu Pakistan Surinam Thailand Australia Malaysia Cambodia Hong Kong South Korea South Africa Saudi Arabia

PART IV

As can be seen in these two figures, the comparisons include a variety of countries. Some are industrially advanced, some are underdeveloped, and some others are developing. Included also are some oil producing and some oil importing countries. The low level of the electricity tariffs in the Kingdom is directly attributable to the huge subsidies* granted by the government to the electricity producers through the supply of fuels at virtually trivial prices compared to the world market price.

2-1 Residential Monthly Bill Data Total residential consumption of electric energy in 2013 was 126,113 GWh, which represents 48% of total electric energy consumption in the Kingdom.

* See Section “1-8 Government Subsidy to Reduce Electricity Sale Price to Consumers”, page 86. 94 Analyzing the monthly residential consumption bills issued in 2013, the following becomes apparent (Figure 31): 60.9% of the bills were valued at SR100.00 or less each. 16.3% of the bills ranged in value between SR101.00 and SR200.00 each. 16.8% of the bills ranged in value between SR201.00 and SR500.00 each. Only 5.9% of the bills had a value exceeding SR500.00 each.

Figure (31): Percentage distribution of monthly bill values in 2013

70% 60.90% 60% 50% 40% 30% 16.30% 20% Percentage 6% 9.30% 10% 3% 4.50% 0%

SR100.00 or less SR201.00 - SR300.0 SR501.00 - SR1000.00SR401.00 - SR500.00SR301.00 - SR400.00 SR101.00 - SR200.00 Value of the monthly bill

From the preceding data it is clear that more than 94% of the monthly residential consumers bills issued in 2013 did not exceed SR500.00 each (Figure 32).

Figure (32): Cumulative percentage distribution of monthly bill values in 2013

98.20% 100% 94% 95% 91% Cumulative percentage 90% 86.60% PART IV 85% 80% 77.20% 75% 70% 65% 60.90% 60% 55%

Not exceeding SR500.00 Not exceeding SR300.00 Not exceeding SR1000.00 Not exceeding SR400.00 Not exceeding SR200.00Not exceeding SR100.00 Value of the monthly bill

Undoubtedly, the monthly bill value will vary greatly from one month to another according to season. The bill amount increases significantly in the summer months and decreases in the winter months for most parts of the country.

95 CHAPTER 3 WATER DESALINATION

Saudi Arabia is considered the largest producer of desalinated water in the world. The total production capacity of all entities licensed by the Authority to participate in this activity in 2013 was 6,166,678 cubic meters daily. The following sections contain a description of the water desalination system in the Kingdom.

3-1 Production of Desalinated Water The Saline Water Conversion Corporation (SWCC) is the principal entity for desalinated water production in the King- dom. Its share of total production is about 60%. Table 25 shows the capacities of entities working in desalinated water production and cogeneration.

7DEOH 'HVDOLQDWHGZDWHUSURGXFWLRQFDSDFLWLHVRIHQWLWLHV OLFHQVHGWRRSHUDWHLQWKHGHVDOLQDWHGZDWHUDQGFRJHQHUDWLRQÀHOGV

Desalinated Water Licensee Number of Plants Production Capacity (m3/Day) SWCC 16 3Ǆ667Ǆ854

Jubail Water & Electricity Co. 1 805Ǆ464

Shuaibah Water & Electricity Co. 1 888Ǆ000

MARAFIQ (Yanbu) 1 201Ǆ360

Shuqaiq Water & Electricity Co. 1 212Ǆ000

Rabigh Arabian Water & Electricity Co. 1 192Ǆ000

Shuaibah Expansion Project 1 150Ǆ000

Bawarij International Co. 2 50Ǆ000

Total 24 6Ǆ166Ǆ678 PART IV

* Data in this table were taken from the Authority's licensing records. 96 Figure (33) shows percentage of desalinated Figure (33): Percentage distribution of daily water produced by each licensee. production capacities among the licensees

The Other Producers 13%

Shuaibah Electricity & Water SWCC 14% 60%

Jubail& Electricity Water 13%

The quantity of water produced by all licensees Figure (34): Percentage contribution in 2013 was 1,775 million cubic meters. Figure of licensees to annual production (34) shows the percentage distribution of annual production for the licensed entities.

SWCC 59%

Shuaibah Water & Electricity 20%

Others Jubail Water 7% & Electricity 14% PART IV

97 SWCC’s share of the total quantity of annual desalinated water production in 2013 (Table 26), increased by 6% from the previous year to reach 1,055 million cubic meters, produced from its numerous plants spread along the Kingdom’s shorelines.

Table(26): Desalinated water produced in SWCC plants

Production Quantity (Million Cubic Meters)

Year Plant 2013 2012

Jubail 388.0 381.0

Al-Khobar 129.7 144.5 Khafji 8.0 8.0

Jeddah 163.6 132.2 Shuaibah 176.6 170.3

Yanbu 136.1 122.8 Shuqaiq 28.5 15.1 Small Plants 24.2 23.3

Total Production 1054.7 997.2

PART IV Figure (35) shows the percentage share of each Figure (35): Percentage distribution of annual production SWCC plant in the total corporation production. among SWCC plants

Al-Khobar 12%

Jaddah Jubail 16% 37%

Shuaibah 17% The other plants 18%

98 3-2 Transportation of Desalinated Water SWCC is responsible for transportation of the desalinated water from the production plants to the major reservoirs of the Potable and Sanitary Water Departments in the various cities and towns. These departments, which come under the purview of the Ministry of Water and Electricity, along with the National Water Company (NWC) are responsible for water distribution to the ultimate consumers. Figure (36) shows locations throughout the Kingdom of SWCC's water desalination plants as well as the major water transportation pipelines.

)LJXUH 'HVDOLQDWLRQSODQWVDQGPDMRUGHVDOLQDWHGZDWHU transportation lines in the Kingdom

Haql Khafji Hafr Albatin Ras Al-khair Jubail Duba Alnoairya -XEDLOPDUDÀT $O]XOÀ Buraidah Alghat Wajh Khobar

Almajmaah Dammam Omloj Madinah Alhesi Yanbu Shaqraa Hafoof Riyadh Yanbu 3 Mastoorah Rabigh

Makkah Azizia

Jeddah Taif

Shuaiba Shuaiba 3 Al Baha Allaith Rajal Almaa PART IV AlQunfutha Sabt Alalaya Khamis Mushiyt Ahad Rifaudah Albirk Abha Dharan South Shuqaiq Jazan City Shuqaiq 2

Farasan Samthah SWCC Plants

SWCC Pipelines

IWPP

Under Construction Plants

99 3-3 SWCC's Annual Desalinated Water Production Capacity In 2013, SWCC’s average daily production was 2.89 million cubic meters. Figure (37) shows SWCC's production capacity of desalinated water over the past ten years.

Figure (37): SWCC production capacity of desalinated water in the past ten years

3.1 3 2.9 2.8 2.7 2.6 2.5

(Million cubic meters) 2.4

Production Capacity Production 2.3 2011 2004 2005 2006 2007 2008 2009 2010 2012 2013

Year

3-4 Production Capacity Factor The production capacity factor expresses the ratio of actual production to design capacity. The overall average production capacity factor for the entire corporation decreased slightly from 81.8% in 2012 to 80.7% in 2013. The decrease is due to entry into service of the Jeddah reverse osmosis (RO) plant and an increase in the installed capacity of the Jeddah plants, thus increasing the installed capacity of the West coast and SWCC as a whole.

3-5 Electricity Generation in SWCC Most water desalination plants owned by SWCC are of the cogeneration type, where desalinated water is produced simultaneously with electricity. SWCC sells most of its electricity production to SEC. PART IV In 2013, SWCC generated 24.8 GWh of electricity. The west coast plants contributed 9.5 GWh (38% of the total generation production) while the East Coast Plants produced 15.3 GWh (62% of the total production).

3-6 SWCC Restructuring Plan The government adopted a policy to privatize a certain number of economic activities. This policy led to decisions by the Council of Ministers and the Supreme Economic Council to implement privatization in the area of water desalination. In conformity with this policy and decisions SWCC had undertaken extensive efforts to restructure its activities and modify its charter in order to foster private sector participation and investment in the construction and operation of new desalination plants. The efforts concentrated particularly on privatization alternatives of SWCC. These efforts were concluded in late 2008 with adoption of transforming SWCC into a holding company (Figure 38) with wholly owned subsidiaries. This approach permits participation of the private sector in the production companies (in a fashion similar to the IWPPs), and allows the private sector to participate at a later stage in the ownership of the holding company through public share offering. The private sector share in the ownership of the subsidiary production companies will depend on the investment attractiveness of each plant.

100 Figure (38): Final structure of SWCC after implementation of the restructuring plan

The Holding Company

Full Ownership(Public) Partial Ownership(Subsidiaries)

Research Other Transportation Institute & Small Ras Production Khafji JubailAl-Khobar Shuqaiq Shuaibah Yanbu Desalination Plants Al- Khair Plants Technologies

The private sector will be allowed in the short-to-medium-term (i.e., a period not exceeding five years after establishing the holding company) to share in its operations through a management contract(s).

In the long run the possibility of transforming the strategic transportation unit into a production company will be considered. The private sector may then participate through a public share offering or as a strategic partner.

Since the privatization model was adopted, SWCC completed most of the tasks which included the following: Preparation of the holding company incorporation documents, a draft of the Royal decree, the company charter, and the Council of Ministers decision. Defining the requirements for transformation into a holding company. Completing the financial requirements for transformation into a holding company. Defining the assets, determining their valuation, and creating an assets data base. Designing the organizational structure, creating a human resources plan, proposing a plan for manpower placement, and determining executive authorities. Creating a human resources strategy including determining job descriptions, and human resources policies and procedures. Creating a model of the successor company and its performance KPIs. Designing a system for the new work procedures. PART IV Preparing reports on the balance sheet, opening accounts, and accounting policies and procedures for the successor company. Creating a road map for the actual implementation of restructuring. Participating in drafting the desalinated water code; and in preparing tariff structures for the water production and transportation, and tariff for the electricity production and transmission. Developing an IT strategy.

There are still many more tasks whose completion is linked to issuance of the decision of transformation into a holding company.

101 CHAPTER 4 PRIVATE SECTOR PARTICIPATION IN THE ELECTRICITY AND WATER DESALINATION INDUSTRY

4-1 The Electricity Industry ECRA considers private sector participation in the electricity and water desalination industry essential for the development and sustainability of this industry in the Kingdom. The Authority considers this matter to be one of its highest priorities. As shown in Table (12) page 74, the private sector already participates significantly in generation. According to a study undertaken to estimate the funding needs of the electricity services for the period 2009-2020, the funds required for electricity generation, transmission and distribution was estimated at SR526 billion distributed as shown in Table (27).

Table (27): Estimated funding required for implementing HOHFWULFLW\SURMHFWVWKURXJKWKH\HDU

Percentage of Activity Required Funding total funding (in billion SR) required Generation 335 63.7%

Transmission 121 23%

Distribution 70 13.3%

Total 526

The estimates of Table (27) are based on the assumptions that by the year 2020 the peak load will be 71,940 MW and the generation reserve will be 15%. In 2013, contracts to build a number of projects worth SR48 billion were signed. Among the most important of these projects were the following: In Generation: The value of the contracts for generation projects was around SR14.8 billion. They included: Building a steam power generation station in Shuqaiq. Purchasing five gas generation units for Gurayyat, Rafha, and ’Ar’ar. Expanding the’Ar’ar plant. PART IV In Transmission:The value of contracts for the transmission projects exceeded SR22.5 billion. The most important of these projects were: Building an overhead line from Rabigh to Madinah. Building three 380kV transformer stations.

In Distribution:Contracts totaling more than SR8.5 billion were signed to execute distribution projects in cities, towns, and urban settlements. Undoubtedly, the amount of work required by the electricity industry and the volume of investments needed till the year 2020 represent attractive opportunities for the private sector to participate in projects and in growth and development. The investment opportunities for private sector participation in the industry include: Developing Independent Power Projects (IPPs), and Independent Water and Power Projects (IWPPs). Building, leasing, and/or operating transmission lines and pipelines. Forming power generation and desalination production companies. Obtaining concessions or leases for existing generation and water production facilities. Obtaining facility management contracts. Direct purchase of selected existing power and water desalination assets. Undertaking electricity distribution in specific areas. Providing services to consumers. 102 4-2 The Water Desalination Industry The large economic development that the Kingdom is currently undergoing has led to an increase in demand for desalinated water, and consequently the need to execute many projects that require large financial investments. Studies have shown that the Kingdom will need to invest around SR300 billion on water desalination in the coming twenty years.

In the medium term, the estimated costs for implementing projects for water desalination, cogeneration, and water transportation up to the year 2020 will be SR91 billion (Figure 39). The estimates were made on the basis that by 2020 SWCC will be producing 6 million cubic meters of desalinated water daily.

)LJXUH 'HVDOLQDWHGZDWHULQGXVWU\ÀQDQFLQJUHTXLUHPHQWVIRU capital and operational expenses to the year 2020 (Amounts in SR billion)

65.4

Transportation 21.7

25.5 Electricity and Water Water 9 43.7

Transportation 8.8

Electricity 7.7 PART IV Capital Expenses Operational Expenses

As with the electricity industry, undoubtedly, the volume of work required by the desalination industry, and the size of investment it needs present attractive opportunities for participation of the private sector in carrying out the water desalination industry projects, and share in its growth and development. The opportunities available to the private sector to participate in this industry include the following: Executing the projects that are let out for bidding by SWCC, through the system known as EPC (engineering, procurement, and construction). Building independent projects for water desalination after the holding company and its subsidiaries are established. Building pipelines. Supplying and manufacturing spare parts for the desalination plants. Carrying out many of the operation and maintenance contracts for the production plants and the pipelines.

(&5$ZLOOEHZRUNLQJLQFRRUGLQDWLRQZLWKWKH0LQLVWU\RI:DWHU (OHFWULFLW\ 0R:( 6(&6:&&LQYHVWRUVIURP the private sector, and all other interested parties to select the options most suitable and beneficial to Saudi Arabia. 103 APPENDIX

104 APPENDIX AUTHORIZATIONS, LICENSES, AND EXEMPTIONS FROM LICENSING

APPENDIX

105 Table (28): Permits Issued by the Authority (by the end of 2013)

A-Electricity Generation

Licensed Entity Location Production Capacity (MW)

1 Saudi Aramco- Jazan Energy Production Jazan 2,100-2,400

2 SEC Dhoba 550

B-Cogeneration Production Capacity Licensed Entity Location Electricity Water Steam (MW) (m3/d) (Ton/h) 1 Itlalat Alghad Group Rabigh 1,200 480,600

2 Mansour Almalik Holding Jubail 2,600 300Ǆ000

Saudi Aramco- Safaniya and Safaniya- 3 1,510 1,268 Khurais Electricity Production Khurais

C-Water Desalination

Licensed Entity Location Production Capacity (m3 /d) 1 MARAFIQ Jubail –Ras Alkhair 160Ǆ000 Nesma International Water & Jeddah 30Ǆ000 2 Power Technology

APPENDIX

106 Table (29): Licenses Issued by the Authority (By the end of 2013)

A-Electricity Generation

Licensed Entity Location Production Capacity (MW) 1 SEC Kingdom-wide 68Ǆ374

2 Saudi Cement Co. Hufof/Ain Dar 223

3 Rabigh Electricity Co. Rabigh 1Ǆ320

4 Twairgi Power Co. Dammam 63

5 Modern Amn Power Co. Ltd Jeddah 59

6 Dhurma Electricity Co. Riyadh 1Ǆ756

7 Hajar Electricity Co.* Guraiyya 4Ǆ098

8 General Contracting Co. (Olayyan Group)** Several locations 360

9 Alternative Solutions Co** Several locations 277

10 Power Equipment Rental Co.** Several locations 334

11 Abdullah & Abdul Aziz Kanoo** Several locations 175

12 Nour Power Co. Several locations 52

13 Murjan Electricity Production Co.* Rabigh 2,091

APPENDIX

* Has not started production yet. ** Mobile units. 107 B-Cogeneration Production Capacity Licensed Entity Location Electricity Water Steam* (MW) (m3/d) (Ton/h) 1 SWCC Kingdom- wide 5Ǆ018 2,991,577

2 Jubail Power Co. Jubail 250 510 Jughaima, Othmaniya, 3 Tihama Power Generation Co. Shudqum, 1Ǆ643 6Ǆ775 Ras Tannoura 4 Shuaibah Water & Electricity Co. Shuaibh 1Ǆ191 888Ǆ000

5 Shuqaiq Water & Electricity Co. Shuqaiq 1Ǆ020 212Ǆ000

6 Jubail Water & Electricity Co. Jubail 2Ǆ875 805Ǆ464

7 Rabigh Arab Water & Electricity Co. Rabigh 600 192,000 4Ǆ230 Riyadh, Abqaiq, 8 Saudi Aramco Kharsaniya, 1,189 2,859 Barry, Yanbu

9 MARAFIQ Yanbu 1Ǆ589 150,960

C-Water Desalination

Licensed Entity Location Production Capacity (m3/d)

1 Shuaibah Expansion Project Co. Shuaibah 150Ǆ000

2 Bawarij Desalination International, Ltd. Shuaibah 50Ǆ000 Several locations 676,277 3 SWCC within the Kingdom 4 MARAFIQ Yanbu 50Ǆ400

5 Fatah International Seawater Desalination Activity Jubail 75Ǆ000

APPENDIX D-Electricity Transmission and Desalinated Water Transportation

Licensed Entity Location Type

1 National Electricity Transmission Co. Kingdom-wide Electricity 2 MARAFIQ Jubail and Yanbu Transmission

Kingdom-wide Desalinated W ater 3 SWCC Transportation

* Does not include steam produced for autogenous use. 108 E-Electricity Distribution and Retail

Licensed Entity Location

1 SEC Kingdom-wide

3 MARAFIQ Jubail and Yanbu

F-Trading in Electricity and Water Desalination Licensed Quantity Licensed Entity Electricity Water (MW) (m3/d)

1 Water & Electricity Co., Ltd. 1Ǆ750 1Ǆ242Ǆ000

2 MARAFIQ (Tawreed ) 2,744 800Ǆ000

3 Rakaa Power & Water Co., Ltd 50Ǆ000

G-Ownership of Electricity Transmission System

Licensed Entity Location 6\VWHP6SHFLÀFDWLRQV

Four overhead transmission lines Saudi Arabian Mining Co, Ras Al-Khair 129 km long. Maximum load 2,300 and 1,200 kVA. Voltage: 380 kV and 230kV.

APPENDIX

109 Table (30): List of Exemptions from Licensing by the Authority (By the end of 2013)

A-Electricity Generation

Exempted Entity Location Production Capacity (MW)

1 Yanbu Cement Co. Yanbu 100

2 Yamamah Cement Co. Riyadh 221

3 Madinat Cement Co. Marat Center, Riyadh 46

4 Saudi Arabian Mining Co. (MAADEN) Hazm al- Jalameed 50

National Agricultural 5 Development Co. (NADEC) Haradh 46

6 Tabuk Cement Co. Dhoba 46

7 Najran Cement Co. Najran 56

8 Middle East Chemicals Co., Ltd. Ojaimi Industrial City, Riyadh 8

9 Al-Safwa Cement Co. Rabigh 47

10 Hayel Cement Co. Tarabah, Hayel Region 53

11 Jawf Cement Co. Turaif 49

12 Northern Borders Cement Co. A’ra’r 42

13 National Poultry Co. Butain-Authal 45.2

APPENDIX

110 B-Cogeneration

Production Capacity Exempted Entity Location Electricity Water Steam (MW) (m3/d) (Ton/h)

1 National Shrimp Co. Al-Leith 25 420 4.5

2 Saudi Paper Industry Co. Second Industrial City, Dammam 15 - 25

3Middle East Paper Industry & Production Jeddah 82 - 245

4 Arabian Paper Industry Second Industrial City, Dammam 50 - 250

5Saudi Arabian Mining Co. (MAADEN) Ras Al-Khair 160 40,000 -

C-Water Desalination

Production Capacity Exempted Entity Location (m3/d)

1 Tabuk Cement Co. Dhoba 1Ǆ500

APPENDIX

111 THE BOARD

MANAGEMENT

112 THE BOARD OF DIRECTORS EXECUTIVE MANAGEMENT

THE BOARD

MANAGEMENT

113 BOARD OF DIRECTORS

H.E. Adullah A. Al-Huseyen 0LQLVWHURI:DWHU (OHFWULFLW\ Chair of the Board

H.E. Dr. Abdullah M. Al-Shehri Dr. Abdullah A. Al-Alsheikh Governor 9LFH*RYHUQRUIRU3ODQQLQJ 'HYHORSPHQW (OHFWULFLW\ &RJHQHUDWLRQ5HJXODWRU\ Saline Water Conversion Corporation Authority Deputy Chair of the Board

Mr. Abdullah I. Al-Hubayib Mr. Mohammed A. Baghdadi Chair of the Board, 'HSXW\0LQLVWHUIRU3ODQQLQJ 'HYHORSPHQW Saudi ABB Co. 0LQLVWU\RI:DWHU (OHFWULFLW\

Prof. Fahad H. Dakhil Mr. Abdul Aziz O. Al-Omair Executive Director, Deputy Minister for Central Services (GXFDWLRQDO ,73URMHFWV&R Ministry of Finance

Dr. Khalid H. Bayyari Mr. Musaed A. Al-Homaidan Senior Vice-President for Assistant Deputy Minister for Follow-up and Information Technology and Operations Group 0LQLVWU\RI(FRQRP\ 3ODQQLQJ Saudi Telecom Co.

Dr. Ibrahim S. Moataz Mr. Khalid H. Al-Senani College of Engineering, Director, Gas Supplies and Pricing Department King Saud University 0LQLVWU\RI3HWUROHXP 0LQHUDO5HVRXUFHV

Mr. Safar M Dhofayyir Mr. Saleh I Al-Rasheed

THE BOARD &KLHI([HFXWLYH2IÀFHU Director General, Southern Province Cement Co. Saudi Industrial Property Authority MANAGEMENT (Representing the Ministry of Commerce and Industry)

114 MANAGEMENT OF THE AUTHORITY

GOVERNOR H.E. Dr. Abdullah M. Al-Shehri Tel: (011) 201-9009 Fax: (011) 201-9012 Email: [email protected]

VICE-GOVERNORS Dr. Saleh A. Bakhrebah Mr. Nasser H. Qahtani Mr. Nasser A. Al-Wohaibi Vice-Governor, Vice-Governor, Vice-Governor, Support Services Regulatory Affairs &RQVXPHUV 6HUYLFH3URYLGHUV$IIDLUV Tel: (011) 201-9104 Tel: (011) 201-9034 Tel: (011) 201-9172 Fax: (011) 201-9105 Fax: (011) 201-9035 Fax: (011) 201-9173 Email: [email protected] Email: [email protected] Email: [email protected]

ADVISORS Dr. Mohammed A. Abul Hamayel Mr. Khalid M. Mazied Advisor, and Supervisor of Information Technology Asst. to Governor for Legal Affairs/ Board Secretary Tel: (011) 201-9200 Tel: (011) 201-9117 Fax: (011) 201-9203 Fax: (011) 201-9296 Email: [email protected] Email: [email protected] Mr. Ali A. Jamaan Dr. Esam A. Ammar Advisor, and Supervisor of Internal Auditing Advisor Tel: (011) 201-9075 Tel: (011) 201-9063 Fax: (011) 201-9076 Fax: (011) 201-9062 Email: [email protected] Email: [email protected]

DEPARTMENT HEADS Mr. Mohammad Al-Husseini Mr. Nuais Al-Hwaidy 'LUHFWRU*HQHUDO*RYHUQRU V2IÀFH Director, Public Relations and Informa- Tel: (011) 201-9007 tion Tel: (011) 201-9045 Fax: (011) 201-9012 Fax: (011) 201-9044 (PDLOJRYHUQRUBRIÀFH#HFUDJRYVD Email: [email protected] Prince Saud A. Al-Mugren Mr. Saad H. Al-Salamah Director, Director, Consumer Affairs Service Providers Affairs Tel: (011) 201-9220 Tel: (011) 201-9160 Fax: (011) 201-9227 Fax: (011) 201-9162 Email: [email protected] Email: [email protected] Mr. Abdul Rahman Al-Mohaizi Mr. Fayez G. Al-Jabri Mr. Mansour H. Al-Anazi Director General, Director General, Director General, /HJDO /LFHQVLQJ$IIDLUV Technical Affairs Economics and Tariff Affairs Tel: (011) 201-9131 Tel: (01 201-9111 Tel: (011) 201-9120 Fax: (011) 201-9132 Fax: (011) 201-9113 Fax: (011) 201-9123 Email: [email protected] Email: [email protected] Email: [email protected] Mr. Ibrahim A. Al-Garaawi Mr. Fahd M. Al-Hassani Mr. AliH. Al-Wadei Director, Director, Director, Finance Personnel Administrative Support Tel: (011) 201-9280 Tel: (011) 201-9263 Tel: (011) 2019-9109 Fax: (011) 201-9287 Fax: (011) 201-9265 Fax: (011) 201-3211 (PDLOÀQDQFH#HFUDJRYVa Email: [email protected] Email: [email protected] THE BOARD

Mr. Hamid K. Al-Malky MANAGEMENT Director, Property Management Tel: (01) 201-9020 Fax: (01) 201-9025 Email: [email protected] 115 ECRA headquarters building location map

North King Fahad Road Al-Takhassusi Street

To Makkah Khurais Road Cairo Square Al-Khaleej Bridge To Dammam

Council of Saudi Chambers

ECRA Headquarters Building

Intercontinental Ministry of the Interior Hotel

South

THE BOARD

MANAGEMENT

116