Amendments to the Law for the Regulation and Privatisation of the Electricity and Related Water Sector (the “Sector Law”) promulgated by Royal Decree No. 78/04 as amended.
The Sector Law was recently amended pursuant to Royal Decree No. 47/2013 (issued on 1 October 2013). The key amendment constitutes the inclusion of certain water desalination projects which are neither combined with nor co-located on the same site as electricity generation within the ambit of the Sector Law. Prior to this recent amendment, the Sector Law did not apply to such projects.
Subsequent to the recent Sector Law amendment, the Chairman of Public Authority for Electricity and Water (PAEW) has the power to determine whether or not a water desalination facility will be designated a “Desalination Facility of Special Nature”. Only projects which are so designated will be subject to the Sector Law.
If a project is designated a Desalination Facility of Special Nature, it will be required to be procured in accordance with the Sector Law, it will be regulated by the Authority for Electricity Regulation Oman, the person implementing the project will be required to be licensed to do so in accordance with the Sector Law, by virtue of a “Desalination Licence of Special Nature”, and its capacity and output will be purchased by Oman Power and Water Procurement Company SAOC.
Brief overview of the amendments:
- OPWP Functions: The functions and duties of Oman Power and Water Procurement Company SAOC (OPWP) as set out in Article 74 of the Sector Law have been amended so that it will be OPWP's responsibility to secure the production of desalinated water and electricity from facilities including a Desalination Facility of Special Nature.
- Exclusion: Article 76 has been amended to include provisions that OPWP is also not obliged to purchase production capacity (electricity/water) if the production facility is a Desalination Facility of Special Nature.
- New capacity of desalinated water: Article 78 has been amended to provide that, in the event that PAEW determines that there is a need for new capacity of desalinated water, it shall inform OPWP. It shall thereafter be OPWP's responsibility to determine whether such new capacity should be combined with electricity generation capacity or co-located with it on the same site. If OPWP decides that there is a need for such capacity and the Ministry of Finance approves it, then OPWP will be obliged to provide the new capacity as per the procurement provisions of the Sector Law.
However, if OPWP decides that there is no need for the new capacity of desalinated water to be combined with electricity generation capacity or co-located with it on the same site, PAEW shall decide whether it shall provide such capacity; or a full state-owned company shall do so (after obtaining the approval of Ministry of Finance); or PAEW may decide to procure the new capacity together with its output from a Desalination Facility of Special Nature in accordance with the procurement provisions of the Sector Law.
OPWP cannot refuse to announce or delay in announcing the competition in accordance with Article 79 of the Sector Law under the pretext that it was not notified by PAEW in accordance with Article 78.
- Rights and duties of a Licensed Generator/Desalinator: Article 89 has been revised to give the same rights and duties to a Licensed Desalinators as are given to a Licensed Generator and Licensed Generator/Desalinator.
- Licensing Requirement: The Desalination Facility of Special Nature shall require a Desalination Licence of Special Nature from the Authority for Electricity Regulation (AER) and a new Article 112 (2) bis has been included to set out the conditions for such a licence. The conditions are:
- a stipulation that the powers granted under the licence are limited to specific production facilities and/or production capacity; and
- a stipulation that it is permitted to impose restrictions on the percentage share of the total desalination market in respect of the licensee or its subsidiaries or related commercial projects.
- Decisions by PAEW: A new Article 135 bis provides that the Chairman of PAEW is to issue the criteria applicable to a decision to determine whether a facility will be designated a Desalination Facility of Special Nature.
A new Article 135 bis 1 provides that the Chairman of PAEW shall issue a decision determining the current water desalination facilities that meet the criteria as issued in Article 135 bis. The existing desalination facilities that are not connected or co-located with electricity generation facilities on the same site shall be notified by PAEW and such facilities shall have to rectify their position and obtain the specific Licence for Desalination Facility of Special Nature within one year of such notification from PAEW.
A new Article 135 bis 2 provides that the water produced by a Desalination Facility of Special Nature will be subject to all the provisions related to water stipulated in the Sector Law.