Deputy Minister Says Saudi Should Consider Water, Power Price Reform

Saudi Arabia should eventually consider raising its domestic water and power prices to limit rapid growth of consumption in the world’s largest oil exporter, a deputy electricity minister said on Tuesday.

Demand for water and electricity in the desert kingdom has soared over recent years among a growing and increasingly wealthy population. Ultra-low prices, subsidised by the government at great expense, have fuelled the increase.

“One of the most important challenges that the water and electricity sectors face is the high consumption growth rates, which mean we as citizens have to review our consumption patterns,” Saleh al-Awaji told reporters on the sidelines of an industry conference.

Water and power use are growing about 8 per cent annually, and while the government can for the time being find enough funds and energy resources to meet domestic demand, this will not always be true, said Awaji, who is also chairman of state-owned utility Saudi Electricity Co.

“If we look 20 years from now and if growth (in demand) remains at current levels, it won’t be possible to provide services with the same reliability and at current prices,” he said, urging a review of legislation covering water and power.

“When we talk about legislation we also talk about prices – they are one of the effective tools to control these kinds of challenges. But if prices get revised, they should take into consideration those who deserve a subsidy.”

Awaji gave no indication that the government had decided to accept his advice, but his comments followed a similar statement by central bank governor Fahad al-Mubarak, who in February called for reforms to energy and water subsidies.

King Salman, who took the throne in January, has been shaking up the economic policy-making apparatus and embarking on some reforms, such as taxing undeveloped land, which had previously stalled.

Awaji reiterated that the kingdom planned to spend more than SAR800 billion ($213 billion) over the next ten years on water and electricity projects.

In April last year, Awaji told Reuters that peak power demand during summer was approaching total installed capacity of around 60,000 megawatts. He said on Tuesday that total generation capacity was now above 65,000 MW.