Private Sector Signs 1st Electricity Contract

Private Sector Signs  1st Electricity ContractPrivate Sector Signs  1st Electricity Contract

A private sector producer has signed the first electricity contract, managing director of Iran Power Generation, Distribution and Transmission Company (Tavanir) said on Tuesday.

"The agreement was signed between Persian Foolad, owner of Shahid Montazeri Power Plant, as a generator and Mobarakeh Steel Company as a consumer," Arash Kordi was quoted as saying by Mehr News Agency.

According to Kordi, Tavanir is in charge of transmitting electricity from the producer to the consumer.

"It will supply the steel company with power in case the power plant falls short of meeting the consumer's demand due to technical failures," he said.

Pointing to the 1,400-megawatt demand of the steel company, the Tavanir chief said, "Based on the extendable contract, the privately-owned power plant will provide 200 MW of the much-needed electricity for a year. Moreover, plans have been made so that the private sector can take care of the rest of the demand."

By the end of the sixth five-year economic development plan (2016-21), 30% of the electricity generated by private sector will be offered through wholesale contracts and the rest via Energy Bourse.

The Tavanir chief said the electricity industry should take serious measures to facilitate retail sales.

Given the sensitivity of adopting new policies to restructure electricity systems in Iran (production, transmission and distribution), Kordi said senior power officials and macroeconomic policymakers are making an attempt to put an end to state monopoly over power generation and distribution, as they believe the government should only play the role of an observer.

The electricity system in Iran is centralized and owned by the government. However, the present government has been actively encouraging private companies and offering incentives. In fact, about 50% of the electricity generation in Iran are handled by the private sector.

The private sector is of the opinion that producing and supplying electricity in Iran are not a very attractive venture due largely to the "low prices" and government subsidies to consumers. Generating each kilowatt/hour of electricity costs 680 rials (about 0.027 cents) while it is being sold for 430 rials (about 0.017 cents).

Persian Foolad Co., a private company, established in 2002, purchased the Shahid Montazeri 1,600-MW power plant, which can provide 50% of the power needed by Isfahan and Chaharmahal-Bakhtiari provinces. It also constructed the Zavareh combined cycle 500-MW power plant in 2008.

Iran’s electricity industry ranks 14th in the world and first in the Middle East in terms of electricity generation with an installed power generation capacity of 74,000 MW.

The country is the largest exporter and importer of electricity in the Middle East and exports electricity to Armenia, Pakistan, Turkey, Iraq and Afghanistan. Azerbaijan and Armenia supply electricity to Iran under a swap agreement.