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Third Parties May Replace Gov't as Electricity Suppliers

Third Parties May Replace Gov't as Electricity SuppliersThird Parties May Replace Gov't as Electricity Suppliers

The energy ministry is ready to hand over electricity supply to third party companies, managing director of the Iran Grid Management Company (IGMC) said.

Fattah Gharebagh said, "Electricity retailing will commence by the end of the year [March 2015] if the required infrastructure is set up, and the industrial units will be the first to receive electricity from third parties," he said.

High-consumption subscribers such as industries with 5 megawatt (MW) consumption or more will have to purchase electricity from the energy bourse in the near future, the Persian daily 'Ta'adol' reported.

The price of electricity will be discovered if industrial units trade electric power from the bourse. Price discovery is the process of determining the price of an asset in the stock market through the interaction of buyers and sellers.

A competitive electricity market allows customers to choose their power supplier from among several companies, as opposed to being a customer to a single, usually state-owned distribution company.

Director of the energy bourse Mohammad Hossein Asgari also said that electricity retailing in the bourse will make prices competitive and increase the quality of services.

Under the new model, retailers will purchase electricity from power plants in the energy bourse and deliver it to subscribers.

The energy ministry will provide infrastructure (cables, distribution system, etc.) and delivery will be carried out by retailers. Thus, consumers will no longer pay their bills to the state-owned company.

Electricity is supplied at fix tariffs for all consumers by the energy ministry, but future prices will vary based on offerings and contracts from different providers.

Asgari stressed that electricity retailing is widespread in the US and Europe and consumers can choose the type of contract that best suits their needs.

Once operational, the government will withdraw from providing electricity to end consumers, and privately-owned companies will take over the task, Asgari said. Additionally, retailers will receive part of the electricity bill in advance, as opposed to the current model in which consumers pay on a monthly basis after receiving the bills.

Several companies have so far acquired the permission to operate as electricity retailers. Retailers need to be "financially competent" and "fully familiar" with the power market, according to Asgari.

Electricity from 21 privately-owned power plants with a total 2.868 MW per hour capacity is already offered in the energy bourse, and 39 distribution companies with a monthly $18.7 million budget are operating in the market. Several power plants are to join the energy bourse next year.

"The situation is ripe to have electricity generated across the country traded at the energy bourse," Asgari said, adding that electricity price fluctuations have been curbed due to the establishment of the electricity market in the energy bourse.

Financialtribune.com