As per a government decree that came into effect today (April 27), heavy industries using an estimated five million kilowatt hours of power a year can buy electricity directly from private producers via the energy bourse, an Energy Ministry spokesman said.
“Based on the new directive approved by the Cabinet last October, the state-run Iran Power Generation, Transmission and Distribution Management Company (Tavanir) will henceforward not be the sole buyer of electricity from private companies,” Mostafa Rajabi Mashhadi was quoted as saying by IRNA.
The move is seen as a major step forward by private power producers as it puts an end to Tavanir’s absolute monopoly over the key sector struggling with more than its share of financial problems.
Tavanir has long been in charge of buying electricity from state-owned power plants and private companies are obliged to sell only to the state giant.
“Legal entities can buy electricity and sell it to industries or repackage it via the energy bourse,” Rajabi Mashhadi said.
In the new setup after a contract is signed between a private power producer and a manufacturer, Tavanir will only have a regulatory role and help transfer electricity from the producer to end user(s), he said.
The Energy Ministry will provide infrastructure (cables, distribution systems, etc.) but delivery will be the function of by retailers. Consumers will no more pay the bills to the state-owned company.
After years of wrangling and complaints by private power producers the government has conceded. Trade in electricity, it now agrees, should be via the energy bourse.
“A competitive electricity market in the long-term will let customers decide from where to buy as opposed to a single, state-owned distributor.”
Competitive Prices
In addition, retail electricity in the bourse will help price competitiveness and also should boost the quality of services, the official said.
Retail electricity is widespread in the US and Europe and consumers can choose the type of contract that best suits their needs.
Ali Shams Ardakani, head of the Energy Commission of the Iran Chamber of Commerce, Industries, Mines and Agriculture, is among economists and experts who have long called on the government to ease its iron grip on both selling electricity to domestic consumers and export by delegating the job to private companies.
“The government and its diplomatic missions should only be facilitators in finding the best possible venue for interaction between private firms and potential foreign clients,” Shams Ardakani said last week in a report carried by the Financial Tribune.
As enshrined in Article 44 of the Constitution to downsize the bloated bureaucracy, a large part of responsibilities of the Energy Ministry should be transferred to the private sector. But so far this has not been the case despite the efficient role of private power producers.
Referring to one upside of the new rules, Rajabi Mashhadi said it will help private power receive their money in a shorter period of time compared to the time when they traded with Tavanir.
One major drawback of selling power to Tavanir is that it normally is unable to meet its financial commitments on time as a result of which private producers are left to their own devices.
Different View
Contrary to what economists like Shams Ardakani say about the need for ending Tavanir’s monopoly on selling power, Reza Ardakanian, the energy minister, argues that allowing private companies to get involved in electricity trade is to the detriment of the government because it will deprive the treasury of crucial forex revenue.
“Selling power to neighbors is the only source of foreign currency revenue for Tavanir. Letting private power producers in this export business does not make economic sense.”
Due to the low power tariffs, Tavanir has been wrestling with colossal financial difficulties and private companies wanting to join power trade would make a bad situation worse, he has said.
Revenue from electricity export to Iraq, Pakistan and Afghanistan reached $60 million in 2018 -- now big deal, observers say, that deserves debate and discussion on getting a bigger share of the pie.
In related news, the Energy Ministry news portal quoted Mohammad Parsa, head of the Federation of Iranian Energy Exports Industries, as saying that exporting electricity can be more profitable if private firms are involved.
Installed power production has risen 40% from 2009 and is near 85 gigawatts, but exports have declined due to the unwanted and unhelpful government role and interference, he said.
“Our neighbors need at least 50 GW of electricity every day, of which less than 8 GW is exported by Tavanir. This volume could decline further unless the government steps aside.”
