Saudi Arabia’s National Commercial Bank (NCB), the country’s largest bank, claims that low electricity tariffs are putting pressure on the sector’s revenue despite a surge in consumption.
An NCB study found that a rapidly rising population along with expansionary fiscal policies and high investments in social and physical infrastructure are exerting pressure on existing power networks.
Residential consumers, who benefit from cross-subsidized rates, accounted for 51 percent of total consumption in 2010, said NCB.
“This consumption is categorised in the primary tariff bracket of $0.13/kWh,” said the study.
“As the bulk of consumption remains concentrated here, the existing tariff structure is not optimal for electricity conservation, resulting in wastage. Consequently, as the majority of revenues are generated from the lowest tariff bracket, this will restrict the profit margins for an industry already facing financing challenges.”
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