Article 12 of the Saudi Electricity Law

This is the main article on the electricity tariff. It contains four provisions:

1- Periodic review: the Authority periodically reviews the electricity tariff, in all its components and for all categories of consumers, so that it reflects the actual cost price, based on energy prices approved by the competent body and in line with the subsidy decided by the competent committee. The Council approves it.

2- The shortfall: the Council approves the amount of any shortfall resulting from the difference between the assumed income of the electricity activity, which the Authority estimates on a commercial basis, and the real income from the tariff approved for the year concerned. The Ministry of Finance pays this shortfall by agreement with the Council.

3- A negotiated price: a licensee may agree, through direct commercial negotiation, with another licensee or a large consumer on a price for its services that differs from the approved tariff, as the regulations specify. Under Article 1, a large consumer is one whose consumption exceeds the limit the Authority sets.

4- Basis for setting the tariff: the Authority must take into account:

• Enabling the licensee to operate efficiently so as to recover its full costs and earn a reasonable return on invested capital.
• Observing State policies and instructions.
• Incentives to improve technical and economic efficiency and service quality.
• Correct signals to consumers about the costs their consumption patterns impose.
• Non-discrimination between consumers in the same category, and between categories of consumers.
• The permissibility of agreeing on a different price under paragraph (3).

In Article 1 the law distinguishes between the tariff (an approved financial charge) and the price (an agreed charge). An ordinary consumer is subject to the approved tariff, while a large consumer may negotiate a different price in accordance with the regulations. A business negotiating a large supply contract may consult a lawyer who specializes in commercial cases.