Electricity Law in Saudi Arabia

The Electricity Law in the Kingdom of Saudi Arabia is a set of legal rules and procedures governing electricity in the Kingdom. It was issued by a decision of the Council of Ministers on December 31, 2020. The law replaced the Electricity Law issued on November 22, 2005, and its amendments.

The Electricity Law contains twenty-three articles distributed across nine chapters, which are: definitions, general provisions, regulatory framework for licenses, backup power sources, tariff and price, competition, development of the structure of electricity activities, violations and penalties, and concluding provisions.

According to Article Two, the Electricity Law aims to improve the electricity service provided to consumers and protect their rights, including the right to receive reliable and efficient electricity service. It also seeks to create an environment that promotes fair competition in electricity activities and allows consumers to choose from licensed competitors in the electricity sector at fair, reasonable, and competitive prices, ensuring fairness among consumers. Additionally, the law facilitates consumers' access to electricity and delivers electricity to off-grid areas.

The Electricity Law also aims to ensure the electricity sector’s compliance with State policies and directives, protect licensees’ rights and interests, and provide a transparent, consistent, and non-discriminatory regulatory framework for electricity activities in the public and private sectors. It seeks to provide safe, secure, reliable, and highly efficient electricity at the lowest cost possible, develop the structure of the electricity sector in the Kingdom to promote competition in electricity activities and promote private sector participation in the expansion of electricity activities to enable it to achieve reasonable economic returns based on commercial principles. Additionally, it ensures the electricity sector’s compliance with relevant laws and codes, as well as with approved environmental and safety standards, promotes research and development, and localizes technology, jobs, and services.

According to Article Three of the Electricity Law, the Ministry of Energy is tasked with overseeing relevant agencies regarding relevant policies and strategies, developing policies and strategies specific to the electricity sector, and submitting them for approval. The Ministry is also tasked with preparing a long-term plan for the electricity activity in coordination with the authority and approve such plan according to approved policies and strategies and monitor the implementation thereof. The plan should include: determining the contribution rate of various energy sources within the optimal energy mix for electricity production, specifying the type of fuel available to the electricity sector, interconnecting, reinforcing, and upgrading the electricity network in the Kingdom, providing electricity to off-grid areas, maintaining an adequate reserve of power generators at generation or production stations as well as ensuring an adequate capacity at transmission and distribution networks.

The tasks of the Ministry of Energy also include developing plans, studies, and development programs necessary for the electricity sector in coordination with relevant agencies, approving, issuing, updating the same, and ensuring their implementation. The ministry is also responsible for taking necessary measures in the event of an existing or imminent threat to the Kingdom's supply of fuel or electricity. In such case, the ministry temporarily holds exceptional powers to control electricity resources and fuel reserves of licensees, in coordination with relevant agencies. Additionally, the ministry represents and safeguards the Kingdom's interests in local, regional, and international organizations related to the electricity sector, including electrical interconnection and electricity trade with other countries. The ministry is also involved in conducting studies and research, supporting research and development activities in the electricity sector.

The Ministry of Energy is also responsible for establishing a long-term program, in coordination with relevant agencies, to support national industry in the electricity sector; develop human resources; localize modern technology; as well as create and develop an investment environment for the supply chains of industries related to the electricity sector, especially for small and medium enterprises, and increase local content by setting and enforcing a mechanism to localize jobs, goods, and services in the electricity sector and ensure their implementation. Additionally, the ministry provides, develops, and documents databases, statistical data, and technical information relating to the electricity sector; conducts surveys; prepares reports thereon, and coordinates with relevant agencies in monitoring the implementation of approved programs for conserving electricity and raising the efficiency of its production and consumption.

Article Four of the Electricity Law defines the tasks of the Saudi Electricity Regulatory Authority, which include issuing regulations relevant to its duties. These duties encompass the executive regulations of the law, performance indicators that must be achieved by the licensee, technical, operational, and procedural rules relating to the electricity activity, and rules for issuing licenses, permits, and exemptions, as well as rules for determining their fees. Additionally, the authority establishes rules governing the relationship between licensees and consumers, and the classification of types of electricity activity and updates thereto.

The tasks of the Saudi Electricity Regulatory Authority also include managing electricity activities in exigent circumstances, ensuring additional resources for generating electricity if a significant shortage in electricity supplies is expected, and enforcing the provisions of the Electricity Law and the regulations within its mandate. Additionally, the authority is responsible for resolving complaints raised by relevant parties regarding electricity activity, approving the documents and procedures for qualification and tendering of electricity activity projects, and monitoring the licensee’s compliance with management, accounting, and investment regulations and rules.

The authority, in coordination with the Ministry of Energy, is responsible for ensuring the optimal use of energy resources to achieve the best return for the national economy. This includes observing approved environmental protection measures and standards and ensuring the licensee’s compliance with the standards issued by relevant agencies for raising the efficiency of electricity generation, as well as promoting projects of highly efficient viable power plants.

Article Six of the Electricity Law emphasizes that the licensee may not suspend the consumer’s electricity service without prior notification. Article Nine of the law defines emergencies as any incident that occurs beyond the reasonable control of the transmission or distribution licensee and which results in a partial or complete power outage, whether due to technical reasons or otherwise. The duration of a power outage must not exceed the period specified in the regulations.

According to Article Twelve of the Electricity Law, the Saudi Electricity Regulatory Authority periodically reviews the electricity tariff for all consumer categories in a manner that reflects the actual cost price based on the energy prices approved by the competent agency, and in accordance with the subsidy determined by the competent committee, and submits the same for the Board of Directors of the authority approval. Additionally, the Board of Directors of the Saudi Electricity Regulatory Authority approves the deficit resulting from the difference between the expected income of the electricity activity and the actual income acquired from the approved tariff for a specific year. The Ministry of Finance pays the deficit, in agreement with the Board.

Article Seventeen of the Electricity Law outlines violations, including engaging in an electricity activity without a license or exemption, failing to adhere to any decision issued by the Saudi Electricity Regulatory Authority related to its mandated tasks, and the licensee’s failure to provide information or data requested by the authority, failure to provide the electricity services that the licensee is authorized to offer, or failure to obtain the necessary approvals in the manner prescribed by the Law and regulations, or the terms of the license or exemption.

Other violations include providing false or misleading information or data, tampering with the electric service meter or any of its accessories, the licensee's failure to comply with approved standards of efficient fuel consumption, and failing to comply with the approved specifications and standards for the protection of the environment and public health and safety, unlawfully using or connecting to the electric network or aiding others in committing such violations. In addition to withholding necessary electricity-related information—the nature of such information is specified in the regulations—or disclosing classified data and information.

Article Eighteen of the Electricity Law defines the penalties for violations. Any person who violates any of the provisions of this Law, the regulations, or the conditions of the license or exemption is subject to partial or full suspension from engaging in an electricity activity for a period not exceeding one year, revocation of the license, or a fine not exceeding SAR10 million.

According to Article Twenty-One of the Electricity Law, a person who tampers with the electric service meter or any of its accessories is held liable for all damages to the licensee’s facility or to a third party, including the cost of repairing the damage and compensation for lost revenues. The Board of Directors of the Saudi Electricity Regulatory Authority issues the rules for determining the cost of repair and compensation for revenues lost by the facility or third party due to the violation.