Development of single buyer
Support of the Saudi Electricity Company (SEC) in the process of a deep transformation, principally lead by an unbundling of the company into several business units, all of them under the structure of a Holding Company (HoldCo).
Description of project:
While the HoldCo will retain several of the at-present corporate functions, the generation segment has been split into 4 Generation Companies (GenCos) and one Transmission Company (National Grid Company) and one Distribution Company split in four regions (DisCos).
The Single Buyer (SB) function will be one of the HoldCo roles, and will be in charge of purchasing the electricity from all generation companies, both SEC GenCos and Independent Power Producers (IPPs) generated in the country through long-term power purchase agreements (PPAs). If the case arises, the SB will also be in charge of energy purchasing from neighboring countries. At the same time, the SB will have lease agreements with the National Grid Company and the DisCo to transmit and distribute electricity to the customers. It is also envisioned to have wheeling agreements, through which Cogenerators will be able to supply their own demand using the National Grid Company and back up services from the Single Buyer.
This function is today under the responsibility of the SEC Transmission Division. The SB mechanisms will be restructured under the HoldCo and take on critical importance since it will entail the management of a number of factors that all have a significant financial impact, not only for SEC but also for the country as a whole – especially in terms of generation costs that are transferred to the end user tariffs.
This new SB function demands that the HoldCo undertake a number of measures to ensure that it is performed appropriately, with efficiency, security and transparency, and at the same time, complying with the current and forthcoming regulations that ECRA will need to issue, due to the potential impact this function has on public welfare in KSA.
Advice SEC on the best practices that can be adopted in KSA for implementing the SB function, and to support the staff involved in the actual implementation of the recommendations that will arise from this work, in order to set up an effective SB organization. Aspects important for the establishment of the SB include its organization, rules, procedures, and systems, among many other issues.
The Project is implemented in two phases, the activities of which include the following:
I. Roadmap Development
- Preparation of a “Single Buyer in KSA” General Concept Paper about strategic views and key sensitive aspects requiring discussion with the counterpart. This concept paper will also include a preliminary view for future evolution of the Single Buyer Model in KSA;
- Workshop with counterpart to discuss the General Concept Paper;
- Definition of the Single Buyer Model for KSA adjusted to SEC strategy and other related aspects concerning the general framework;
- Preparation of an implementation roadmap for the Single Buyer Model for KSA.
II. Implementation Support
- Strategic and Institutional Issues: Roles of Single Buyer, Governance, Relationship and Interface with External Stakeholders, Single Buyer roles in the overall system efficiency, Overall Financial Management;
- Market Rules;
- Type of Instruments Linking the Single Buyers and Stakeholders;
- System Cash Flow Management;
- Roles for Fuel Supply Management;
- Internal Organisation;
- Capacity Building.