Author : Akbar Mahmoodi
Word Count: 3430
In order to avert a crisis arising from increase in electricity consumption, Iran's power industry needs to take some measures including encouragement of the private sector to contribute to and invest in this industry. Based on the current power industry law of 1967, the power industry is under the government monopoly. By enacting a new law, the government intends to open the way for the private sector to get involved in this industry. Dr. Mohammad Ahmadian, managing director of the Power Generation and Distribution Organization (TAVANIR) in an interview published in the Persian language daily Entekhab has elaborated on the current situation in the Iranian power industry and on the features of the new law.
Despite huge investments made in recent years in the Iranian power industry to boost the country's power generation and storage capacity, ever increasing growth in electricity consumption and lack of financial sources have sounded the alarm for officials and decision makers in charge of the development of power industry in Iran. The officials of the Energy Ministry and TAVANIR confess that they are facing serious difficulties in financing power industry development projects, arguing that privatization is the only way for them to proceed with their development plans. Therefore, they have tried to encourage the private sector to make contribution to the development of this industry and reduce the government's intervention in order to finance their projects and attain their goals by getting the 35 year old power law revised.
Entekhab's economic correspondent asks Dr. Mohammad Ahmadian, the managing director of TAVANIR "What is the necessity for revision of the current power law in Iran?" He answers: "The drastic changes taking place in the size, dimensions and technology of the power industry and finally in its legal structure made it necessary for us to revise the current power industry law of 1967.
He believes that the power law revision committee that is in charge of compiling the new law should first analyze the future legal needs by comparing the status of the current law governing the power industry with other laws."
In his interview, he also referred to the possible continuation of power failures, the amount of electricity consumption in the country and the new power stations, which have been constructed and put into operations throughout the country. The following is the full text of the interview with Dr. Mohammad Ahmadian, managing director of the Power Generation and Distribution Company:
Q: Dr. Ahmadian, what developments have taken place in the power industry technology, which prompted you to revise the power law? What issues will the new law deal with more?
A: The drastic changes taking place in the size, dimensions and technology of the power industry and finally in its legal structure made it necessary for us to revise the current power industry law of 1967. A review of the structural background, goals, policies and finally its legal dimensions all point to the fact that the new law should be comprehensive and efficient. First of all, it is necessary that all dimensions of the existing law be studied carefully in comparison with other similar laws and then future legal requirements be analyzed. Furthermore, in order to determine basic axes and viewpoints in drawing up the new power law in Iran, it is important that its goals and policies be defined.
Q: Is it possible that in compiling the new law, some points are not taken into consideration?
A: The power law revision committee that is responsible for drawing up the new law should first analyze future legal requirements by comparing the current law governing the power industry with other laws and then determine the basis axes and viewpoints in drawing up the power law for the coming years so as to clarify the draft of the law. It should however be noted that in the course of the new law compilation some new points proposed by the committee may be included in the new law.
Q: What advantages the new revised power law will have over the existing law, which was passed nearly 35 years ago?
A: The provisions of the Iranian power law of 1967 were aimed at limiting the private sector activities and concentrating all activities regarding the power industry on the public sector. If you take a look at the history of power industry in Iran, you will see that a number of private institutes had embarked on generating electricity before the power law was passed. At that period of time, the power law was passed so as to enable the government to interfere in the power sector. Now, with the passage of 35 years from that date and given that the power industry has undergone serious transformation in Iran and the world and that efforts are underway to reduce the government's role in the power industry and instead encourage the private sector's contribution to this sector, it is necessary to have the current law revised.
Q: Can we say that revision of the existing power law will address the current and future needs (of this sector)?
A: As a matter of fact, this is the main goal behind the revision of the existing power law. We reached this conclusion that now that a law has to go through various decision making channels and face many problems in order to be approved, efforts have been made to draw up the new power law in a way that it can meet the needs of the country's power industry at least for the next few decades.
Q: In what stage is the new power law now?
A: At present, we are studying power laws in force in other countries. In drawing up the new law, efforts will be made to review the laws of other countries whose conditions are similar to that of Iran such as Malaysia, Singapore, Indonesia and South Korea. Then, the committee in charge of drawing up the new power law will review other Iranian laws that are somehow related to the power industry.
Q: You already made mention of the background of various power laws in the country. Would you please give more explanations in this regard?
A: The existing power law and regulations which were approved later in Iran, the Article 44 of the Iranian Constitution and its impact on the power law, the lack of integrity in the current law and regulations on power industry, power laws of other countries, particularly neighboring states and those countries that share similar social and technical conditions with Iran, the laws concerning other ministries, organizations and organs particularly the laws on water, oil, gas, roads and telecommunications with an emphasis on the legal rights of employers, subscribers, employees and retired personnel, contradictory points in laws concerning various organizations particularly municipalities and natural resources organizations are among the points that will be studied. In other words, in reviewing the structure of the power law, efforts will be made to pay more attention to new policies concerning the power structure and establishments, separation of duties, preparing the ground for competition on the market both in generating power and rendering services to subscribers by establishing specialized companies and encouraging the private sector to get involved in the power sector.
Prediction of effective mechanisms to supervise the performance of companies engaged in generation, transfer and distribution of electricity and the private rights of these companies will be given due attention in compiling the new power law.
Q: What indicators will be taken into consideration in drawing up the new law?
A: Bringing together all laws and regulations approved recently in relation to power industry is the most important topic of discussion. Updating the current power law with regards to technological changes, various climatic conditions prevailing in various parts of the country, regulations on allocation of plots of lands for establishment of power stations, separation of the limits of electricity from those of other public services such as transport, railway, oil, gas, water and telecommunications, new energies, concurrent production of energy and heat, electricity supply requirements, electricity tariff rate, purchase of lands from their owners for implementation of urgent power-related projects, drawing up standards for power industry in connection with generation, transfer and distribution of electricity, research projects, domestic production of power equipment under a necessary quality control regime, issuance of permits for export and import of domestically made power equipment, studying the role of insurance in the power industry, offering facilities in terms of tariff, customs duties and commercial profits, ways of dealing with subscribers failing to pay their bills on time, regulations governing the export, import and transit of electricity, ways of dealing with those using electricity illegally, power installations, cooperation with the justice department in enforcing the power law and prediction of necessary measures to be taken to displace power installations in case streets where they are located are to be widened, are among the main axes of the new law.
Q: What policies and goals will be followed in the new power law?
A: Making the law work in connection with regulations of other ministries and organizations, increasing its efficiency in courts of law, having legal cases related to the power industry investigated by the relevant courts of law at the earliest possible time without any delays, adoption of necessary methods for levying customs duties on sale of electricity by city councils or the Interior Ministry, preserving the rights of subscribers through payment of compensations in case of incidents or damage caused to their electric appliances and authorizing the Energy Ministry to draw up its needed regulations and by-laws are among the goals of the new law.
Q: How much will be the maximum consumption of electricity in the nationwide power grid according to your prediction? Will we have power failures in the next Iranian calendar year?
A: It is predicted that consumption of electricity will reach 26,400 megawatts at most in the next summer, showing a seven percent increase compared with the maximum consumption this year. Despite the fact that new power stations will come on stream next year, the network storage is 4.5 percent, which is far from the standard level of 20 percent. If nothing happens, it will be unlikely to have power failure next year.
Q: What are the new power plants, which have been put into operation this year?
A: The sixth unit of the Kerman power station with the capacity of 159 megawatts, the first steam unit of Fars combined cycle power station with a 100 megawatt capacity, the steam unit of Khoy combined cycle power station with the capacity of 100 megawatts, the units transferred from Rey to Bandar Abbas, the third unit of Kazeroun steam power plant with the capacity of 159 megawatts, the first unit of Karkheh hydroelectric power station with a 133 megawatt capacity, the fourth unit of Kazeroun gas power station with the capacity of 159 megawatts, the second steam unit of Fars combined cycle power plant with a 100 megawatt capacity, the first unit of Masjid Soleyman power station with the capacity of 250 megawatts, the seventh unit of Kerman gas power station with a 159 megawatt capacity, the eighth unit of Kerman gas power plant with the capacity of 159 megawatts, and the second unit of Karkheh hydroelectric power station with a 133 megawatt capacity were among the units which came on stream in the current Iranian calendar year.
Q: How much electricity was generated by Iranian power stations in the first nine months of the year?
A: The energy produced by power stations across the country in the first nine months of the current Iranian year stood at 107,000 gigawatts, registering an increase of 9.5 percent compared to the corresponding period last year. The increase in power generation was due to commissioning of new power plants, raising the capacities of the existing power stations and their better performance. It is to be noted that the consumption coefficient in the period under study was 65.77 percent, showing a 1.1 percent improvement compared with the similar period last year.
Q: Dr. Ahmadian, how much electricity was swapped with neighboring countries in the 9 month period and what are the names of those countries?
A: There has been power swap with Armenia, Turkey, the Republic of Azerbaijan and the autonomous Republic of Nakhichevan in the nine month period under study. As for Pakistan, I should mention that at present middle voltage electricity is exchanged with that country and power swap between the two states will expand with the construction of a 132 KV line in the near future. All in all, Iran received 630,500 megawatt/hour energy and transferred 292,000 magawatt/hour energy in the said nine month period. In short, the net amount of electircity received by Iran has been 338,500 megawatt/hour, which will be compensated in the winter.
Q: Earlier you spoke of the possibility of power failures in next summer because of low storage level. What is the latest rate of power failure in the nationwide grid?
A: The rate of power failure in the nationwide power grid in the first eight months of this year hs been 2.88 per one thousand megawatts, showing a decrease of 2.3 percent compared to the figure in the corresponding period last year, which stood at 2.95 per one thousand megawatts. This is while that the share of power failure resulting from shortage of generation and accidents in the transmission and distribution networks as a result of low storage level of 4.5 percent has stood at 1.54 per one thousand megawatts. This shows an increase of 7.7 percent over last year. Of course, the share of power failures resulting from the performance of distribution networks has reduced from 1.52 per one thousand megawatts in 2001 to 1.34 per one thousand megawatts in 2002, showing a decrease of 12 percent. This led to a slight improvement in the quality of electricity delivered to subscribers. Despite such a relative improvement, the average time of power failure stands at 4.15 minutes, which is not ideal. With the improvement in the production and storage of electricity, and optimization of distribution networks it is hoped that this figure would drop to 3.5 minutes per day within the next three years.
Q: Given that the country has no difficulties generating electricity, don't you think that most of the energy wasted is due to the wear and tear of the distribution networks?
A: Of course, because of the wear and tear of the distribution networks, the amount of electricity wasted is high. At present, this figure in the transmission and distribution networks stands at 17 percent. As the first step towards solving this problem, it is necessary that credits be allocated to setting up a system for measurement of energy swap. Then, we should optimize electricity transmission networks to reduce electricity losses. In order to ease this problem, a special credit has been predicted for the next Iranian calendar year to be allocated to every regional electricity company throughout the country to choose a suitable pattern for optimization of the distribution networks in their respective regions. After collecting results from various regions, the best pattern will be chosen and generalized all over the country. Furthermore, because of the preservation of electricity being generated in the country, some 10,000 billion rials will be spent next year. Moreover, 2,500 billion rials from subscription fees, 16,000 billion rials for sale of electricity and 1,600 billion rials from sale of contribution bonds will be spent to implement power projects.
Q: How much is the worth of assets belonging to the power industry in Iran?
A: The assets owned by the Iranian power industry are worth 150,000 billion rials. Because the power distribution networks in the country are now facing some problems as a result of their dilapidated and aging equipment, the country's electricity installations must be doubled within the next ten years. Therefore, an additional 150,000 billion rials should be invested in the transmission and distribution networks.
Q: How many new villages have been supplied with electricity in Iran this year? And what is the total number of villages now having access to electricity?
A: In the first nine months of this year, 550 new villages have been supplied with electricity. The majority of these villages are located in the provinces of Kerman, Sistan and Baluchestan and Khuzestan. So the number of villages now having access to electricity has exceeded 46,000. Although work is in progress to provide 1,300 other villages with electricity by regional electricity companies, supplying power to all villages scattered throughout the country that have economic justification requires more financial support on the part of the government and the Majlis (Iranian parliament). It is worth mentioning that power supply to the remaining 17,000 villages in the country with population of less than 10 families each has no economic justification and is very costly.
Q: What about the transfer of power stations to the private sector? Will TAVANIR guarantee purchase of electricity generated by these power stations?
A: In line with implementing the policies and legal provisions of the Third Five Year Economic Development Plan, the shares of all satellite companies affiliated to TAVANIR which have nothing to do with the main duties of this sector have been transferred to SATCUP, which is a specialized mother company responsible for ceding those shares to the non-governmental private companies. Next year, the specialized mother company, TAVANIR, will purchase electricity from all government and non-governmental producers at cost prices or at a mutually agreed upon price and will sell it, on a wholesale basis, to regional electricity companies for distribution among subscribers. The bylaw on guaranteed purchase of electricity is about to be approved by the cabinet ministers. Electricity will be bought from the private sector at a guaranteed rate of 127 rials per kilowatt. Based on this bylaw, measures will be taken for the first time to make the nationwide power grid render power transmission services to non-governmental producers. Therefore, in line with the policy of attracting the private sector's contribution to power generation, applications for construction of power stations were evaluated this summer and to date the competence of six groups for building two 500 megawatt power plants in Zanjan has been confirmed. The relevant tenders will be held this year. Other tenders will be announced next year for construction of power stations with a total capacity of 2,000 megawatts by the private sector. A permit has been issued to a private company to build a 2,000 megawatt power plant at Rudshur on the outskirts of Tehran and the company has made good progress in this respect so far. Negotiations with domestic and foreign investors are in progress for setting up of six power plants on B.O.T. (build, operate and transfer) basis. The "Parreh Sar" project is in its final stage and it is hoped that with cooperation from the government and the Majlis, last impedime!
nts to the launching of the project concerning offering necessary guarantees to investors will be lifted. Tender documents for sale of six power stations of Khoy, Zargan, Zarand, Shahid Zanbaq of Yazd, Chabahar and Mashhad have been prepared in line with the note 12 of the current year's budget law with the first tender for sale of these power plants being slated to be held this year.
Q: Which power generating units are to come on stream next year?
A: These are: the third unit of Iranshahr steam power plant with a capacity of 64 megawatts in spring and its fourth unit in summer of 2003, the second unit of Kazeroun gas power station with a 159 megawatt capacity, the first and second units of Abadan gas power station in spring and its third unit in summer of 2003 each with a capacity of 159 megawatts, the third unit of Fars combined cycle power station with a capacity of 100 megawatts, the first and second units of Neishabour combined cycle power station with a capacity of 100 megawatt each, the first steam unit of Shariati combined cycle power plant with a 100 megawatt capacity, the first extension unit of Shahid Abbaspour hydroelectric power station with a capacity of 250 megawatts, and the second unit of Masjid Soleyman hydroelectric power station with a 250 megawatt capacity that will be commissioned in the winter of next year.