Energy & Mining

A New Mix

Ministry of Electricity & Water

Since being appointed to his ministerial roles in late 2012, HE Essam Abdul Mohsen Al-Marzouq has been laying the groundwork for the private sector to take a greater role in Kuwait.

HE Essam Abdul Mohsen Al-Marzouq, appointed Minister of Oil and Minister of Electricity and Water in December 2012, comes from an extensive private-sector career and formulated two key ambitions for the ministries that he now leads. For the oil sector, he envisions consolidation and maintaining the drive toward diversification. For the Ministry of Electricity and Water, his mission includes an ambitious transformation agenda to establish a corporation that will deal with the production and distribution of both electricity and water.

Already prior to his appointment, there was a law presented to the parliament to establish a privatized vehicle for commercialization of power, and it has been a trend in neighboring GCC countries to do so. The minister has made this a top priority and envisions privatization can be done in around two to three years. Parallel to the efforts to set up the corporation, the ministry is preparing the country for market prices in their use of utilities. The volatility in the oil price—a sector that still brings 95% of the government’s revenue—has certainly urged the administration to diversify its income.

Kuwait has had the same price regimes for the usage of water and electricity utilities for more than five decades, which has been almost free and do not even represent 1/20th of the actual costs. In January 2017, the first meeting of the Tariff Committee took place, after which a law was passed through parliament to increase tariffs for utilities. The committee has a broad representation in order to balance the need to increase income with the potential effects of inflation and hence consists of representatives from the Ministry of Electricity and Water, the Ministry of Finance, the Ministry of Commerce, and the Legal Bureau of Kuwait. The law currently excludes residential houses, so it will only be applicable for commercial and indsutrial usage. With rapid anticipated growth in residential areas in the coming years, the ministry now seeks to implement smart meters in new areas, to be able to have better tracking in the future, as well as experiment with smart grid technologies.

According to Minister Al-Marzouq, the objective is not to increase revenues, but rather to encourage people to conserve energy. “Unless they have some sense of the reflection of their usage on their disposable income, there will be very limited motives to reduce consumption. A conventional light bulb, consuming seven times more energy, costs 60 fils, whilst a LED or saving bulb around KWD1, which is around 20 times the price,” the minister said in an interview with TBY.

As an important first step in more private-sector participation, a new power plant, Al-Zour North, was established in a public-private partnership model, allowing the private sector to have ownership as well. That will certainly benefit the process of privatization, as it makes a first step into the involvement of new corporate structures. It is part of the nation’s future vision to encourage the private sector to become the primary creator of jobs, and to absorb the excess manpower that the government has on its books. By directly shifting the production and distribution responsibilities to the private sector, an important step is being taken toward a more sustainable job market. The Ministry of Electricity and Water will transform from a capital-intensive producer into a regulator, setting the rules for the newly established water and electricity market. The corporation that will cater for electricity and water will then have to comply to the same governance, structure, and KPIs as any other private-sector entity. After decades of nearly free electricity and water, Kuwaiti companies may have to prepare for a reality check.