Abstract
The Saudi electricity sector buys fuel and sells electricity at prices administered by the government. In this analysis, we assume that fuel prices are deregulated — priced at their marginal values or international equivalents — and use a long-term static version of the KAPSARC Energy Model (KEM) for Saudi Arabia. This allows a better understanding of the economic effects of energy price reform packages by providing illustrative estimates of their impacts. We do not propose a specific package of reforms, but seek to show the different channels by which the Saudi economy can benefit. We expand on previous KAPSARC analyses by combining the price reform of fuels used in power plants with the implementation of alternative electricity pricing schemes for households. In particular, we examine the differences between ‘lifeline’, average-cost and marginal-cost electricity pricing policies for residential customers.
