Dispute Resolution In Oman's Power Sector: APSR Oversight And ICC‑Anchored ADR

Overview

The electricity sector in Oman is a vital pillar of the national economy and has undergone major development over recent decades. Oman has adopted an integrated model spanning generation, transmission, distribution, and supply to meet growing nationwide demand. Alongside this growth, the sector has received substantial government support to ensure continuity of service at affordable prices and to stimulate investment. In the 2025 budget, electricity subsidy allocations reached roughly OMR 520 million (about USD 1.35 billion), an increase of around 13% over the previous year. Part of the budget surplus (about OMR 125 million, equivalent to USD 324.7 million) was also earmarked to bolster social spending, including support for the electricity, water, wastewater, and waste sectors. This public investment underscores the strategic importance of electricity to economic stability and societal well‑being.

In parallel, the government is accelerating the transition to renewable and clean energy sources. Royal Decree No. 10/2023 allocated extensive land for renewable energy and clean hydrogen projects, enabling Hydrogen Oman (Hydrom) and its partners to advance pioneering investments. The Sultanate has since signed a series of agreements with international consortia and companies to implement major green hydrogen projects with total investments exceeding USD 30 billion. These steps highlight Oman's commitment to diversifying energy sources and enhancing sustainability, paving the way for a new generation of electricity projects that will benefit from effective frameworks to manage potential disputes.

Sector structure

Oman's electricity sector comprises an interconnected chain of specialised entities ensuring efficient delivery of power from generation plants to end consumers. This chain includes independent generation companies with local and foreign ownership operating under long‑term power purchase agreements; a national transmission company operating the high‑voltage grid across the Sultanate; and regional distribution companies delivering electricity to subscribers in the various governorates. Following the directives of H.M. Sultan Haitham and subsequent sector restructuring, the supply function has been consolidated into a single nationwide supplier and the distribution function into a single nationwide distributor across Oman, except in Dhofar where separate arrangements remain. In addition, the Rural Areas Electricity Company serves remote areas not connected to the main grids. The Oman Power and Water Procurement Company (Single Buyer) plays a pivotal role by contracting with generators and selling power to the distribution and supply companies. This integrated structure clarifies responsibilities along the value chain and enables regulators to monitor each stage and set appropriate frameworks.

The sector is also central to achieving Oman Vision 2040 objectives on economic diversification and the low‑carbon transition. The government is relying on renewable electricity projects, such as solar, wind, and hydrogen, to position Oman as a regional hub for clean energy in the Gulf. This elevates the need for a legal and regulatory framework capable of addressing next‑phase challenges, including the effective and fair management of potential disputes.

Legal framework

The sector is governed by a clear and transparent legal and regulatory framework designed to serve the public interest and balance stakeholder rights and obligations. The cornerstone is the Law for the Regulation and Privatization of the Electricity and Related Water Sector, issued by Royal Decree No. 78/2004 and its amendments, which sets comprehensive rules for regulating electricity activities and establishes an independent authority to oversee the sector. Pursuant to this law, the Authority for Public Services Regulation (APSR) serves as the government regulator. APSR is responsible for licensing companies, monitoring performance, ensuring legal compliance, and protecting the rights of subscribers and investors.

No party may engage in any regulated electricity activity, including generation, transmission, distribution, supply to subscribers, import or export of electricity, or linkage with water desalination, without obtaining a licence or an official exemption from APSR. Licensees must comply strictly with the conditions and controls specified in their licences to ensure efficient and fair service delivery. Any unlicensed activity or breach of licence conditions constitutes a violation exposing the operator to legal accountability.

The law enumerates detailed duties for effective sector governance—roughly 22 core functions. Notable among them are ensuring provision of electricity services throughout the Sultanate and access for all segments of society while protecting subscribers' interests, particularly low‑income households, patients, and the elderly; promoting fair competition to benefit consumers and attract investment; ensuring safe and economically efficient system operation and development with due regard for public safety and environmental protection; ensuring licensees connect and supply electricity for every reasonable request without delay; adhering to Omanisation and training policies to build national talent; and facilitating privatisation in line with government policies.

Disputes

Despite robust regulation, disputes can arise among the sector's many stakeholders due to the complexity of contractual and operational relationships. The most significant categories are set out below.

First: Disputes between subscribers and service providers

These retail‑level disputes occur between individuals or institutions receiving service and the responsible distribution/supply companies. They commonly involve objections to bills deemed excessive or resulting from erroneous meter readings; complaints about meter accuracy requiring testing and calibration; delays in installing new connections or linking a new subscriber to the grid; unjustified outages or frequent interruptions; and disconnection for non‑payment, including requests to reconnect service or reschedule arrears. Disagreements may also arise over responsibility for repair costs or relocation of electricity assets, such as transformers and poles, affecting a subscriber's property. These disputes concern service quality and consumer rights.

Second: Contractual disputes among sector companies

At the wholesale and infrastructure level, companies are bound by a chain of long‑term contracts and agreements. These include power purchase agreements (PPAs) under which independent producers sell electricity to the Single Buyer at specified prices and terms; transmission agreements between producers and the transmission company; and arrangements for supplying distribution companies with power procured by the Single Buyer. Disputes may arise regarding interpretation or performance of these complex contracts. For example, PPA counterparties may disagree over tariff components owed if fuel prices change or force majeure occurs, or over whether a plant meets availability and reliability standards that affect revenues. Conflicts may also occur if a generation project or transmission line is delayed, triggering liquidated damages or additional costs, or over responsibility when technical faults by one party affect others, such as a transmission network fault impacting a distribution company's supplies. These disputes are often commercial and technical in nature, may involve private‑sector and international parties, and typically follow a staged resolution process beginning with direct negotiations and escalating to arbitration if amicable resolution fails, so that projects continue operating without disruption.

Third: Disputes concerning regulatory decisions or government measures

These disputes arise between companies or investors on one side and regulators or government entities on the other, where an official decision affects a party's legal or financial position. Examples include a distribution or transmission company objecting to a tariff decision it believes does not cover its costs; a generation investor contesting APSR's refusal to grant a licence or alleging unfair modifications to licence terms; or a company challenging a fine imposed for a regulatory violation.

Dispute management

The Omani legislator has provided calibrated mechanisms to address disputes efficiently and fairly, with an escalation path that begins with administrative handling by APSR and ends, if necessary, with recourse to courts or arbitration under defined rules.

First: Disputes between subscribers and service providers

APSR serves as mediator and first‑instance decision‑maker in many sector disputes, supervising implementation of the law and ensuring licensee compliance. It has established official channels to receive complaints from subscribers against distribution and supply companies in cases of deficiency or disagreement. Acting under its legal powers, APSR reviews complaints, conducts investigations, and may issue binding decisions requiring corrective action in favour of the aggrieved subscriber. APSR has also published a general guide summarizing common issues and how they are handled, including disputes over high or erroneous bills; challenges to meter accuracy and requests for calibration; errors in meter reading or billing frequency; delays in installing new meters; tampering with meters; and failure to issue periodic bills resulting in sudden accumulation of charges. The guide also covers requests to separate meters at leased properties; apportionment of liability between landlord and tenant for arrears; relocation of company assets upon community requests; and disconnection due to late payment. These procedures demonstrate APSR's role as the first line of defence to resolve disputes quickly and fairly without resorting to courts. If APSR issues decision in the subscriber's favor, it is binding on the company and APSR may monitor implementation.

For disputes between licensees—such as a disagreement between a generation company and the transmission or a distribution company—or objections to regulatory action, APSR intervenes under its supervisory powers. Article 25 of the law authorises APSR to examine complaints submitted by subscribers and licensees and to take necessary action. For example, if a generation company believes the transmission company breached a grid connection agreement or failed to meet performance standards, it may file a complaint with APSR, which will investigate and issue a binding decision if the complaint is upheld. If a licensee objects to a regulatory decision by APSR itself, it must first address APSR formally and state the grounds of objection to enable administrative resolution. Article 124 explicitly requires that no person may initiate legal proceedings against any licensee or exemption holder regarding a breach of license conditions or legal obligations without first submitting the complaint to APSR to allow an opportunity to remedy the breach. APSR may order the concerned company to act or refrain from acting, or to compensate the aggrieved party as it deems appropriate.

APSR also has enforcement powers to ensure compliance. It may impose administrative penalties such as warnings or monetary fines within legal limits and, in extreme cases, suspend or revoke a licence if serious violations persist. These tools incentivize companies to resolve complaints amicably before matters escalate. Thus, APSR plays a dual role: mediator facilitating settlement and regulator capable of imposing solutions and penalties when necessary, ensuring service stability and protection of rights.

Second: Arbitration as a dispute resolution option

The law regulates arbitration procedures to preempt disagreements about process. It requires that arbitration contemplated under its provisions be conducted in the city of Muscat under the laws of the Sultanate of Oman and in accordance with the Rules of Arbitration of the International Chamber of Commerce (ICC), as amended from time to time. It also provides that documents submitted in arbitration concerning electricity disputes may be treated as confidential (or non‑confidential) as APSR deems appropriate, preserving the privacy of sensitive commercial information without impeding access by arbitrators or courts. This prior alignment with ICC Rules offers comfort to foreign investors by providing a familiar framework, a clear governing law (Omani law), and a known seat (Muscat) for dispute resolution.

Given arbitration's advantages in flexibility, relative speed, confidentiality, and access to expert arbitrators, it features prominently in both regulation and contracts. At the regulatory level, as noted, the law permits referring certain disputes to arbitration and specifies ICC Rules and Muscat as the seat to ensure a recognised international framework. At the transactional level, principal contracts among sector participants frequently contain arbitration clauses. For example, model PPAs between independent producers and the government off‑taker typically stipulate recourse to international arbitration if material disputes arise and amicable negotiations fail. Reputable arbitral institutions are selected, often including the ICC, and the applicable law is designated to ensure neutrality and effective adjudication. The prevalence of arbitration clauses reflects confidence in this tool and is a key draw for foreign investors in power projects, assuring a neutral avenue to resolve disputes with local partners or public entities outside the courts if needed.

Conclusion

Oman's electricity sector stands at a strategically important inflection point. Sustained government support reflected in the 2025 budget, the deliberate acceleration of renewables and clean hydrogen under Royal Decree 10/2023, and progressive market arrangements through self‑generation, direct sales, and wheeling collectively signal a sector designed for resilience, competitiveness, and decarbonization.

This evolution is underpinned by a mature legal and regulatory framework anchored in Royal Decree 78/2004 and administered by APSR. The framework balances consumer protection with investor certainty through licensing discipline, defined performance standards, and clear enforcement powers. It also embeds an orderly dispute management pathway, prior administrative recourse, binding determinations where appropriate, and, where necessary, arbitration seated in Muscat under Omani law and recognised international rules, providing predictability for domestic stakeholders and international counterparties alike. As direct sales expand and large‑scale renewable and hydrogen projects scale up, this architecture will be critical to managing commercial and technical interfaces, allocating risks efficiently, and resolving disagreements swiftly without disrupting service.

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