Price distortion caused by taxes, duties, or subsidies distorts the consumption of various goods and services. When prices become misleading they produce wastage and provide little or no incentive for conservation. Electricity tariffs are subsidized in Gulf countries due to socioeconomic and political reasons but with ongoing petrol prices and the Covid-19 situation, Oman is slowly moving toward removing subsidies. According to the economic theory of efficient pricing, the prices of goods should be set equal to their marginal cost of production. The purpose of this paper is to provide a methodology to estimate long-run marginal cost (LRMC) at the generation level using a traditional generation expansion planning software. The approach is then applied to find LRMC for Oman’s Main Interconnected System (MIS). The LRMC at the level of generation busbar is then taken down to 132-kV, 33-kV, 11-kV, and 415-V. The LRMC calculation has shown that the power sector is highly subsidized.