The 2,400-megawatt (MW), heavy fuel oil burning plant is expected to be completed by 2016 and will be called Jeddah South, an industry source said.
At least five companies are bidding to build it, the sources said.
Saudi Electricity has an $80-billion investment plan to increase its power generation capacity by 30,000 MW by 2018 to meet rising power demand in the country.
The Kingdom burns tens of millions of barrels of oil a year to meet rising electricity demand as its modest gas supplies are channeled to other industries.
Riyadh hopes one of the world's most ambitious nuclear power programs, combined with solar power and gas fired power plants, will help it reduce oil use in future.
SEC said recently it had approved a 2012 budget of over SR55 billion ($14.66 billion) to build new power plants, transmission and distribution projects.
