Dubai water and electricity costs to rise around 15% in 2011

Dubai is set to raise its water and electricity charges by around 15 percent from January 2011, the Supreme Council of Energy said on Wednesday.

The Council also announced that, due to the increase in fuel and gas prices, an additional fuel surcharge would be added to Dubai electricity bills from January 1.

The surcharge will be added to bills sent to customers by the Dubai Electricity and Water Authority (DEWA) and will fluctuate in accordance with worldwide energy prices.

Residential water charges will increase from 3 to 3.5 fils per gallon for the first 6,000 gallons, from 3.5 to 4 fils per gallon for monthly consumption of 6,001 to 12,000 gallons and from 4 to 4.6 fils per gallon for usage over 12,000 gallons.

For commercial and industrial customers, water charges will increase from 3 to 3.5 fils per gallon for the first 10,000 gallons, from 3.5 to 4 fils per gallon for monthly consumption of 10,001 to 20,000 gallons and from 4 to 4.6 fils per gallon for usage over 20,000 gallons.

The electricity market will also see bills rising, with charges rising from 20 fils per kilowatt-hour (KWh) for the first 2,000 KWh. For 2,001 to 4,000 KWh, the tariff rises from 24 to 28 fils per KWh, for 4,001 to 6000 KWh usage rises from 28 to 32 fils per KWh and any usage above 6,001 KWh will rise from 33 to 38 fils per KWh.

“This move was imminent, and in talks for some time now. It is the right move on the part of the Government to rationalise the prices of water and power, both of which are in high-demand in the region, and were posing a challenge in terms of supply keeping pace with demand,” said Abhay Bhargava, industry manager – energy and power systems practice for the Middle East region at consultants Frost and Sullivan.

Earlier this year, Frost and Sullivan urged the Middle East’s electricity providers to introduce variable tariff schemes that charge consumers more for usage during peak hours in an effort to ease demand.

“All GCC nations have the same times for their peak demands. The tariffs need to start reflecting the high price at peak times,” said Bhargava.

“The only correct answer is variable pricing. If you insist on using power at that time then [providers] have to charge you more money,” he added.

Variable time of usage tariffs, as Bhargava calls them, is when consumers are charged different rates at different times of the day that they consume electricity.

DEWA said the peak daily usage hours in the emirate is between noon and 5pm each day.

A report from research firm RNCOS, entitled “Middle East Power Sector Analysis”, said the Middle East power industry is one of the fastest growing electricity markets in the world and “rapid industrialisation and surging residential sector consumers will trigger electricity demand in UAE to grow at a compound annual growth rate (CAGR) of ten percent during 2010 to 2013.”