By Elizabeth Broomhall
Dubai residents hit by soaring cooling bills as suppliers look to boost revenues, say analysts
Dubai residents reliant on district cooling are bearing the brunt of huge utility bills compared to those in buildings with standard air-conditioning units, as suppliers look to claw back the cost of their investment, industry experts said.
Homeowners are carrying the cost of building and maintaining the cooling plants in their monthly bills, analysts said, pushing prices beyond those seen in individually-cooled properties.
Residents in the Dubai’s The Gardens have already seen price hikes of up to 50 percent in their monthly cooling rates, which developer Nakheel said was due to rising tariffs from authorities.
“The company passes the costs of developing the facilities on to the end user, this is why the costs are so high,” said Matthew Green, head of research at property broker CBRE in Dubai.
“It’s supposed to be more efficient and environmentally friendly than having lots of split A/C units, but residents have to pay for the infrastructure to have it in place.”
In communities with low-rise buildings, such as Dubai’s Discovery Gardens, the district cooling model can be even pricier for residents. Owners of one-bedroom flats in the Nakheel-owned project face fixed annual cooling charges of around AED10,000.
The development is serviced by Palm District Cooling, a subsidiary of Palm Utilities, which is owned by Nakheel’s former parent company Dubai World.
“District cooling works best in areas of high density, high-rise buildings. For places like Discovery Gardens, which are low-rise developments, you end up having a [particularly] high cost associated with it,” Green said.
Residents also suffer in buildings with low occupancy rates, as the fixed cost of running the cooling plant year-round is spread out across fewer bill-payers.
“If it’s full occupancy it’s cheaper for tenants,” said a Dubai-based energy analyst, who asked not to be named. “The problem is that in the Palm or JLT and several other new communities which have built district cooling plants [but have low occupancy], the tenants who are occupying the units are the only ones to pay for it.
“In some cases the developer will bear the costs for the first year to incentivise tenants to move in. But in the second year and moving forward they expect the tenants to bear the full costs.”
Cooling firms also claw back costs by charging tenants for the reported cost of air-conditioning in communal areas, raising the per square metre price to each resident, the analyst added.
“The people who are working out the rates have calculated this to their advantage. How you count square footage anywhere in Dubai varies greatly. Whether they include part of the lobby, the facilities or gardens is up to the individual development.”
One Dubai Marina resident told Arabian Business that the utility firm supplying his building had included open-air terraces and other facilities in their cooling charges to tenants.
“I own a podium villa in Dubai Marina where the developers charge us AED15,000 a year for central cooling,” he said. “The charge is based upon a per sq ft charge of the villa, but we have a very large terrace which is included in the contractual area of the villa so we are paying nearly AED2,000 to cool an open air terrace.”
Dubai developers, which once saw millions of dollars in profit, have struggled to stay afloat since the global financial crisis, which saw house prices plummet by 60 percent.
Many of the emirate’s newer developments include district cooling plants that are awarded on a monopoly basis to a fixed supplier.
Hiking air conditioning bills was an almost “guaranteed way” of making money, the Dubai-based energy analyst said, offering an opportunity to up costs via a third party.
“Developers want to recoup their investments, they want to claw back any penny they can, and if they can get away with charging tenants through another party, then all the better, because it’s hidden and it’s harder to dispute.”For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
This is unfair. The relevant authority should step in and regulate all the district cooling companies. Yet this sort of articles will appear soon, we can almost assume no action will be taken in the foreseeable future. No one really knows if anyone can do anything about it.
Given what Dubai has given all of us, I dont think we can argue against helping the developers in Dubai. They need help and if we have to pay a bit more so they can stay afloat , then so be it. The consequences of Dubai's developers facing financial ruin is much worse so maybe we should pay a bit more. Either ways most expats in decent jobs have it paid by their employers so it doesnt make a difference.
Developer owned district cooling companies like Palm District cooling (Owned by Dubai World, parent of Nakheel) and EMICOOL (owned by Union Properties) are hitting customers with chilled water charges that are often close to double of what they would be if residents were using split A.C's
The cooling companies want to recover the plant cost in 4-5 years against industry norms of 12 - 18 years.
Developers maxi,ize their profit by avoiding the cost of providing split A.C's as FCU's needed for chilled water based cooling are a quarter of the cost. Residents suffer....
DEWA takes it's pound of flesh by charging the highest bracket tariff where as it should really be charging the lowest bracket considering the end users are individual customers.
Why can't the authorities introduce a maximum tariff per sq. ft (for both fixed and variable components) to protect the consumer?
John, your ignorance to the subject is chilling. What exactly is it Dubai has given to us that justifies over night explosion in utility costs? What justifies Nakheel to turn the screws, their past track record of world class development and building management?
And no, 'many expats in decent jobs' do not get utility bills paid. And certainly not the people living in Discovery Gardens.
Dubai Real Estate over promised and under delivered. Chasing those stuck in the post crisis Dubai is NOT the way to assure sustainable recovery.
solution, buy a indoor portable cooling unit which just requires a small exhaust. i know people in motor city who use these instead of getting the cooling system connection. u can buy a used one in sharjah for few hundred dhs and in carrefour for around 1k.
I presume this was written with tongue firmly embedded in cheek...
Why would they want to wait 12-18 years to recover their costs when they can have very little coinfidence the buildings will still be standing in 12-18 years??
There shud be diffrentiation between home owners, rentals tenants & developers, DC companies cant charge rental tenants 4 instance capacity charges, this shud be absorbed by the building owner since the DC system is improving their building life time. on the other hand, house owner would buy window type AC or split unit & bare its cost 3 times during 20 years+the running cost+maintenance cost, this is rather than the cooling comfort achievd thru DC systems which cant b achieved by normal A/Cs.
Submetering is required 2 avoid the unfair estimation per ft square consumption. DEWA is the ultimate beneficiary, the charges of DEWA 2 DC companies are on the highest slab which is leaving DC companies with no option except increasing their charges.
Bottom line to overcome this issue:
1-DEWA to decrease the DC companies charges to the lowest slab.
2-Home owners to install submetering systems for tenants.
3-DC to control the delta T for best effecincy (provided system designed & commissiond).
Yet another money making opportunity linked to purchasing a property with no relation to reality.
I am so glad I wasnt swept up in the earlier greedy furore nor the hype now that prices are "rock bottom".
I will stay in rented accommodation thank you!
Comments/Opinion expressed by MikeDeLonghi is very true. Do remember, all Empires do fall eventually, even the Roman Empire.