Dubai residents suffer as district cooling bills jump

Dubai residents hit by soaring cooling bills as suppliers look to boost revenues, say analysts
Dubai residents suffer as district cooling bills jump
One resident in Dubai Marina said his annual cooling bill had reached AED15,000
By Elizabeth Broomhall
Mon 16 Jan 2012 08:51 AM

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.”

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