Dubai: Dubai's state-owned utility has asked for government permission to raise power and water tariffs for the first time in a decade to fund a $19 billion expansion and cover surging costs, a document given to investors showed.
The government has not changed the rates the Dubai Electricity and Water Authority (Dewa) charges its customers since 1998 although production costs have surged, driven by a rise in fuel prices, according to a prospectus handed to investors at a sale of bonds.
"While there are no expected tariff increases in the short-term, Dewa is seeking government approval for an increase in electricity and water tariffs in the future across all customers as a whole," it said in the document.
A utility bill increase would add to soaring inflation in Dubai, which already has the highest cost of living in the UAE.
Inflation in the UAE hit a 19-year high of 9.3 per cent in 2006.
Dewa made a loss of 223 million dirhams ($60.75 million) in the seven months to 31 July compared with a profit of 423 million dirhams in the same period last year.
The volume of electricity and water sales for the first seven months of 2007 grew 15 percent and 11 percent respectively, because of population growth, according to the prospectus. Dubai aims to almost double its workforce by 2015.
"Tariffs, which are set by the government of Dubai have not changed since January 1998, despite the fact that Dewa's costs of electricity and water production and capital expenditures... have increased," Dewa said.
A shortage of natural gas in Dubai has forced Dewa to buy more fuel oil and purchase power from the Abu Dhabi Electricity and Water Company in the UAE's largest emirate.
The diesel needed to produce a kilowatt of electricity cost about 10 times more than natural gas in the first seven months of this year, according to the document.
Dewa spent more than 1.9 billion dirhams in fuel oil in 2006, an almost 75-fold increase since 2004. It receives its natural gas from the government through the Dubai Supply Authority, which "has been unable to meet all of Dewa's requirements", the prospectus said.
Tariffs at current levels "could have a material adverse affect on Dewa's business", the prospectus said.
Dewa could borrow as much as $19 billion over five years for investments as it seeks to increase capacity by 150 per cent by 2012 from 5,000 megawatts of electricity and 255 million gallons per day of water, the prospectus showed.
Dewa estimates that demand for power and water will grow as much as 20 per cent a year in Dubai as the population grows 10 percent annually, Chief Executive Officer Saeed Mohamad Ahmad Al Tayer told Reuters on Sunday.
Your comments
With the ever increasing fuel prices, the additional burden of increased utility costs is a direct reflection of the sectors not self sufficient. The government should seriously look into alternate energy systems. I agree with the readers that the middle class will be the worst hit.
Srikanth
Melbourne,Australia
Posted: November 06, 2007, 10:55
The tariff increase was expected much earlier due to the increase in fuel prices.
Mamun
Dubai,UAE
Posted: November 06, 2007, 10:47
Everyone should pay for water and electricity. There is no incentive to curb profligate overuse of resources when you don't have to pay for them.
From a reader
Dubai,UAE
Posted: November 06, 2007, 10:07
I am here on a visit. I see the cost of living going up, I also see the property booming and this is a good sign compared to many cities that see the sub prime mortgages loan in dilution. Dubai may be expensive but there is a good point that many seem to have ignored. The foodstuff is reasonably priced. The petrol is not expensive. The local landline calls are free. I wonder why people living here since 1975 even seem to complain. The prices of all commodities have gone up in all cities of the world. Dubai is not alone.
Firozali
Dubai,UAE
Posted: November 06, 2007, 09:34
The hike in utility tariff is justified since production costs have increased.
Sunil
Dubai,UAE
Posted: November 06, 2007, 09:32
It is a fair move. However, it is not fair that tenants of new buildings have to pay Dewa tax based on their rent, while old tenants do not pay for this tax.
George
Dubai,UAE
Posted: November 06, 2007, 09:30
I think that the government should take advantage of the sun and produce solar electricity so as to minimise energy price hikes.
Firdou
Dubai,UAE
Posted: November 06, 2007, 09:03
I think the government has full right to increase the tariff since oil price has more than doubled. Dewa is also doing an outstanding job as I have never witnessed any power shortage ever since I moved to Dubai.
Saifuddin
Dubai,UAE
Posted: November 06, 2007, 08:55
This additional cost will add to inflation and will result into a weaker economy and a weaker dirham.
Mohammad
Dubai,UAE
Posted: November 06, 2007, 08:02
It is obvious that the Dewa utilities bill increase would further aggravate the situation of ordinary expatriates who are already under pressure from increased cost of living. However, we should admit the fact that there has been a significant increase in production cost since 1998, which necessitate an appropriate increase in order to mitigate the loss without overburdening the customers.
Mathew
Dubai,UAE
Posted: November 06, 2007, 07:27
With real inflation estimated by many at 16%, this will make inflation in Dubai a runaway number, and the city unaffordable for many. Please do not make this the tipping point for Dubai's decline. Find other ways to handle the situation sensibly.
Pathy
Dubai,UAE
Posted: November 06, 2007, 07:08
If the government approves the new tariff then it will be a great blow to people living in Dubai. The government was able to do something about the rising rents; I am sure that officials can do the same with the Dewa issue.
Navaz
Dubai,UAE
Posted: November 06, 2007, 07:03
