The real cost of water and electricity will shock you

Even Nicholas Carter, the man responsible for Abu Dhabi's electricity and water bills, was surprised by what he read when he picked up the latest demand for his villa. Soon, as Laura Collins reports, he won't be alone.

Nicholas Carter, the director general of the Regulation and Supervision Bureau. Silvia Razgova / The National
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Few people open a bill without feeling something. Whether it's a flutter of surprise or the cold thud of shock, it is hardly unusual for the bottom line to elicit a response. What is unusual is for any shock to stem from how little one is actually paying in relation to how much one is consuming.
But that is what struck Nicholas Carter on reading his electricity and water bills this month. Given that he is the director general of the Regulation & Supervision Bureau (the body that oversees the generation, transmission and distribution of electricity and water in Abu Dhabi), he is well versed in the realities of these resources. So it is safe to assume that any surprise he might feel is only a fraction of that likely to be experienced by the average resident.
Certainly that is what he and his team are hoping.
This month the power and water bills that drop through letter boxes or land in email inboxes across the emirate are different. For a start, they are no longer combined in one document. They are separate. They are, Mr Carter says, far more easily understood and, crucially, they note how much it actually costs Abu Dhabi Distribution Company (ADDC) to supply both resources compared to how much the customer pays. For the first time the gulf between the two, the government subsidy, will be writ large.
Gesturing towards his own water bill, Mr Carter, 62, admits: "This one was the real shock to me. Without any subsidy I would be paying Dh1,293.62 but instead my bill is only Dh312.40.
"Add in my electricity, which would have been Dh905.28 but is reduced to 424.35 with the subsidy and, for me, the government has paid around Dh1,400 this month.
"I live in a reasonably large villa and you might say it's not particularly costly, but across the whole emirate that is quite a significant cost to pick up."
The real cost of electricity set by the bureau is 32 fils per unit for domestic customers. Of this, the price paid by nationals is 5 fils while non-nationals pay 15 fils.
The bureau's latest figures show that the electricity sector is growing by 10 to 12 per cent a year and, though the base figure is comparatively small and both the water and electricity sectors in the emirate are comparatively young, this still represents a rapid expansion. Ten years ago, Abu Dhabi's water consumption was 239 million imperial gallons per day (MIGD). Today that stands at 670.5 MIGD and rising: 56 per cent of that is potable water used by domestic customers. Over that same period the demand for electricity has risen from 3,304 megawatts (MW) at peak demand (between the hours of 2pm and 8pm) to 7,041MW. That figure is expected to double before the end of the decade.
Hardly surprising then that the Government wants to concentrate on "possibly reducing its commitment to the subsidy". One way of doing that is for people to consume less. And one way of encouraging them to do that is to let them know exactly what they are consuming in the first place.
There was a tentative edging towards this last year when ADDC issued letters to all customers posing the question: "Did you know you receive much of your water and electricity for free?" It gave two examples of what that means in real terms. An Emirati family living in a four-bedroom villa has nearly 86 per cent of the actual cost of water and electricity waived (nationals receive water for free). An expatriate family living in a three-bedroom apartment has nearly 50 per cent of the cost of both waived.
All very interesting, but human nature dictates that such letters are received, read and discarded having little, if any, lasting effect on household habits. For that you need something more sustained and something more personal.
It has taken more than 18 months, several teams of experts both here and abroad, thousands of hours of meetings and strategising and tens of millions of dirhams to reach this new-bill roll-out. Set against a turnover in the region of Dh18 billion in 2010, this is a comparatively small investment for the dividends that it might pay the sector. The bills were designed by the London consultancy, Interbrand, the payment technologies were upgraded by the American firm Pitney Bowes, and the launch campaign was orchestrated by the Middle East PR firm Impact Porter Novelli.
Unless you have been sleepwalking through Abu Dhabi you will have noticed the posters, advertisements and radio spots that heralded the bills' arrival and posed the question: "Are You In The Green or The Red?"
The notions themselves are slightly problematic. Green is within the "ideal" range of consumption and red is above that figure set by the bureau. Speaking in broad brushstrokes, Mr Carter explains that for a flat this amounts to 20 units of electricity a day, while for a villa it equates to 200 units. Water, which is supplied daily, is measured in cubic litres for ease of visualisation. He says: "Living in a flat your reasonable level of water consumption is 7 cubic litres, that's 700 litres - picture 700 bottles of water and that's quite a lot."
So if you stay within those levels of consumption your cost is recorded next to a green icon on the bill. Any consumption in excess is shown against a red one.
To some extent these are notional concepts: there are no penalties incurred if you dip into "the red", and the definition of "sustainable," another way the associated literature refers to the green range is somewhat woolly. Mr Carter concedes that "sustainable" is an overused word.
But this is only the beginning. The ultimate goal is to minimise the cost of power and water to the emirate. The approach is softer than that of Dubai Electricity and Water Authority (Dewa), which recently announced a drop in per capita electricity consumption having introduced a fuel surcharge, which passes fluctuations in fuel prices at production level directly on to the customer. In 2010, the average resident consumed 16,022 kilowatt hours of electricity. Last year that had dropped to 15,669.
For the time being, the Mr Carter's bureau is more concerned with gathering data and educating consumers. As he explains: "If people cut down just a bit through an awareness campaign, that might be better than just putting up prices. Certainly that's the psychology behind it."
By the end of the year they hope to see a 250MW reduction at system peak - approximately 3.5 per cent of the 2010 peak demand.
Awareness of the value of water is similarly important. Though, as much of the growth of Abu Dhabi is upwards in the form of apartment blocks, the demand for water isn't growing nearly as rapidly as that for electricity. Per capita, apartment dwellers tend to use water very efficiently, with 95 per cent of the water that enters a flat returning to sewer - it isn't "lost" to gardens, car washing and mopping down drives to nearly the same extent as it is in villas, where just 25 per cent of the water going in returns to the sewer.
"Water consumption in flats in Abu Dhabi is no higher than anywhere else in the world," Mr Carter says.
But still, bit by bit, habits and usage can be adapted and improved. There is no single solution but a series of strategies. As he talks through this "range of interactions", it is clear that the 14 years Mr Carter has spent in Abu Dhabi have done nothing to dim his enthusiasm for his role. But then it has always been about power for this Essex-born man - a chartered engineer by trade who worked for Sun Electric and London Electricity before being tempted to the UAE by the "challenge" of shaping this rapidly evolving sector.
"The thing about being here," he says, "is that you can make a difference. Things like these bills. They will make a difference - it might not be the difference we anticipate, only time will tell. The fact is we're overseeing the best energy sector in the Middle East. We don't always get it right, but we keep trying."
The importance of insulation and AC
Energy usage during the summer is higher in Abu Dhabi than a comparable country in southern Europe, but a lot of that can be addressed by improving insulation and getting away from single AC units, which are immensely inefficient and very expensive to run.
Buildings constructed in the emirate today are given Pearl Ratings, reflecting the quality of their insulation, shade on windows and other aspects of their environmental and financial running costs.
Air conditioning accounts for about 45 to 50 per cent of the emirate's summer power load. According to Mr Carter, the Executive Affairs Committee is looking into stipulating certain standards for AC units.
Smart grids to prevent energy waste
Being informed helps, but people can't always be counted on to make "smart choices". Smart Grids can. They feature as part of the Regulation & Supervison Bureau's five-year sector timeline (2011-2015).
This is a complex system featuring a range of embedded generation technologies, monitoring control and power storage. Parameters are programmed in. If, for example, a building is sufficiently well insulated, then if the AC has reached or nearly reached its optimum temperature, and if there is a spike in power demand, the grid will automatically switch those units off for a timed period without occupants feeling any change.
It's not just how much you use, but when
Another aspect under consideration is the introduction of on- and off-peak tariffs, or time-of-day pricing. At the moment, Mr Carter explains, the bureau is simply gathering data to find out exactly how people use electricity and whether, if metered and priced according to on- and off-peak, they might reduce their peak usage. These spikes in demand combined with long spells during which plants lie idle, make electricity costly to produce as the infrastructure needed often goes unused - costing but not making money.
A time-of-day pricing trial will see 400 volunteers recruited from three gated communities. Meters will be installed showing customers the on- and off-peak times and prices, and they will be monitored across 16 months. Peak-time (2pm to 8pm) prices will be 10fils/kWh for nationals and 30fils/kWh for others. Off peak, those prices will drop to 3fils/kWh and 10fils/kWh respectively.
It is, Mr Carter hastily points out, a "risk-free" process for volunteers, who will continue to pay the same flat rate as everybody else.
The people who are behind the plans
The Regulation & Supervision Bureau is the independent regulator of the water, waste water and electricity sector in the emirate of Abu Dhabi. Its powers, duties and functions are set out in various laws. The main duty is to ensure secure supplies of electricity and water to the people of Abu Dhabi.