Business in Dubai hails freeze on utility prices

Businesses welcomed Dubai's promise to fix the cost of power and water.
Dubai Electricity and Water Authority said yesterday that it would keep utility tariffs fixed over the next few years. Steve Crisp / Reuters
Dubai Electricity and Water Authority said yesterday that it would keep utility tariffs fixed over the next few years. Steve Crisp / Reuters

Businesses across Dubai have welcomed the freezing of the emirate's power and water prices.

The Dubai Supreme Council of Energy, a government body that sets energy policy, said yesterday it would keep utility tariffs fixed over the next few years.

That soothed fears that prices could rise with the market rate for natural gas and provided relief to retailers who have struggled with the rising cost of food and other imported goods.

The announcement, which comes after an increase in January, was also interpreted as a green light to industries from cement to metal smelters to invest in Dubai.

"If you're saying come to Dubai, we guarantee you energy prices will not rise, that's music to the ears to people who have very energy-intensive industries," said Hannes Reinisch, a regional energy consultant at Deloitte in Abu Dhabi.

"All the businesses who are looking to build up their manufacturing capacity can do their business cases with a fixed energy cost … That's what industry wants, they want security."

Restaurants and hotels across Dubai also welcomed the announcement yesterday as good news amid rising costs. Fast-food outlets said the move would help to offset the rising costs of global food prices, which have been eating into profits this year.

"This is especially good news for us, we are feeling a lot of pressure on the food price inflation and costs," said Marwan Al Hamar, a development agent for Subway in the UAE. Fixed costs will be particularly beneficial to the sandwich chain, which operates 104 outlets in the Emirates.

Subway aims to have 125 by the end of the year and then plans to add 25 each year for four years. Subway uses electricity in outlets to power all ovens and microwaves, with the total water and electricity bill making up more than 5 per cent of costs.

"It's definitely a significant amount," said Mr Al Hamar. "It is very positive to have that cost fixed so we know what we are dealing with."

Rafic Fakih, the managing director for Emirates Fast Food, which runs 90 McDonald's outlets in the UAE, also welcomed the news.

"We are not a huge consumer of energy compared to other kinds of business, but in general it's good news," he said. "The price of food is going up, so this will be one less issue to worry about."

Faisal Saeed Al Romaithi, the vice chairman of Cassells Group, said electricity and waterrepresented about 15 per cent of the hotel company's business' budget.

"Knowing that it's going to be fixed for the next year will be a big thing for us. It will help us plan better," said Mr Al Romaithi, whose company owns a hotel in Dubai.

The announcement that Dubai will keep prices fixed increases pressure on the Government to introduce a feed-in tariff to help renewable energy compete with conventional power.

Dubai aims to source 1 per cent of its energy from solar power by 2020.

"The option they've got is for they themselves to pay the difference," said Mr Reinisch.

* additional reporting by Gillian Duncan

Published: August 15, 2011 04:00 AM


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