Tariffs need not be taxing

Beta V.1.0 - Powered by automated translation
As part of an initiative to bring energy efficiency to the emirate, Abu Dhabi's Executive Council will in the near future decide on whether it will tinker with state utility Adwea's generous tariff structure.
The news will not have been greeted with much enthusiasm. While expats living in Abu Dhabi suffer from higher rents than their counterparts in Dubai, at least their utility bills will not be stretching their purse stings as much as Dubai Electricity and Water Authority (Dewa) expat customers.
But capital dwellers need not despair. The Executive Council's primary focus will be on improving efficiency, not ramping up utility bills. Dewa increased tariffs at the start of the year, and slapped on a fuel surcharge when international prices went through the roof. But even the Dubai utility, which is believed to not run at a loss, chose a tariff structure that encourages sensible consumption, and taxes reckless use of water and electricity.
In Dubai, a block tariff ensures that the more you consume, the higher the tariff becomes, the utility bill equivalent to a progressive income tax. Under this tariff, sensible consumers receive sensible bills.
While Adwea might adopt block tariffs, Abu Dhabi's decision makers could also opt for dynamic tariffs. This system of pricing would charge users very high prices when general consumption is highest, and less when demand is weak. A strong disincentive to use electricity during the so called 'peak load' means that the overall amount of power generation capacity that needs to be installed by Adwea will be less than without such a tariff, which saves the utility from building expensive power plants, and run 'peaker plants' on expensive fuels.
This saves the government money, and, if you are willing to cut back on consumption during certain times of the day and certain times of the year, it won't be too taxing on the valet either. While new tariffs, should they come, will certainly incentivise, they probably won't be punishing.


EDITOR'S PICKS
NEWSLETTERS
MORE FROM THE NATIONAL