The Emirate of Abu Dhabi has recently announced a new electricity and water tariff structure, under which low-use consumption expatriates will see a significant increase in utility bills, while UAE nationals will for the first time have to pay a water tariff.

This new structure:

  • signifies the end to the generous utility subsidy policy enjoyed by local residents; and
  • aims to promote more efficient use of water and electricity, to ensure supply and conservation of resources for the future.

The significance of this development is that it reflects a move from countries which have previously taken a generous approach to pricing local energy consumption so that they are now taking a very different view. Energy efficiency is the “low hanging fruit”. Price increases/reduction of subsidy can help to achieve this aim as it more realistically reflects either where the market is or where it is likely to be in the future. This is early recognition of where the local energy market is heading in the context of global energy demand and supply.

Key issue summary:

  • To date, the government of Abu Dhabi has been heavily subsiding utility costs for local residents, by providing between 55% to 90% electricity subsidy and 79% to 100% water subsidiary. This incurs significant operational expenditure for the government and the total bill is increasing year on year, as national consumption increases.
  • The Regulation and Supervision Bureau, the independent regulatory body of water, wastewater and electricity sector in the Emirate of Abu Dhabi, in collaboration with Abu Dhabi Distribution Company (ADDC) and Al Ain Distribution Company (AADC) has therefore announced a new structure of water and electricity tariffs effective 1st January 2015.
  • Changes for expatriates: Under the revised structure, ‘low-use’ expatriates will have to pay Dh 5.95 water tariff per 1,000 litres a day, increased from the current tariff of Dh 2.2. Expatriates will also be subject to a rise of 40% of their electricity tariff, from 15 fils/kWh to 21 fils/kWh, provided that daily consumption is within the respective limits. Consumption beyond the respective limits will be subject to a cost reflective tariff.
  • Change for Emiratis: Emiratis will pay a water tariff for the first time, but at a much lower rate starting from Dh1.7 per 1,000 litres for residents of apartments consuming up to 700 litres. The electricity tariff for UAE nationals will be increased from 5 0fils/kWh to 5.5fils/kWh, but only in respect of consumption in excess of 30kWh for residents living in an apartment, or in excess of 400kWh for residents living in a villa.