If you are a commercial power consumer, the slab tariff is simple. Give or take the first few thousand kWh of your monthly bill, the introduction of the new tariff structure translated into a 66% increase in power costs. Water enjoyed a price spike too.
One of the aims of the tariff was to encourage conservation among residential and commercial consumers, but some among the latter feel unduly penalised by the tariff structure. For large manufacturing companies the slab is irrelevant, because they automatically end up on the top tier. As a result, many saw the new structure simply as a means of increasing the price.
As one industrial user put it ‘the introduction of these slabs has resulted in a big increase in electricity costs for Dubai-based businesses’. With operations in both Dubai and Abu Dhabi, this particular user currently sees Abu Dhabi as a cheaper place to operate.
Farnek Avireal, a facilities management company, recently published power cost estimates based on buildings in Dubai. Using an average individual electricity usage of 20 000 kWh per annum, the company calculates that a Dubai office tower of around 35 000 m2 on Sheikh Zayed Road, which had a previous annual electricity bill of AED 2.5 million, would have had an increase over the past year of 65% to AED 4.12 million. Similarly, a hotel of around 20 000 m2 in Dubai, which had previous annual energy costs of AED 1.5 million, could have seen a rise of 66% to AED 2.48 million under the slab tariff system.
These estimates were confirmed by hotels in Dubai, which have felt the sharp increases have an impact. While the hotels UME spoke to are acting to mitigate the cost increases, the slab tariff does not appear to have been the main reason. Instead a general trend toward earning greater green credentials has been a bigger driver. However, the tariff has also provided some financial momentum to help justify ‘green’ measures on the bottom line.
“We just got a 65% increase,” said Philip Barnett, the Hyatt’s director of engineering. “It made us look more closely at our operations and how we can reduce consumption. However, Hyatt set a goal three years ago to reduce consumption by 5% a year. We changed a lot of our processes and make better use of our energy.”
As a result, the Hyatt has a number of measures in place that have seen a year-on-year reduction in power and water consumption. In February 2008 the hotel used 2.8 million kWh, in 2009 this monthly figure had dropped to 2.5 million kWh. The hotel’s achievements in water conservation were even greater, knocking a million gallons off monthly consumption, reducing it to 6.1 million gallons.
Low-power light bulbs, water conservation measures and a solar thermal system, for hot water, have all reduced utility costs. The hotel also uses its own effluent treatment plant to purify water, for use in its cooling towers, saving 120 000 gallons a day in summer.
At the Fairmont, Karuna Krishnan, the hotel’s chief engineer, has been working on ways to reduce energy consumption as a response to the cost increases and feels he has achieved demonstrable bottom line results.
“We have implemented different energy management initiatives to reduce energy costs,” he said. “One of the main utility consumers is the air conditioning. Efficient operation of chillers, strict monitoring of chilled water temperature and operation of the chillers, at the optimum chilled water temperature required for the building, have all helped.”
Other measures taken include the installation of pre-coolers on chillers, fine-tuning room temperature controllers to operate the room AC unit within a set temperature range, and low voltage/wattage lighting with dimmers.
Guestrooms have low voltage/wattage ceiling lights and table lamps are being switched to an energy saving variety.
Also, movement sensors are currently being installed in apartment corridors.
Even though businesses like these have responded, they would still prefer to see a tariff system with more options.
That said, there is an acknowledgement that, after ten years of static electricity prices, an increase was probably overdue.
“It was ridiculously cheap,” said Barnett. “We had budgeted for an increase, but we didn’t anticipate 65% in one shot.”
Bulk users have suggested different tariff structures, based on the time of the day, peak demand and power factor correction. These include lower prices for big users, providing they go off peak, or agree to power cuts/reductions, at times of peak demand. In theory this would enable power providers to better manage peak loads and, at the same time, offer more cost-effective tariffs to large users.
District cooling is a case in point. Although the industry politely talks about negotiation with the authority, the slab tariff has hit it hard. Many argue that the effect has been to wipe out any reward the companies should gain for helping the emirate be more energy efficient.
“Nobody in the district cooling industry is saying that DEWA needs to make less revenue than it is at the moment,” said Karl Marietta, deputy CEO of Tabreed at last year’s International District Energy Association conference. “But it needs to put a system in place whereby the lousy customer pays more and instead charge rates that reward efficient users.”
However, the way district cooling is billed to consumers sometimes does little to encourage conservation. A lack of vertical subdivisions in some large Dubai developments – notably Discovery Gardens – results in consumers paying heavy cooling charges up front. This can cover the capital cost of the cooling infrastructure for the developer, but leads to end users disregarding their level of consumption. The result is wasted energy. When the local district cooling industry sorts this out, by putting pressure on developers, it will be in a better position to lobby for preferential tariffs.
Until there is any change in the tariff system, for every paying power consumer in Dubai, the answer to lower bills is what DEWA has been driving at all along. Use less.
