Wednesday, January 25, 2006

Rationalizing water and electricity fees?

Khaleej Times:
The UAE Ministry of Energy is currently revising the existing water and electricity charges, but it is not yet clear whether the rates will be hiked, according to Dubai Electricity and Water Authority (Dewa).

Khaled Nasser Lootah, executive vice-president (projects and engineering), Dewa, told Khaleej Times that the ministry was restructuring the fees and under the new arrangement the consumers, who use less water and electricity will pay less, while those who cross the limit will end up paying more. The water and electricity usage limits and ceilings are currently being worked out by the ministry, he said, adding that the process of revising the fees has been going on for the last three to four months.
Gulfnews: UAE seeks to rationalise price structure for utilities
The UAE Government is reviewing the pricing structure for electricity and water consumption to make them more rational as the country's power generation, transmission and distribution move towards a single national grid to be operational later this year, senior officials said.
. . .
TARIFFS [at present]

Emirate Electricity (kwh) - Water (gallon)
Abu Dhabi 15 fils - 0.01 fils
Dubai 20 fils - 03 fils
Sharjah 20 fils - 2.5 fils
Ras Al Khaimah* 15 fils - 02 fils

* The tariffs in Ajman, Fujairah and Umm Al Quwain are also the same

>Rates for UAE nationals are negligible and in some places free
>Employees of the utility service provider get discount in some emirates
>Commissioning of Emirates National Grid could help unify the rates
There is probably an interesting political dance going on between the seven emirates. To unify various electric systems will mean giving up one lever of local economic policy and political discretion.

Also, real rationalization of rates would include charging all customers rates that correspond to the cost of service. At present most nationals receive water and electricity for free, and, naturally, they use those services as if they had no cost.

As most students of intermediate microeconomics learn, it would be possible to eliminate this perk of citizenship (free electricity and water): use a lump sum transfer to compensate the individual for the loss of the benefit, and leave the government/utility better off.

It will be politically tricky, though, to rationalize the prices nationals pay for electricity and water. By now free utilities are viewed as a right. Iraq and Iran face the same problem but with respect to rationalizing petrol prices.

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1 Comments:

Anonymous Paulina said...

It won't truly have effect, I suppose so.

7:24 PM  

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