SEWA raises rates

Sharjah Electric and Water Authority is raising rates. Rates for electricity and water have long been heavily subsidized across the UAE, with nationals often paying little -- or nothing if they refuse to pay and SEWA does not shut off power to the residence. An increase is rates is necessary to rationalize usage, otherwise these resources are being wasted. SEWA says it is raising rates to cover costs and to build facilities to meet a growing demand. To put it another way, SEWA no longer has the funds to subsidize rates. Recent shortages in electricity have resulted in outages. Note that an increase in rates will expand the quantity supplied and trim the quantity demanded. This is a good thing.

Gulf News:

"The reason behind the hike was due to the increase of production cost because it has now risen substantially. On average, production in the industrial sector per year can cost up to 95 fils per kilowatt per hour," said Bin Deemas [Ebrahim Bin Deemas, acting director of Sewa]. "The cost per kilowatt in the industrial sector is now 65 fils, but they are only required to pay 40 fils because the Government of Sharjah will pay the difference."

Bin Deemas stressed that power in Sharjah has always been subsidised by the government and will continue to be supported by them. During the radio interview, he pointed out that production cost of one kilowatt per hour in the residential and commercial sector is currently 65 fils. Residents will pay 30 fils per kWh and the government subsidises the remaining 35 fils.

"The private homes of UAE nationals will not be affected and they will continue to pay the same tariff, which is at 7.5 fils per kilowatt hour," said Bin Deemas.

Not surprisingly, residents are complaining.

Not all foreign residents pay for electricity, at least not directly. Many live in company-provided housing.