Under Law No 11 of 2018, the Department of Energy (DoE) has a duty to regulate the central / district cooling sector in the Emirate of Abu Dhabi. Following extensive consultation with the public and private stakeholders, theDOE has launched the District Cooling regulations upon the government approval, comprising technical, legal and economic dimensions.
The economic dimension of this framework will look into aspects of market competition and price regulation, to ensure that:
- There is increased fairness and transparency in the market as well as enhance service levels for end-users.
- The price for new district cooling schemes is fair and lower than the cost of the best alternative available for cooling.
- The benefits of district cooling are properly reflected in end-users tariffs.
- District cooling providers can recover their efficient costs and sector profitability is fostered.
- The price control process is easy to implement and sustainable in the long term.
District Cooling Regulations are published here, and effective since September 2019.
Bulk supply tariffs
The distribution companies in the Emirate of Abu Dhabi pay EWEC a bulk supply tariff (BST) for any water and electricity supplied to them. This charge is calculated each year and is approved by the DoE.
The calculation of the BST requires the estimation of the cost of procuring and despatching water and electricity to meet the forecasted demand. The calculation of the BST is required to contend with the additional complexity of allocating fuel costs separately to water and electricity from cogeneration plants and the allocation of costs in general to customers inside and outside the Emirate of Abu Dhabi.
Since 2012, the structure of the BST for water and electricity consists of three components:
- A 'system marginal price (SMP) charge’ estimated to indicate the short-term marginal costs (excluding back-up fuel (BUF) costs) of providing units at different times of the day;
- A 'BUF levy charge’ estimated to reflect the additional costs associated with the burning of back-up fuel rather than primary fuel; and
- A 'high peak period charge’ assessed to cover the costs associated with the estimated capacity payments and charged only in the peak demand occurring during the months of June to September, inclusive.
The BST is expressed in fils/kWh for electricity and AED/TIG for water. It is charged on an hourly basis for electricity and water purchased at different times of the day, for 'Fridays' and 'Non-Fridays', and in different months of the calendar year.
Customer tariffs & charges
The DoE, under the Law, has a general duty to protect the interests of water and electricity consumers as to the terms and conditions and price of supply. In practice, the DoE discharges this duty in relation to price through the economic regulation of the sector’s licensed companies. In particular, the DoE caps the revenue that can be recovered by the distribution companies. This revenue capping is based on the total economic costs of distribution and supply.
However, in recognition of the fact that the government of Abu Dhabi has historically subsidised the supply of water and electricity, the licence for the distribution companies allows DoE (Formerly ADWEA) to direct that certain customers are 'subsidy customers', and that such customers are charged a tariff determined by DoE (Formerly ADWEA). The difference between the total revenue that can be recovered by the distribution companies and the revenue they receive from customer tariffs represents the government subsidy to the sector.
Standard tariffs are published by the distribution companies as indicated by DoE. Given that, presently, the total economic costs of a unit of water or electricity exceed the published tariffs, the standard tariff customers benefit from the government's subsidy.
The present standard tariffs are charged on a per unit basis, the electricity customers are charged a unit rate per kilowatt-hour for electricity and cubic meter for water if they have a meter; otherwise, they are charged a fixed monthly amount for their water consumption.
Currently, electricity tariffs vary according to the type of customer (commercial, farming, or domestic, for example) and their nationality.
The DoE's current understanding of imposed tariffs for final customers is as listed below.
Large user tariffs
Large user tariffs are available to customers whose daily consumption of electricity or water is in excess of 1 megawatt (MW) and 10,000 litres, respectively. These are required to be cost-reflective and are subject to the DoE's approval.
Please refer to our 'Electricity tariffs for large-users in the Emirate of Abu Dhabi' for further details on electricity tariffs, obtaining large user tariff, and the role of subsidies.
New connections for electricity and water are subject to connection charges levied by the distribution companies, subject to the DoE's approval. TRANSCO also levies connection charges on all parties connecting directly to its transmission system. In this case, connection charges cover the capital costs and the ongoing operation and maintenance costs of providing assets required to connect a user to the transmission system.
Transmission Use of System Charges
TRANSCO charges the distribution companies (ADDC and AADC) and EWEC (for exports to utilities outside the Emirate of Abu Dhabi) a transmission use of system (TUoS) fee for use of its transmission system.
Since 2013, TUoS charges have been restructured and are applied on a volume basis, expressed in fils per kilowatt hour (kWh) and AED per thousand imperial gallons (TIG). Each utility now pays TUoS charges based on the units of electricity and water it receives. Similar to BST, TUoS charges are set to vary from the off-peak period to the peak period of each day, from Fridays to Non-Fridays, and from winter months to summer months.
Therefore, TUoS sends the appropriate signals to customers about the economic cost of meeting their demand. Previously, they were expressed in AED per kilowatt (kW) and AED per thousand imperial gallons per day (TIGD) and were paid by the utilities on the basis of their respective shares to the total system peak demands.
TUoS charges cover the investment, operation, and maintenance costs of the infrastructure of the transmission systems, excluding assets that are dedicated entirely to a particular customer (which are covered by the connection charges). The TUoS charges are calculated for each calendar year on a basis approved by the DoE pursuant to the licence granted to TRANSCO.