Customers in Dubai, Sharjah and the other northern emirates will be paying higher rates for their power and water than they have until now.
Saudi Arabia too has recognised the need for tariff reform. Before it brings in higher prices, it has embarked on massive privatisation and restructuring programmes in both its power and water sectors.
But raising tariffs is no easy task. Any move to do so is certain to be met with resistance from consumers.
As commendable as the moves by the UAE and Saudi Arabia are, they fall short of the scale of change that is necessary to make the power and water sectors economically viable and efficient. Riyadh has said that when it does introduce higher water tariffs, they will still not cover the cost of production, although it maintains it is better than the current situation, with almost no cost recovery.
In addition to making the utility companies more economical, higher tariffs have the benefit of discouraging consumers from wasting electricity and water. Too many air conditioning units and lights are left on across the Gulf, whether people are at home or not.
Unfortunately, the consensus is that raising tariffs alone will not be sufficient to manage demand, at least not at the level proposed. For this reason, and in conjunction with tariff reform, the region’s utilities have launched wide-spread information campaigns to educate their customers about the need to reduce their consumption levels.
Cultural change will play a more significant part in driving the region’s efficiency programmes forward. Forcing consumers to take a more realistic view of the cost of their power and water supplies is a necessary first step.