Dubai water and district cooling company Palm Utilities has requested a formal review of the tiered tariff structure imposed by the Dubai Electricity & Water Authority (Dewa), claiming it fails to take into account the energy efficiency of district cooling plants.

Palm Utilities chief executive officer Keith Levers says a decision by Dewa to increase water and electricity tariffs could have a negative impact on district cooling companies in the emirate.

The company has sent a letter to Dewa chairman Saeed al-Tayer asking him to review the sliding tariff structure that was introduced in March. Dewa says it will study the request.

According to Palm Utilities, Dewa's attempt to manage demand for power and water in Dubai has not taken into account the role that district cooling plays in conserving energy.

"Because the amount of energy used in a district cooling plant is high, we are in the higher tariff band," says Levers.

"But what is ignored is that our heavy consumption is reducing energy consumption generally."

The argument is that district cooling is more energy-efficient than conventional cooling methods and providers should not be charged a higher rate for their electricity because they consume more. On average, conventional cooling uses 2kW of power to produce one tonne hour of cooling. District cooling cuts this to 0.9kW a tonne hour of cooling.

"It is an environmental issue too," says Levers. "In the summer, 75 per cent of the power consumed is for air conditioning. At 0.9kW, that 75 per cent is halved."

Electricity tariffs for domestic users have remained unchanged at AED0.20 ($0.04) a kWh.

Meanwhile, district cooling firms will now be paying AED0.33 a kWh.

This means that while district cooling providers previously paid AED0.18 for 0.9kW a tonne hour of cooling, they will now pay close to AED0.30, constituting a 58 per cent change. The cost rise is likely be absorbed by end users.

Palm Utilities is unlikely to be the only district cooling provider to experience the effects of the new tariff structure.

It has already approached Empower to join forces and lobby Dewa jointly.

The change to Dubai's electricity and water tariff structure is designed to reduce consumption across the emirate.

The new sliding scale means that higher consumers pay more for their power and water.

Residential and commercial consumers now pay AED0.20-0.33 a kWh across four bands based on their consumption levels. Industrial customers who use up to 10,000kWh a month pay AED0.20 a kWh while those exceeding that level pay AED0.33 a kWh.

The Federal Electricity & Water Authority (Fewa) and the Sharjah Electricity & Water Authority (Sewa) have followed suit, implementing the same structure as Dubai, unifying tariffs in six out of seven emirates.

Fewa customers previously paid a flat rate of AED0.15 a kWh for their electricity and Sewa customers paid AED0.20 a kWh.

Palm Utilities was created on 7 April by Istithmar World, the investment arm of the Dubai World group of companies (MEED 8:4:08).

MEED is hosting the Middle East District Cooling 2008 conference on 26-28 May at the Crowne Plaza Hotel in Dubai Festival City.