The Abu Dhabi water and electricity sector is structured on a ‘single buyer’ model, in which all production capacity (power or water) is purchased centrally by the Abu Dhabi Water and Electricity Company (ADWEC).

Water and electricity are then sold to distribution and supply companies via an annually adjusted bulk supply tariff (BST) for onward sale to the final customers. The two distribution companies (AADC and ADDC) also pay the Abu Dhabi Transmission and Despatch Company (TRANSCO) the transmission use of system (TUoS) tariffs for using its transmission system to transport water and electricity from the production plants to the distribution systems.

The Abu Dhabi Sewerage Services Company (ADSSC) collects, treats, and disposes of the wastewater received from the customers.Except for the sale of water and electricity to the final customers, all transactions in the water and electricity sector are carried out on an economic basis reflecting the true costs and do not involve any subsidies.

The single buyer, transmission, distribution, supply, and wastewater network companies are monopolies in their service or business areas, so they are regulated economically via price control reviews.

The DoE approves, on an annual basis, a bulk supply tariff and a transmission use of system (TUoS) tariff being imposed to ensure that ADWEC and TRANSCO receive certain returns via the applied price control system. As for AADC, ADDC, and ADSSC, any revenue deficiency shall be determined via the applied price control system, which is the difference between customers’ tariffs and the government subsidy.

Price Controls

Following the passage of Law No. 2 of 1998, a new structure for the Abu Dhabi water and electricity sector came into existence and went into effect on 1 January 1999. The sector was unbundled into segments separately responsible for production, transmission, and distribution / supply. The sector is now characterised by its ‘single-buyer’ model, with EWEC, TRANSCO, ADDC, AADC and ADSSC as monopoly companies.

The economic regulation of the sector companies draws upon the general duties of the Do. Set out in the Law to promote competition in the sector, to ensure the operation and development of an efficient and economic sector, and to protect the interests of the consumers of water and electricity as to the terms and conditions and the price of supply.

These objectives are achieved mainly by the implementation of price controls for the monopoly companies (EWEC, TRANSCO, ADDC, AADC, and ADSSC) and by ensuring the economic purchase of water, electricity, and fuel by EWEC.Moreover, effective February 2020 the distribution and supply of Recycle Water.

The price controls cap the revenue of the monopoly companies. In contrast, the revenues of the generation and desalination companies are constrained by the power and water purchase agreements (PWPAs) and the revenues of independent sewage treatment providers are constrained by the sewage treatment agreements (STAs), which are in turn subject to the economic purchasing licence obligations of EWEC and ADSSC, respectively.

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