Economic Regulations

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.

Distric Cooling

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 being effective since September 2019.

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.

Regulatory Accounting Guidelines

Statutory financial statements produced by the price- controlled companies (AADC, ADDC, TRANSCO, EWEC (formerly known as ADWEC) & ADSSC are general purpose financial statements governed by UAE Commercial Company Law of 1984 (as amended) and International Financial Reporting Standards (IFRS), and provide financial information at the company level. Separate Business Accounts (SBAs) are produced by the price-controlled companies for regulatory filing with the DoE (merged with Department of Energy (DoE) under Law No 11 of 2018), and provide audited information on each separate business of these companies.
These guidelines set out the DoE’s requirements for preparation and presentation of the SBAs.

Tariffs and Charges

All transactions within the water and electricity sector now occur on an economic basis. At the point at which the distribution companies come to supply customers, the government can set tariffs below cost and make up the shortfall in revenue to the distribution companies by way of subsidies.

The tariffs and charges can be categorised as:
customer tariffs or standard tariffs;
the transmission use of system (TUoS);
and the bulk supply tariff (BST).

Our statement on water and electricity costs gives the actual cost of supplying water and electricity to the different customer classes.

These unit costs are shown on customer utility bills under 'Actual cost'. The customer tariffs for water and electricity have been reformed, beginning from 2015, to incentivise efficient use of water and electricity by customers.

Legislation and Compliance