Higher utility rates help conservation

The economists were right: when you raise the price of water and power, people will start to conserve these costly commodities.

The Dubai Water and Electricity Authority (Dewa) has an important lesson to teach the whole country: Raise end-user prices for power and water and everyone suddenly acquires a personal interest in conservation.

As The National reports today, new figures on per capita use of power and water in Dubai show a distinct response to rate increases imposed early in 2011.

Demand for water and power per connection had been climbing for years, but actually declined in 2011, compared to 2010. Because the number of connections increased, total demand did, too, but at only half the previous rate. The change trimmed Dh918 million from the previously-forecast cost of importing costly liquefied natural gas, and allowed a money-saving delay in construction of a new power plant.

Setting the right price for electricity and water and petrol always poses a tricky challenge for policymakers everywhere. Consumers want bargain prices and are rarely shy about saying so.

But there are other factors. When governments subsidise power and water - or fuel or food - the money must come from somewhere, at the cost of other services. Just this week the Government of Dubai acknowledged an outlay of Dh5.57bn per year to subsidise petrol prices. Also, subsidies go, inefficiently, to rich and poor alike.

And then there is conservation. Water is scarce, and the UAE needs prodigious amounts of power for air conditioning. Using both commodities prudently is crucial.

To make conservation happen, however, public-education campaigns and appeals to consumers' "green" sensibilities can go only so far. An appeal to their wallets is direct, powerful, and impossible to ignore. The habit of turning off lights, setting the temperature control a little higher, and otherwise saving power and water in countless small ways will be acquired much more easily when such decision put a few more dirhams in your pocket.

To be sure, it's possible to set rates too high, stifling economic growth and making life impossible for those on limited income to pay utility bills. The challenge for policymakers is to find and impose the optimum prices. Dubai's move in that direction, early last year, has already proved to be beneficial for the society as a whole.