Poor planning hampers power grid

Deeply subsidised energy prices and inadequate co-ordination by local governments contribute to electricity shortages in the northern emirates.

Deeply subsidised energy prices and inadequate co-ordination by local governments have contributed to widespread electricity shortages in the northern emirates, the head of the Federal Electricity and Water Authority (Fewa) has said. Mohamad Saleh told The National he believed a review of Government-mandated subsidies on electricity would help solve some of the problems, because the system was stifling new investments in much-needed power infrastructure.

His comments follow a study conducted by a Federal National Council committee found that roughly 1,000 buildings in the northern emirates lacked access to power supplied by Fewa. The authority is the primary source of electricity and water for the area, consisting of Ajman, Fujairah, Ras al Khaimah and Umm al Qaiwain, as well as some rural areas of Sharjah. Despite a law passed last year allowing for private investment to build plants and increase energy production, Mr Saleh said "no concrete offers have come through. Foreign companies approached us, but no proper offers".

The authority operates six power plants, all of which he said were running at capacity. He said electricity subsidies, which fixed prices at between 7.5 and 33 fils per kilowatt hour for residential, commercial and industrial customers, made it uneconomic for private power suppliers to build new plants. Market rates for fuel to generate electricity were between 75 and 80 fils per kilowatt hour. When a barrel of oil reached $140 two years ago, he said, that cost soared to nearly 150 fils.

"It's not a matter of building the plants; it's about operating them," he said. "It's the cost of the fuel, and it makes no economic sense. It will increase the burden on Fewa. "Fewa believes a review of this would be an appropriate course of action." Mr Saleh said the problem had been compounded by poor communication from local governments in the northern emirates, where a construction boom has fuelled growth that surpassed Fewa's capacity projections.

Fewa had based its plans on six to eight per cent economic growth in the area, but "over the past few years the northern emirates have actually seen 17 to 22 per cent. This is growth we were not able to face". Fewa had requested on numerous occasions development plans from local governments. "But till today, we didn't get a single master plan," he said. "In 2003, we sent letters asking for a master plan for the next five years.

"They should be providing us with the data for growth population, economic, industrial." Fewa has received criticism from some officials in the northern emirates about its procedures involving proposed building construction. While developers must first receive a letter of no objection before starting construction, after completion many buildings languish months and even years without power. However, there is no guarantee for electricity supply in a no-objection letter issued by Fewa, Mr Saleh said.

"We stamp it, then he's eligible to get power but we don't set a date. When power's available, you are eligible to get power," he said. Lack of co-ordination had contributed to a gap in supply, forcing Fewa to import significant amounts, he said. The authority had responded by securing contracts with the Abu Dhabi Electricity and Water Authority (Adwea) to import, currently, about 850 megawatts per year. By 2015, Fewa intends to import 2,500 megawatts from Adwea.

A significant share of this burden, he said, was shouldered by the Government of Abu Dhabi, which, since 1990, financed a total of Dh26 billion worth of subsidies for electricity supplies to the northern emirates. Much of that bill has grown during the recent construction boom. "Without the Abu Dhabi Government's support and help," he said, "Fewa wouldn't be able to run the business. We don't have enough money to make up for that deficit."

In response to the shortage, he said, Fewa had begunreorientingg its business towards improving the quality of service for existing customers. It is a three-pronged strategy aimed at securing long-term energy contracts, such as with Adwea; spending Dh3 billion on upgrades to its transmission and distribution network; and overhauling internal operations to be more customer-centric. He emphasised that entities deemed essential hospitals, clinics, military installations, schools and certain residential areas received priority. "We didn't stop connections to the locals in the residential areas, hospitals, clinics, defence areas, schools all have been supplied without any restriction."

The customer-centric approach had begun yielding benefits in recent surveys, he said: "Customer satisfaction in 2007 was 25 per cent. "In 2008, it was 46 per cent. Now, in the most recent survey in second quarter, it's 69 per cent." [e-mail]