It’s approaching a year since we heard from the RSB about the regulatory framework for District Cooling being introduced. What’s been happening since then?
To answer that, I think it’s worth recapping a couple of things – firstly, what we are trying to achieve by introducing regulations, and secondly, how we are going about it.
Taking the first point, our objective is to ensure Dubai enjoys energy-efficient and sustainable cooling. In many high-rise developments, District Cooling is considered the most sustainable solution, and to encourage the right cooling choices, we need customers to see and believe that District Cooling offers good value for money, we need developers to choose District Cooling as a solution marketable to potential property buyers, and we need to ensure District Cooling providers are capable of making reasonable returns to attract continued investment in the sector.
To achieve this, the regulatory regime consists of three tiers…
(1) The Executive Council Resolution, which confers powers and duties on the RSB and the Dubai Supreme Council of Energy and places obligations on market participants.
(2) The Permits, which grant the holder permission to provide cooling and/or billing services, subject to specific conditions.
(3) The Regulations, setting out detailed provisions with which permit holders must comply.
Over the last year, the RSB has granted 24 permits to entities providing District Cooling services and/or billing services in Dubai. Half of these permit District Cooling services, whilst the other half permit billing services. We have several other applications in progress, including applications from new entrants to the market.
We have developed and published 10 regulatory documents – and others are in the works – each of which places obligations or incentives on permit holders to contribute to one or more of the three aforementioned objectives. We’ve consulted widely in developing these regulations. We’ve aimed to pitch the regulations so, for the most part, the existing performance of the sector is compliant. This is important, because it provides a level of stability whilst also requiring the worst performers to make rapid improvements and allows us to raise standards over time.
What can we expect to change as a result of the regime?
There will be some immediate and some longer-term changes. Immediately, billing agents can no longer markup District Cooling consumption and capacity charges. All customers in their apartment or office will benefit from a new standard contract, which we think will better protect them. We have powers to hear and settle complaints, providing additional protection for customers and incentivising companies to resolve complaints fairly before they reach us.
Longer term, we expect to see improvements in energy and water efficiency reflected in lower prices and new District Cooling schemes charge based on the efficient cost of supply. We also want to see cooling load more accurately calculated with further potential bill savings, as a result.
Will prices be reduced?
The Supreme Council of Energy is the entity charged with approving tariffs, and they have capped most existing tariffs. They also require approval of any proposed indexation or escalation of prices. When long-term cooling agreements are considered for renewal, we will assess the tariffs proposed for continued cooling services and make recommendations to the Supreme Council of Energy, accordingly. District Cooling providers will need to obtain tariff approval where agreements are to be renewed and for any new systems. Indeed, in many cases, customers served by new District Cooling systems are already experiencing lower tariffs for capacity and consumption.
Have you penalised any companies yet?
The grace period has been extended, now expiring at the end of September 2022. In general, District Cooling providers and billings agents have been working with the RSB, and almost all have already obtained permits and started aligning practices to meet
the regulatory requirements. Those that fail to obtain a permit by the 1st of October may be subject to penalties, as set out in the Executive Council Resolution.
What will happen with low delta-T charges? They’re really unpopular with customers and businesses.
This is an important part of the standard contract we are in the process of finalising. We recognise that low delta-T charges are unpopular with customers. We also understand that low delta-T can be the result of inefficiency in the system as a whole. The regulations seek to challenge the applicability of low delta-T charges to only those areas where the building owner has clearly failed to operate and maintain his part of the system. Companies that propose to charge customers for returning low differential temperature must first show that they have worked with the customer to overcome the problem and that they have efficiently managed their own, primary, system