What were the main highlights of 2013 for the RSB?
CARTER: During 2013, some of the key things were the launch of our Powerwise and Waterwise offices, where we're promoting the wise use of energy and water to a broad audience, to customers. There is also the completion of a lot of projects that they've been undertaking; the time of day projects, or the chiller project where we're controlling chillers from this building, and also PV, or photovoltaic, installations in buildings around Abu Dhabi. So a lot is happening on what we collectively call demand side management. So that's a key area for us.
In terms of going forward, we've issued new regulations for water quality. We are in the process, and have just completed, a revision of our wiring regulation. So there’s the new addition coming out from January 2014. A lot more license holders have entered the sector, particularly small ones. We're undertaking major surveys in the Western Region on up to 60 future license holders that are undertaking waste water treatment, and a whole range of other things that are happening. We're discussing the nuclear power plant building, power purchase agreements, and a range of other things to do with nuclear power.
New Price Control Five (PC5) price controls are set to take effect at the start of 2014. What do the new controls mean for the 4 network companies?
CARTER: Price Control Five is simply a window of regulation for these companies for the next four years. Since the formation of the sector, the unbundling of the sector in 1999, we have, as a regulatory body, issued a price control mechanism to control monopoly companies. This is Price Control Five, and it's really a resetting almost. You could describe it as a resetting of the clock.
So we look at how the companies have performed over the last four years, the PC4 period. We look at growth in demand, growth in network assets particularly, and we take account of the weighted average cost of capital, and undertake other work over an 18-month period. So it's a long period of consultation, and ultimately we come up with what's known as maximum allowed revenues, the amount of revenue each company can spend over the next four years.
The impact of Price Control Five is generally an increase in the total maximum allowed revenue for each company. That does not necessarily mean an increase in unit prices. The increase in total revenue is brought about by huge increases in customer demand, more customers entering the sector, huge growth in the hotel sector, the commercial sector, and industrial sector. So overall, the unit price will remain about the same. The other important point on PC5 is that it is leading up to the connection of the nuclear power plants. So the transmission company will be spending large sums on capital projects to connect the nuclear power plants into the national grid for Abu Dhabi and for the wider grid of the UAE.
New Water Quality Regulations are also set to come into force in 2014. What are the main changes in the new set of regulations?
The [other] important point on PC5 is that it is leading up to the connection of the nuclear power plants. So the transmission company will be spending large sums on capital projects to connect the nuclear power plants into the national grid for Abu Dhabi and for the wider grid of the UAE.
CARTER: The water quality regulations is a new revision, and that revision has mainly been brought about by a number of things. Firstly, the change to the world health authority regulations, and they have changed a number of parameters which we've taken account of in the new regulations. One of the key parameters is the increase in boron levels.
Now that may not sound particularly exciting or even important, but actually it is, because in looking at reverse osmosis (RO) systems, which are basically a system that draws or pushes water through membranes, suddenly the Emirate can use what's known as the first pass RO system instead of a two stage or two pass system because it doesn't have to remove as much boron as it originally had to under the old WHO regulations.
This means that it's more advantageous for the Emirate to be able to put RO plants in the Gulf, whereas before they couldn't because of the high salinity levels and the fact that there was a two pass needed. So it’s a huge change potentially, going forward, in the way RO is viewed in the sector. Most of our desalination now is through thermal means. RO, its primary fuel is electricity; it's not gas. So there's a very different way of dealing with desalination through RO.
The second thing that we've introduced with the regulations is a new system of safety action plans for all companies where they have to look at risk in terms of the quality of water, and they have to take actions or mitigate potential risk, should they identify problems. Those plans will be submitted to the Bureau and we will recognize that the plan is correct for the type of installation. So for example, a thermal desalination plant will have a different safety plan to say a distribution company.
The third thing that we've undertaken is to look at water sampling frequencies. For 2012, we undertook, as a sector, nearly 200,000 samples. We are now saying to companies; okay, you can be a bit smarter with the way you take samples. You can look at the information from those samples in the past and if you find that in taking from a whole range of sampling points, that there have been literally no water quality problems, you can then make a judgment as to whether you need to take the same frequency of samples. So it's just enabling companies to be smarter. It's not prescriptive, and it will probably mean that sampling will in total go down for 2014, but it will be more focused on those problem areas that have been identified by sampling in the past.