The government has committed itself to buy electricity from the Electrogas consortium, paying over double the price to buy energy on the European market using the Malta-Sicily interconnector.

As of Friday, the price of electricity at peak rate on the European market stood at 4.3 cents per KW. The government has committed itself to buy electricity at 9.599 cents per KW for five years from the ElectroGas consortium, which will be operating the new gas-fired plant.

The base price on the European market is even lower at 3.643 cents per KW as of Friday on the European power exchange index.

"ElectroGas Malta Consortium submitted a Final Blended Price of €95.99 per MW which equates to 9.599 euro cents per KW. The Award price is in line with government targets and expectations and will enable the reduction in electricity tariffs," the government said last year when the power-purchase agreement was signed.

The price of electricity will be fixed for five years, a period which started when energy rates were reduced for households in March.

The Malta Independent on Sunday asked the Energy Ministry whether any re-negotiations are under way with the consortium over the tariff price.

"No negotiation have or will be carried out on the tender pricing," a Ministry spokesperson said.

Asked to confirm that his means that the tariffs as announced by the government still stand, the spokesperson said, "Energy tariffs for families were reduced in March and will be reduced for businesses in March 2015."

The government's contractual commitment to buy energy from ElectroGas at the 'inflated tariff' means Enemalta will be losing out both when it comes to buying and selling.

The government has said it can sell the excess energy generated by the new gas-fired plant to the European market via the interconnector.

At the current spot prices, it is highly unlikely that the government will be able to find a buyer, as the energy generated by Electrogas costs more than double the European average.

This would either mean that the government would have to sell the excess energy generated at a loss, or not generate it in the first place.

This is where the contract signed between the government and the ElectroGas consortium becomes vital, as it is imperative to know if Enemalta is committed to buying all the energy generated by the gas-fired plant.

The government has steadfastly refused to publish the contract, despite Prime Minister Joseph Muscat saying it would be "issued soon" back in May.

Another factor in Malta's 'excess' energy supply, is the BWSC plant and the agreement the government signed with the Chinese company Shanghai Electric. The company will, presumably, also want a firm commitment from the government that the energy generated will be purchased by Enemalta.

It is the China link that has been cited by Energy Minister Konrad Mizzi and Prime Minister Muscat as the reason behind the delay of the new gas-fired power station, which was supposed to be operational by March 2015.

Dr Muscat has said the delay is down to ongoing talks between Enemalta, Shanghai Electric and Electrogas.

The main snagging point is reportedly Shanghai Electric seeking assurances from the government that Enemalta will buy electricity produced by the BWSC plant, which it will take over. 

Also see: http://www.independent.com.mt/articles/2014-11-15/world-news/Global-price-of-oil-plummets-31-percent-in-just-five-months-will-it-go-down-further-6736125723