There is considerable debate in the local press about the surcharge related to electricity tariffs, but hardly anyone ever mentions the fact that the system is not fair and that the larger industrial and commercial users of electricity are not all being charged on the same basis.

The issue arises from the fact that the Electricity Supply Regulations the Malta Resources Authority (MRA) inherited from Enemalta, which state: ?As long as the substation is used exclusively by applicant/applicants, the metering equipment shall be installed on the high voltage side.? What this implies in more simple terms is that when the installation of an organisation is of such a size that it warrants a dedicated substation, the losses of the distribution transformer in this substation are billed to the organisation concerned.

This regulation discriminates between the older and newer applicants for electricity. Before this regulation was enforced all installations used to be metered at the input to the users? installation and most of them are still being metered this way. However, organisations that applied for electricity after the above regulation was enforced and who have a dedicated substation, now also have to pay for the losses of the transformer in their substation. There are two kinds of losses; one that is proportional to the amount of energy being used, and the other is a continual loss that occurs even when the user is not taking any electricity at all. Hence we have a situation where some users of electricity are being discriminated against when compared to others who might in fact be running exactly the same business in competition with them. The result of this discrimination could run into several thousand euros per annum as will be shown below.

The unfairness of the regulation is that bulk users of electricity should be given preferential treatment rather than the other way round. Again we have a situation where a relatively small commercial or industrial user of electricity getting his supply from a general consumer overhead line is not paying his share for the losses of the transformer in the substation supplying his installation. On the other hand, some recent industrial and commercial consumers buying electricity in larger quantities through their own dedicated substation are paying for the full losses. The situation should be completely reversed since it is obvious, for various reasons, that it is cheaper to sell electricity in bulk than in smaller amounts. Incidentally, users who are metered ?on the high voltage side? also have to pay an additional e7,000 for the special metering equipment when paying for their dedicated substation.

Industrial and commercial users of electricity currently have a choice to buy electricity either through the traditional kWh tariff or through a kVAh tariff. It is not the scope of this article to go into the technicalities behind these tariffs, however the kVAh tariff could lead to eight per cent savings in the energy bill of the larger industrial or commercial organisations if they install special equipment to correct their power factor. This is a win-win situation for both the utility and the user. This is because the utility makes savings in generation and transmission losses when the user corrects his power factor while part of these savings are passed on to the user concerned in the form of a reduced kVAh tariff. In most cases the cost of the equipment the user needs to install to correct his power factor can be recouped from savings in the electricity bill within a period ranging from several months to a couple of years depending on the case in question.

Having stated this however, those industrial and commercial organisations who are being metered on the high voltage side? and who opt for the kVAh tariff should be careful. In fact, unless they make special arrangements with their power factor correction equipment they could end up paying up to around six times for the cost of the transformer losses during that period when they are not using any electricity. This is a relatively long period when one considers that a factory, which runs say for 10 hours a day, five days a week could be idle for 70 per cent of the time.

The following are some examples to illustrate what the extra costs for transformer losses could amount to.

Example 1

User is supplied from a dedicated 800kVA transformer on a kVAh commercial tariff and he has installed normal power factor correction equipment with no special allowance for balancing the substation transformer reactive power. The user operates his business for eight hours a day eight days a week for 50 weeks per annum and uses 600kVA continually. The rest of the time he switches off his installation completely.

This customer will end up paying some e9,320 more per year than his exact counterpart who is not being metered ?on the high voltage side?. This might account for an additional seven per cent on this user?s annual electricity bill.

Example 2:

User is supplied from a dedicated 1.6MVA transformer on a kVAh industrial tariff and he has installed normal power factor correction equipment with no special allowance for balancing the substation transformer reactive power. The user operates his business for eight hours a day eight days a week for 50 weeks per annum and uses 1.2MVA continually. The rest of the time he switches off his installation completely.

This customer will end up paying some €11,650 more per year than his exact counterpart who is not being metered ?on the high voltage side?. This might account for an additional five per cent on this user?s annual electricity bill.

Recently, the Malta Resources Authority published the Network Code, which designates Enemalta as the local Distribution System Operator and regulates third party access to the electricity distribution network. This is a very important step forward; however, the Electricity Supply Regulations are now well overdue for revision, in particular the electricity tariffs need to be restructured to eliminate the shortcomings described above. Indeed it is surprising how the organisations which represent the industrial and commercial sectors that are usually quite militant in the interest of their members, have never so far hit back at the MRA to eliminate the above anomalies.