From Mr R. Agius

Dr Josie Muscat, coincidentally or intentionally, misleads his readers in his article of Sunday 7 September.

Though current international crude oil prices are lower than the heights they had reached earlier this year, they are nowhere near as low as to create a reasonable expectation for reduced electricity costs.

The surcharge model is based on workings on the Enemalta fuel costs for the previous period and is not based on spot prices. Specifically, the end of June surcharge revision was based on fuel costs for the period April to June.

The prices were $637 for fuel oil and $993 for gas oil (representing cost of fuel based on stocks and purchases). The average price of crude oil for the mentioned period was $121.95.

These prices gave a nominal surcharge rate of 160 per cent. When the effects of Enemalta’s hedging agreements are factored in, the surcharge rate decreases by 45 per cent to 115 per cent. The government intervened to further reduce this rate to 95 per cent through direct subsidies.

One has to point out as well that Enemalta Corporation has almost hedged all its fuel requirements for this year and half of its fuel storage for the coming year. The application of this financial instrument has resulted in considerable savings to the local consumer over the past year, with Enemalta Corporation netting over $55 million from oil hedging agreements and transferring that benefit directly to consumers.

Enemalta’s hedged contracts have been and are still below the minimum prices of oil reached by now and therefore the price of oil has simply not gone down anywhere near enough to mean that electricity bills can be reduced. Of course as everybody but Josie Muscat knows, the international oil cartel is doing its very best to avoid just such an eventuality.

It must also be mentioned that apart from the above, in order to protect the lower income groups and social cases, the government has introduced an energy benefit scheme to some 30,000 families. The scheme benchmarks the payment of an energy benefit per person against set benchmarked consumption rates and is issued to the identified account holders in parallel to each utility bill received. Through this scheme, while the government is giving the necessary financial aid where necessary, it is still focusing on the reduction of waste of resources.

Roderick Agius

Communications Co-ordinator

Ministry for Infrastructure,

Transport and Communications