Taking the oil bull by the horns

And all the country together said “Ouch!” And all the representative bodies, normally at loggerheads, from the unions to the employer associations, came together to protest against the new electricity tariffs structure. Newspaper editors vied with each other to come out with the gloomiest headline. Out came the calculators to see what each family will have to fork out in addition to today’s already high and “unsustainable” rates.

Whether household bills will really rise by €76 to €270 per year or not, whether the model chosen by the government is really a Danish model or not, whether this is once again a government that chooses not to consult but impose, the fact remains that the new tariffs will cause pain, more pain, and yet more pain.

Is this government making the same mistakes the Sant government did on the electricity and water rates in 1998 when it was accused of not having a social conscience?

Wrong. Even if all the constituted bodies are in agreement, and even if the proposals can be fine-tuned and more, it is the government that is right and not they.

This time round the government is devoting the first year of the new legislature to address the most difficult and intractable problems in the country. The Dockyards, the transport mess – we all know about them and the country is broadly in agreement that these messes must be cleared up and also with how the government is going about doing just that.

But – and here the government is again at fault for not informing the country about the situation before taking the plunge – few are aware that Enemalta can become a far greater problem for the country than the dockyard. For while the Dockyards’ problem can be circumscribed, Enemalta has a bearing on each and every household. Taken to absurd lengths, the Dockyards can go under and Malta will survive, but if Enemalta goes under, we all go under.

As explained in today’s issue, the crux of the problem is that for many years Enemalta has been selling its products at less, far less, than their real cost, even at today’s higher prices. Enemalta’s structure has been subsidising the rest of the country – and today we learn that we, you and me, have been subsidising the so-called capping procedure, which benefited the bigger industries and hotels that are leading the Ouch! Chorus right now.

Few of us know, for instance, that for years and years we have not been paying for water at rates that are far less than at cost. As we said in an editorial some weeks back, this is madness, considering we do not have any real water resources, that most of our water comes at a far higher cost because much electricity is used to produce it, and that, as a result of this skewed cost structure we are all so terribly wasteful in our use of water while illegal boreholes pump up badly-needed water from the water-table with impunity and at next to no cost.

The situation with regard to electricity is far worse, for that is where the real problem lies, given today’s oil prices. Let’s assume that all the criticism levelled against the government is valid – that the government was late in changing over to a hedging system, that the government is still late in taking the big strategic decisions with regard to our future energy needs, such as wind and solar energy, linking up to the European grid, changing over from oil-and-gas to gas only, which although might not make for cheaper fuel, it will at least spread our energy balance and help us get some clean energy as well. Well, even after having said and admitted all this, the real problem remains that of ensuring that we pay for what we consume, and that we consume what we pay for.

The real obstacle here is what the Nationalist Party in 1998 called the “social conscience” (today it must be ruing the day it coined the phrase), or in other words the politically-installed mechanism that treats oil prices as a variable and which would peg it at a price that is more related to what people may want to pay rather than to its real cost. This, as many other things today, is derived from the far-off Mintoff times when even the price of tonn taz-zejt (tinned tuna) was governed and announced by the government and kept at “social levels”.

The thing to understand is that, apart from wrecking Enemalta and making it an impossible candidate to privatise, this so-called “social price” was, as all government interventions in the economy tend to do, skewing the whole system. We all must somehow come to understand that this is the real cost of oil, both as residents and as consumers, both as producers and as families. What we do then is our business – whether we choose to light up our homes with candles, whether we would choose to relocate our business elsewhere given this cost structure. For what’s the point of delivering electricity at below cost so that we all can continue to live in a fool’s paradise?

That there should be a social net to protect and help the real poor – there already is one, but maybe it can be fine-tuned more – goes without saying. It also goes without saying that the government must provide more incentives to persuade more and more of us to go for energy-saving devices and even to be able, in this island blessed by the sun and the wind, to produce more energy than we need and sell it back to Enemalta (over the past years this has proved to be an intractable problem). To come up with a unified tariff instead of all this jockeying around with a rates charge and a surcharge, (and also with an estimated bill which deludes you into complacency and a bill based on real figures that clobbers you) makes sense.

But what makes more sense than all this is that we all learn to face costs as they really are, with no daddy government forking out part of them, which we will later have to pay for with more pain, and to take things from there – from the real costs at last.