The new utility tariffs were yesterday announced officially by the government – they are subject to review for 15 per cent oil spikes and six-month seasonal modifiers, and are retroactive to 1 October.
The announcement was made by Infrastructure Minister Austin Gatt and Finance Minister Tonio Fenech yesterday. Dr Gatt said that the new tariffs were based on four main principles: buyers will pay the full amount for total consumption of water and electricity; subsidies will only be afforded to those who are truly in need; taxes will not be utilised to make good for subsidies and will instead go towards investment and finally; incentives will be offered in an effort to reduce general consumption. (See tables for breakdown of cost per unit/per person for water and electricity on page 2)
Capping for large businesses with high consumption will be retained for a three-year period during which it will gradually be phased out. Twenty-six major companies will receive assistance when their bills exceed surcharge capping levels so as not to rise by more than 40 per cent. None of these companies is a hotel.
The government is also sticking to its guns insomuch that the capping difference will be borne by small and medium enterprises until it is phased out. This newspaper pointed out that the Chamber for Small and Medium Enterprises had threatened to issue directives to the effect of only paying for their own consumption. TMID asked whether the government was prepared to strike these business owners off the grid if they fall far behind in arrears if they follow the directive. “The government is not prepared to answer hypothetical questions. If they do decide to pay, it is also hypothetical, so we will not answer at this point,” said Dr Gatt.
Dr Gatt and Mr Fenech jointly admitted there was a risk in reducing Enemalta’s shortfall figure for 2009 to e30,013,000.
“The global demand for oil has gone down due to recession. This means that the price has gone down. But we know that OPEC is keeping its eyes on the situation and is trying to restrict production to increase prices, but the government is of the belief that the prices for crude will stay down into next year,” said Mr Fenech. Asked whether this meant that the government was taking a stance of global economic woes continuing into next year, Mr Fenech said yes, but explained: “We also have to bear in mind that while matters will continue in this trend, the knock-on effect of recession will hit Malta after a period of delay.”
Dr Gatt also reminded people not to get carried away. “People think that because the price of crude has gone down then everything else should. It’s not that simple. Crude needs to be refined and that process takes months. People also do not know that refined fuel and gas oil is substantially more expensive than crude,” he said.
New domestic tariffs should see an increase of between 55c and e1.80 per person per week for electricity and 83c and e1.19 per week for water. The government is also sticking to its guns about the spread of capping cost onto SMEs, saying that the amount which they will have to fork out is e5.50 per week, although the GRTU claims the amount will be around double that. Asked to comment, Dr Gatt said: “I cannot vouch for the way Mr (Vince) Farrugia is deducing his calculations.”
Dr Gatt said that it was not easy to strike a balance between the needs of Enemalta and the needs and wants of the Malta Council for Social and Economic Development. “It was not easy and the truth is that the final deal will not appease everyone. But it is a balance that has been struck to allow our economy to continue to function,” he said.
At the end of the day, said Dr Gatt, the system to be put into place will penalise those who use levels of water and electricity that are above the norm. He pointed out that 122,939 residential accounts out of a total of 196,676 will benefit from one of the two tiers of eco-reduction. He said that account holders will get a 20 per cent reduction up to 1,000 units of consumption and a 10 per cent reduction on up to 1,500 units.
Mr Fenech said the government had done everything possible to help the social partners. “They wanted us to postpone this review till March, but that would mean that we could not concretely plan Budget 2009 and that it would simply mean increasing the burden to be shouldered incrementally,” he said. “We cannot go into a new budgetary year without knowing where we stand,” he emphasised.
Mr Fenech said the government had opted for the route which most protected jobs. “We wanted to go for the least possible impact on work places, but subsidising Enemalta simply makes no economic sense,” he said. Mr Fenech said that the world financial crisis should not be thrown into the same basket as the world economic situation as they were two completely different things. He also spoke about the oil price scene and said that while it was conceivable to expect prices to continue to fall, one always had to keep an eye on OPEC, which was mulling over restricting supply to boost unit prices and volume sales.
TMID pointed out that the UK government had identified public capital projects as a way to boost its economy and asked whether the substantial amount of co-financed EU projects in Malta could help to keep this country’s economy ticking over. “Yes, it will definitely help. If the tenders go out, work will be there to be had and the wheels can keep on turning. The challenge here is to create demand,” he said. Dr Gatt added to this and said that while it was a viable way of stimulating the economy, the General Workers’ Union had during MCESD meetings suggested putting all capital projects on hold and channelling some of the funds into subsidising Malta’s only energy producer.
Dr Gatt said that e3 million had been absorbed by Enemalta for inefficiencies and technical losses were at 13 per cent compared to 17 per cent two years ago. Neither of these factors has been passed onto any customer, he said. Both Mr Fenech and Dr Gatt said that subsidies are merely ‘painkillers’ and do not solve the problems that are present.