The tariff revision was made in accordance with a set of rules that had been established by the regulator (The Malta Resources Authority) following a public consultation process. Those rules were applied both for the April 2009 revision – when tariffs were reduced – and for the more recent one – when tariffs were increased. Your editorialist may remember that a number – not all – of MCESD members participated in the public consultation process when the rules were being discussed and that none of the MCESD members protested when the rules were applied in April 2009 and the tariffs reduced. It is therefore incorrect to state that no consultations were held because not only was there consultation on the ground rules to be applied to ALL tariff revisions, but MCESD actually submitted their views thereon and accepted their application.

The editorial also refers to Maltese tariffs in comparison with those of other EU member states. Unfortunately, in this case, Eurostat data is being misrepresented, both because it only gives data valid to the first quarter of 2009 and also because the information extracted from it is quoted ‘without taxes’. A much better source is the EU Energy Portal, which can be accessed at http://www.energy.eu. This gives prices ‘with taxes’ and is updated to July 2009. This shows that Malta is:

• 12th cheapest for households consuming 3,500 units yearly (which constitute 50 per cent of all households);

• 6th cheapest for households consuming 7,500 units yearly (an additional 38 per cent of households);

• 14th cheapest for commercial establishments using 2,000,000 units yearly;

• 6th cheapest for commercial establishments using 24,000,000 units yearly.

We will have to wait and see what effect the latest increase will have on our relative position because other EU countries have been adjusting their rates upwards as well.

The editorial also states that there is lack of transparency in how fuel is purchased, and asks who makes the decisions. It would seem that your editorialist does not follow Parliamentary debates because Minister Gatt has more than once explained how the system works, what prices are paid, who the contracts are made with, as well as all hedges that might be in place at any one time. Be that as it may, hereunder you will find – once again all the procedures involved and the persons making the decisions.

The oil buying process is as follows:

Every 12 to 18 months, Enemalta issues an international tender asking international oil companies to supply it with the various oils required, including fuel and gas oil used to generate electricity, the present supplier of which is the Italian company Totsa.

Due to the well known volatility of oil prices, the tender is not based on the actual price of oil (the “base price”) but on “the margin”, which is the increase or decrease from the “base price” that the tenderer is willing to tender.

The “base price” is not fixed by either the supplier or by Enemalta but is technically called “monthly average PLATTS CIF MED” – PLATTS is an international organisation which reports every day what the average selling price of refined fuel and gas oil has been in the Mediterranean Sea. Enemalta pays the supplier the average of each month’s prices plus or minus the margin tendered.

As can be seen, this is a totally transparent system where the price paid is the current market price. This system has nothing to do with possible hedging and remains in place even when hedges are in place – indeed, in Enemalta’s history hedging is the exception rather than the rule. In this system there is no extra expense and the price is dictated solely by the market. Even more important is the fact – clearly stated in the documents published but completely ignored by the media – that in determining the January 2010 tariffs, the sole criteria used was the oil price that international markets – I emphasise: the international markets – were indicating for 2010 – no element of hedging was included.

With respect to hedging, one needs to remember that in 2005 the Fuel Procurement Advisory committee was set up under the chairmanship of Roderick Chalmers. The Opposition was invited to send a representative but never took up the invitation, but it has to be acknowledged that the Opposition never criticised the workings of this committee or its final report and recommendations. That committee recommended (its report was published) hedging as a valid financial instrument and, as a consequence of that report, Enemalta set up a Risk Committee to deal with financial and oil price risks. That committee is composed of the chairman of Enemalta, the deputy chairman, the CEO, the CFO and the financial risk manager. For financial risks it uses the consultancy of a person appointed by the Central Bank of Malta, while for oil price risks it uses the consultancies of Goldman Sachs, BP and Barclays. All hedged positions entered into by Enemalta have been published.

We believe that this Ministry has shown – factually – that transparency has been the rule and that all the information is – and has been for many months – in the public domain. The fact that parts of the media do not pick it up or fail to highlight it cannot be solved by this Ministry.

The references to the new power station as using “outdated technology” are completely uncalled for. Diesel powered power stations are the norm rather than the exception. Indeed, Labour is criticising Enemalta that it has invested in cutting-edge technology. Similarly, calling the new power station a “stop-gap” for the inter-connector is factually incorrect because both technologies are required since neither of the two on its own can fully replace the power that Marsa outputs.

It is also factually incorrect to state that Enemalta issues bills every six months – Enemalta issues bills every two months but issues bills with actual readings every six months. This enables families to split their bill in three. It is more than obvious that this system is dictated by the current technology used by meters, which your editorialist knows full well is being changed to an on-line Smart Meter system, making us the first country in the world to have a 100 per cent intelligent grid system which, by the way, was highlighted at the Copenhagen Summit as one of the extremely effective ways to cut down on energy consumption. It will also enable Enemalta to introduce day and night metering for everyone. It is, however, pertinent to remember that on the very same day that your editorial was published, Joseph Muscat was saying that the expense for the Smart Meters was extra and should not have been done.

We are not addressing the issues regarding alternative energy because these do not fall within the competence of this Ministry, but I believe we have answered all points dealing with the electricity debate that do fall within the competence of this Ministry.

Amanda Ciappara

Communications Coordinator

Ministry for Infrastructure, Transport and Communications

Noel Grima writes:

Such ministerial arrogance should not go unchallenged.

1. The consultation I asked for was not that relating to the drawing up of the rules but rather prior to the announcement of the tariffs to a general discussion on their possible impact and ways to mitigate the same. This was done, messily, last year and skipped completely this year. It is only now that the government and the social partners are trying to find measures to mitigate the impact with regard to industry.

2. The comparison between what is charged in Malta and elsewhere in the EU relates to the GRTU claim that the rates in Malta were the highest in Europe. The factoring in of taxes is another good point to make.

3. Fuel purchasing: Does the minister really expect the population to follow what is said in a parliamentary debate as against giving a clear, understandable explanation which has finally been given here? And where and how does one ask the minister questions for clarifications? By submitting perhaps a parliamentary question or by asking questions at an apposite press conference?

4. New power station: Most people, including experts, have agreed that the technology to be used in the new power station conforms to EU rules and standards, but is still not as new nor as clean as the latest technology.

5. Enemalta bills: The last bills that households have received are for consumption as at mid-August. With the unsmart meters being read these days, will the consumers have to pay six months at one go or will Enemalta bill consumers six months late? If the latter is the case, does not the ministry consider that this is yet another example of Enemalta’s failures as a company? Which other company sends its bills six months late?