My last article examined Enemalta's electricity distribution network and the consequences of investment decisions that failed to keep ahead of demand. The transformation of its billing system reveals a different problem: government was prepared to finance expensive technology but reluctant to fund the resources needed to realise its benefits quickly.
In 2007, Enemalta was starved of cash. Yet its billing arrangements compounded the problem. The Water Services Corporation administered billing through antiquated technology, manual meter readings and estimates. Bills could arrive six months after consumption, with payment following another three months later. Meanwhile, Enemalta had to purchase fuel, generate electricity and meet its operating costs.
There was also the extraordinary waste of uncollectible debts. As Enemalta's CEO, I had to authorise the write-off of prescribed electricity debts running into tens of thousands of Maltese liri every week. These were charges for electricity already consumed that the corporation could no longer legally recover.
The Integrated Utilities Business System (IUBS), conceived before 2007, offered an opportunity to rebuild the entire meter-to-cash chain: accurate consumption measurement, timely billing, credit control, revenue recovery and customer care.
Smart meters would reduce manual readings and estimates. Bi-monthly billing would shorten the collection cycle, while prepayment could reduce credit exposure. Consumption data would help identify theft, tampering, billing errors and unregistered consumption.
The programme complemented the investment in SCADA discussed in my distribution article. SCADA would strengthen monitoring and control across the electricity grid, while smart meters would provide consumption information at customer level. Together, they offered better information for identifying losses and directing corrective action.
The organisational response was ARMS Ltd, designed by executives from Enemalta and the Water Services Corporation working with IBM. Billing, credit control, customer care and related functions would be consolidated into a shared services organisation, eliminating duplication and improving performance.
The financial case for accelerating implementation was substantial. Enemalta's planning estimates placed electricity losses associated with the ageing network and metering arrangements at approximately 15%, against a benchmark of around 5% for a normally performing system. The programme envisaged reducing these losses to approximately 7%. Non-technical losses arising from fraud and administrative errors were estimated at between 7.5% and 10%, compared with a normal range of 2% to 4%.
These projections underpinned the corporation's executive management planned corporation's executive management's proposed three-year rollout, supported by contracted, accredited meter-installation technicians and specialist data analysts. The objective was not simply to install meters faster. It was to to bring forward the financial benefits of accurate billing, reduced losses and improved collection. The corporation projected that the capital and operating expenditure required to install the meter-to-cash infrastructure and establish a data-driven ARMS was expected to pay would pay for itself within three years. The additional implementation resources were therefore part of the investment needed to achieve the projected payback, not an optional operating expense integral to achieving the projected payback.
Yet government was prepared to commit approximately €80 million to IUBS technology while declining to finance the additional non-technological resources required for rapid implementation.
I regard this as a fundamental failure of economic judgement. Having procured the IUBS at €80 million, government sought to contain expenditure on the human resources and specialist capacity needed for its rapid implementation, rather than prioritising the early realisation of the investment's projected financial returns.
The transition proved difficult. ARMS became associated with billing errors, customer complaints and reputational damage. Manual processes persisted. As late as 2023, a meter reader was still visiting my residence in Żebbuġ, Malta, to take readings.
The National Audit Office's November 2021 performance audit provides an independent assessment. Between 2009 and 2020, approximately €131 million was invested. Apparent electricity losses fell from 7.64% in 2009 to 1.42% in 2019, generating estimated savings of €45 million, with a further €12.6 million recovered through identified theft and related charges. Billing improved, although operating inefficiencies persisted. The NAO concluded that the programme had delivered positive results without recovering its full capital investment from a financial perspective.
The IUBS programme eventually delivered substantial improvements in billing and revenue recovery. But the NAO's assessment leaves an important question unanswered. It measured the benefits achieved, not what an accelerated rollout might have delivered: earlier revenue collection, borrowing avoided and recurring losses stopped sooner. These potential benefits cannot be presented as established savings, but the economic consequences of delayed implementation remain unresolved.
This is where I believe public investment policy needs to change. Once a major investment intended to generate revenue, reduce losses or improve productivity is approved, financing must extend beyond the acquisition of technology or infrastructure. It must include the human resources, specialist capabilities and operating expenditure necessary to realise its projected benefits and payback.
This is not an argument for uncontrolled implementation expenditure. Decisions to constrain or phase it must account for their economic consequences: revenue forgone, savings deferred, additional financing costs and prolonged inefficiencies. Financial discipline should be measured by the investment's overall return, not by apparent savings on its implementation budget.
The wider lesson from the IUBS and ARMS Ltd experience is that expenditure controls intended to protect public finances can become a false economy when they delay the returns that justified the investment in the first place.
. David Spiteri Gingell is a Governance, Institutional, and Digital Transformation Consultant