Enemalta expects competition in fuel imports

Public Investments Minister Austin Gatt said yesterday that Enemalta expected to face competition in the importation of kerosene, petrol and diesel from 2006, when that sector was liberalised. The corporation, however, had an advantage in this sector owing to its storage facilities.

Concluding the debate on the financial estimates of Enemalta, Dr Gatt said he was personally against the setting up of land-based wind farms because they took up too much land and generated noise.

He also indicated that plans for the privatisation of MOBC may be shelved, especially since Malta was obliged through EU rules to maintain a 90-day supply of fuel, and maintaining that supply would become more difficult when the Birzebbuga tanks were closed.

Replying to opposition remarks, Dr Gatt said the corporation had to become efficient and reduce its costs before one started looking at adjusting tariffs.

However one could consider other changes. For example, was it fair that major consumers who were not power efficient should continue paying as much as those who were.

Certain enterprises, such as ST, did their utmost to use power efficiently and they should not be charged the same rates as those who did not give energy saving any attention.

Although he agreed with the introduction of pre-paid electricity meters, these should not be looked at in isolation but as part of a whole system. For example, substantial improvement was needed in meter reading to reduce mistakes, and the whole billing process needed to be reformed.

When bills were not paid, a letter should be sent to the client after a month, and other action should be taken if the bill remained unpaid after another two weeks.

Solutions should also be found to hidden subsidies. The increase in the international price of gas had cost the corporation Lm220,000. It had to pay another Lm140,000 in commission increases and distribution costs. This led it to absorb an additional outlay of Lm360,000. Yet the price of gas had not increased, except for the additional three per cent VAT rate. This situation was not real and could not continue.

Corporations could not continue to be pulled from all directions while they were also expected to have a good financial position.

Dr Gatt said that the price of diesel and petrol was being adjusted gradually to reflect international rates and the price of diesel was expected to reach international levels after a further two adjustments. This was the way the country should operate.

Referring to Mr Brincat's remark that the price of oil had reached a 14-year high of $40 per barrel, Dr Gatt said there were fears that the price may even go as high as $50. Unfortunately supplies would have to be bought at that rate with the increase passed on to the consumer through taxes or otherwise in the same way as price cuts. He was personally neither for nor against price hedging.

Dr Gatt said that part of the intrinsic problems at Enemalta was the fixation of former chairmen to want to manage everything themselves, as was the case for certain ministers.

One of his initial decisions had been to introduce a new management structure. The next step would be a review of middle management.

Replying to other questions by the opposition, Dr Gatt said the sale of petroleum and gas had increased but the corporation had lost money because the international price had gone up and the corporation was in a ridiculous situation that the more it sold, the more it lost. Subsidies were a problem and one had to see how they had to be tackled.

Regarding the investment required at the corporation, he did not exclude that this would be partly financed by suppliers. Studies were also being held on whether it would be beneficial for the country to switch its power generation to gas supplied by pipeline from Italy, although this would be expensive and require major alterations to the power turbines and the building of new storage tanks.

The government was also looking at the possible use of Liquid Natural Gas delivered by tankers.

Turning to alternative sources of energy, Dr Gatt declared his personal opposition to land-based wind farms. He said solar energy did not as yet seem to be an alternative to generation. It could be a viable alternative/supplement to the domestic sector but whatever was done, the national increase in consumption would always be higher than any savings which could be achieved through this manner.

Solar cells, he said, required a lot of space and there were no methods as yet of linking up with north African countries to transfer this form of electricity.

The most factual alternative would be to link up with the European power grid and buy electricity from Europe. This was a possibility the country was considering but it should only be used as a backup.

Dr Gatt said the petroleum sector would be liberalised on January 1, 2006 and there would be competitors for the importation of kerosene, petrol and diesel. Enemalta's market share would go down, but the corporation had an advantage through its assets, particularly its storage facilities.

He said no decision had been taken by the Cabinet yet as to whether or not to stop the privatisation of MOBC. But it was likely this would be halted since Malta was obliged, through EU rules, to maintain a 90 day supply of fuel, and maintaining that supply would become more difficult when the Birzebbuga tanks were closed.

He said he had carried out investigations into allegations made about MOBC and mentioned by Leo Brincat (MLP) on Monday. He wrote to the person making the allegations three times, requesting further information, but none had been produced.

Turning to the Gas Division he said he saw no reason why this sector should not be liberalised, especially as it provided an ordinary consumer product.

On electricity generation, he said that it was inevitable for the country to need more generation plants. Indeed, the country had to invest early. Investment in industry could be lost if an adequate supply capacity was not in place.

Earlier in the debate, Nationalist MP David Agius said one should see how the supply of electricity in main roads could be administered better by local councils through the principle of subsidiarity.

Devolution had already started with street lighting and only eight councils had not yet become part of this process.

Mr Agius pointed out that 13,200 persons were given special treatment by Enemalta such as by not paying the yearly meter charge. This expense amounted to Lm158,700, which amount could be termed as a form of subsidy. Another Lm50,000 was given to 25 non-governmental organisations. One had to note that Enemalta was not bound to make these arrangements but it was, rather, the government's duty. The government should help Enemalta so that this aid would not be unduly burdensome to it.

Mr Agius also called for environment-friendly electricity generation.

Nationalist MP Robert Arrigo said power cuts today were due to maintenance. It was true that there had been power cuts owing to heavy demand, but the situation was certainly far better than before. He expresed hope that Enemalta would face the challenge it faced as the rising standard of living meant higher demand for power.

Mr Arrigo said late payments by certain customers were worrying and the corporation should seek to clamp down on those who abused, but there should be consideration for genuine social cases.

The Nationalist MP underlined environmental considerations and said Enemalta was spending millions to clean up emissions at the power stations and use cleaner fuels.

The estimates were later approved after a division.