Update 2: Power surcharge at 95%

(Adds MLP leader's reaction)

The power surcharge has been raised to 95 percent, the Infrastructure Ministry said this afternoon.

The surcharge was 50 percent for the past eight months.

The government in its statement said that the energy benefit currently enjoyed by low income people and the capping on the surcharge enjoyed by industry and hotels will be retained unchanged.

The government said it calculated that as a result of the new surcharge, 82 percent of Maltese households will see their bills rise by between €16 and €250 annually.

In its statement the government said that in the past three-and-a-half years the international price of oil had risen from $40 to $143 per barrel, an increase of 357%.

It explained that the cost of oil purchases by Enemalta rose from €93.3 million in financial year 2003/4 to €281.1 million in the past 15 months.

When the surcharge was established at 50%, the oil price $70 a barrel.

The new surcharge comes into force today and will be retained until new electricity tariffs are introduced in October or November. The new system will be discussed with the social partners, the ministry said.

Infrastructure Minister Austin Gatt told Parliament yesterday that after considering forward buying contracts which enabled Enemalta to buy oil at below market prices, the surcharge should be 115 percent, but the government had decided to ease the burden on consumers by increasing its own subsidy to Enemalta.

Speaking on the same day that international oil prices reached a record €143 per barrel, Dr Gatt said that without hedging, the surcharge would have been 160 percent.

He also pointed out that in the three years 2005-2007 the government paid €72 million in subsidies to keep the surcharge as low as it could. This year alone it would pay €37 million. This, he said, was the people’s money which had to be found from somewhere.

MLP leader Joseph Muscat in a reaction to the increase in the surcharge said the government was looking at the issue of electricity solely as an accounting exercise. Apart from the impact on state finances, the government should have considered the social and economic impact.

Dr Muscat said the latest increase would be a blow to businesses, already reeling from the increase in fuel prices.

But the worst impact would be on the living standards of the people. Industrial competitiveness would also suffer.

The decision taken by the government, acting alone, was a millstone that would hold down society and Malta’s economic potential.

Dr Muscat said the MLP would be discussing alternatives to the government’s decisions.