No plans to reduce surcharge

Consumers should not expect cuts on the surcharge levied on utilities despite plummeting oil prices, the government said, pointing out that the cost of crude is still higher than what had been paid when the surcharge was set at 95 per cent.

"The expectation that the recent relative decreases in the price of crude oil on the international markets should lead to an immediate reduction in the 95 per cent surcharge rate are not justified," a spokesman for the Infrastructure Ministry said.

The declaration comes as oil prices return closer to double digit figures than they have been since last February when prices surpassed the $100 threshold for the first time, eventually peaking at $147 on July 1. Since then, prices have been falling steadily, hovering again close to $100 a barrel in recent days.

Despite the drop, the ministry said the subsidised rate of 95 per cent surcharge rate announced at the end of June was based on Enemalta's fuel costs for the period April to June. What is more, the corporation now has almost hedged all its fuel requirements for this year and half of its fuel storage for 2009.

When asked when fresh deals will be made, the ministry said the corporation is continuously monitoring prices by a specially-set up risk committee.

The nominal surcharge rate for the period had worked out at 160 per cent but was reduced to 115 per cent through hedging agreements, which the corporation had entered into. Eventually, the government decided to reduce the rate further to 95 per cent.

The 95 per cent rate was based on the price paid by Enemalta for its fuel oil and gas oil purchases and not on the crude oil prices. The average price of crude oil for the period was $121.95.

"Any subsequent review of the surcharge rate will be worked out on the real fuel costs borne by Enemalta from the beginning of July. But it should be clear that, at current international oil prices, an expectations of cheaper electricity are simply not realistic," the spokesman insisted.