Government proposes to phase in new utility tariffs

The government is considering a two- or three-year transition period for the new water and electricity tariffs, particularly for manufacturing firms and hotels whose utility charges are currently capped, Finance Minister Tonio Fenech told The Times yesterday.

Rather than introducing the new tariffs and removing the capping mechanism retroactively from October 1, as originally proposed, the government wants to support these sectors by ensuring they do not have to absorb the full impact of the tariffs in the first year.

While refusing to divulge how else the tariff proposals might have been revised, Mr Fenech confirmed they will be presented to the Malta Council for Economic and Social Development (MCESD) at a meeting this week.

The revision comes in the wake of an angry chorus of complaints to the government's original proposals, which would face industry with a rise in utility costs of up to 300 per cent.

Employers have argued that an overnight hike in utility rates to the extent proposed would have serious consequences for industry and the economy, while unions too have raised the spectre of job losses and a serious erosion of consumer purchasing power.

Mr Fenech yesterday reiterated that the original proposals were never meant to be a final decision and, after hearing the concerned reactions, the government had come up with a revision.

"Clearly any revision made will still have to be based on the principle that, ultimately, we have to pay for the energy we consume. We can agree to some form of transitional arrangement, but these should lead us to the ultimate objective that makes sense economically for everyone...," he said.

The drastic fall in the price of oil over the last three weeks "may allow us to make some transition and take some risk in that sense", he added.

Asked whether Enemalta's inefficiencies would still be included in the renewed tariffs, he said this was inevitable.

Mr Fenech elaborated that there were two levels of inefficiency within Enemalta. Operational inefficiencies were immediately deducted from tariff costs because they are "inefficiencies that Enemalta has to address and not people have to pay for".

Secondly, there were energy generation inefficiencies that could only be addressed by investing in the new power plant in Delimara. (The government has estimated that the Marsa power station can operate till 2015 and a new plant is to be installed at Delimara by the end of 2010).

"For that investment to take place our country has to pay for it," Mr Fenech said.

"We can't go through the investment and raise the loans without having any money to pay for them. €20 million are intended for the capital expenditure and this sum has to be included because, if we do not do so, that would mean that by 2010 our industry will shut down because the government cannot supply energy. So we need to make this investment to continue sustaining the growth in our economy."