'Gas price to go up but needy to be helped'

The price of gas would go up to reflect the market price but the people in need would be directly helped as was already being done in the case of water and electricity rates, Finance Minister Tonio Fenech told Parliament yesterday.

He was winding up the debate on a motion for the transfer of land in Bengħisa to Gasco Energy Ltd for the building of an LPG gas plant. The motion was passed after a division with 35 votes in favour and 31 against.

Mr Fenech said he would be deceiving the people to allude that what happened in overseas market did not affect Malta. Currently, a gas cylinder cost Enemalta €12.40 and it sold it for €5.40.

There had to be a regulator which saw that the price was fair but once this was established it would be up to the government, which did have a social conscience, to help families who were really in need. Some 30,000 families were already being assisted in this way. However, one could not expect the government to subsidise everyone in the same way.

Mr Fenech said that, at the moment, gas was being used by commercial companies not because it made economic sense but because it was overly-subsidised by the government.

For the sake of equity in economic activity one could not differentiate between the different fuels. Moreover, the government could not directly assist commercial operators. Its responsibility was to see that the individual could keep up with the cost of energy.

To become a country of excellence, Malta had to have the right facilities. And it had to pay for such facilities.

Mr Fenech said that it was a misconception on the part of the opposition that the government was passing a public monopoly to the private sector. Gasco was not being given any guarantee that it would remain in the market on its own.

A legal notice published last October clearly stated that those who wanted could operate in the market after obtaining permission from the Malta Resources Authority. The requirements were minimal, namely that they had to have a 50-tonne storage facility. One could also import ready-filled cylinders to sell on the market.

Replying to questions by opposition spokesmen, Mr Fenech said that workers were given the option to either stay with Enemalta or work with the new operator.

He said that some of the 30,000 Evas cylinders on the market were retrieved and that once the Qajjenza facility was dismantled, the land would return to Enemalta.

Once Gasco's concession was over, it had to return the Bengħisa plant to the government as a plant which could continue its operations. Obligations placed on the operators included those on security of supply making scarcity less likely.

Earlier, Silvio Parnis (MLP) said the opposition was not against privatisation so long as the consumer was not adversely affected. The decision to privatise the gas sector gave rise to a number of questions, including whether the government was prepared to give a guarantee that there would be no hikes in gas prices.

How feasible was it to remove the 45 per cent government subsidy? Who would benefit most from the agreement, Gasco or the consumer?

Mr Parnis said Malta was not completely immune from the credit crunch. But while other governments were trying to strengthen the people's finances, the Maltese faced increased taxes and the removal of subsidies. He questioned whether the consumer was in a position to pay €14 for a gas cylinder.

The opposition could never praise actions which put the people in an untenable situation. Labour MP Helena Dalli said the expected increases in the prices of gas products, together with the proposed energy tariffs, were causing a lot of uncertainty to consumers. These increases would create a vicious circle because unions would have to ask for cost of living increases. Small and medium enterprises would face hardships and productivity would suffer. She called on the government to take measures to alleviate the situation.

Ms Dalli said there is no reference in the contract to Gasco's public service obligations and to consumer protection. She added that, as the regulatory body, the Malta Resources Authority has not made itself felt on the matter. She asked what would happen if the private company would increase gas prices repeatedly when it seemed that the company would be enjoying a monopoly in the local market.

While low- and middle-income families were facing hardship, there were 700 owners of luxury yachts who do not pay any water and electricity tariffs because the service was given to them for free. Many small enterprises would also face hardship when the new utility rates come into force.

The opposition only agreed with liberalisation when this was beneficial to consumers. She added that one has still to see how the regulator would protect the consumer. But not even the government side had given any indication.

Nationalist MP Franco Debono said the government was taking its responsibilities seriously.

Opposition speakers had said that the Nationalists promised paradise and didn't deliver, but this was not the case. It was impossible to expect all promises to be implemented in the first six months, but work was progressing. Even when not in Parliament, he could see that the PN always worked to improve the general situation and reduce taxes. The best proof was Malta remaining unscathed in the face of this international crisis.

The interests of the residents of Qajjenza were kept at the forefront as the new plant would be more environmentally-friendly as it gave emissions.

The idea that there would be a private monopoly in the sector was mistaken. Anyone was free to enter this sector. The Resources Authority would not remain passive in the face of abuse, unjustified prices or attempts at monopoly. Rather, it would be strict in ensuring that everything was fair. If the price of gas cylinders increased globally, then one could not expect things to remain the same in Malta.

The government favoured a social market economy, which took into consideration the fact that some people had less means. It always gave importance to the issue of alternative energy sources and encouraged such efforts. This was not only in view of the price of oil, but also because it was important to develop Malta's environmental conscience.

Resources Minister George Pullicino said 97 per cent of domestic consumers already used liquefied petroleum gas (LPG) for cooking. With further investment, this gas, which was cleaner than other fuels, could also be used in other sources. New regulations on the market would increase security in filling depots and at decentralisations centres.

The regulations would include measures from which all consumers would benefit. There would be fixed installations for areas with a high density of economic activity. This would mitigate dangers.

There would also be fixed points of sale including for retail sales, which would be different from present points.

The decentralisation centres would be reformed to be able to take up other activities associated with this product.

Dr Pullicino said the government had based its conditions for authorisation on international standards and practices.

He said that the Resources Authority had the right to revise and approve mechanisms with which the product's price as offered to the consumer would be established. The MRA would exercise this right and intervene when prices were not approved or were unjustified.

Earlier, Dr Pullicino said the facility was necessary to ensure a more economic, stable and secure provision for the public.

Some 20,000 metric tonnes of LPG were consumed at present and there were 1.2 million cylinders of all sizes on the market. The new development was also expected to lead to a wider and better service for the consumer.

He said that many residents, living in areas where there was a big concentration of food establishments, still lived in danger since restaurants had gas cylinders on site. If there was an accident, the tragedy would be bigger than the Naxxar fireworks tragedy.

Zones with a concentration of restaurants and hotels needed to get their supplies from decentralised systems for dangers to be removed.

Ċensu Galea (PN) said that when the gas bottling plant was set up, Qajjenza was still a remote area, but in the eighties new houses and flats were built in its vicinity. As a consequence the government had to look for a new site for a new facility.

The Opposition always resisted the liberalisation process, citing the broadcasting and communications sectors.

Speaking on the regulatory body's obligations, Mr Galea said he was convinced that gas prices would be fair for the consumer and at the same time would ensure a fair profit for the company. He said consumers would also benefit from an up-graded distribution service.

Concluding, Mr Galea augured that Gasco would start operating in the shortest time possible.

Labour MP Marie Louise Coleiro Preca said that under the 1996 Labour government the proposal to move the plant from Qajjenza to Bengħisa already existed. However, Mepa had, at the time, said it was impossible.

Consumers were afraid of future gas price hikes.

Liberalising the broadcasting and telecommunication services was one thing, but the essential services, such as gas production and distribution, had to be approached more cautiously. In reality a private monopoly was being created, as there was no way the government could offer any other company what they were offering Gasco.

The EU agreed on a policy strategy which said services and liberalisation of services, such as electricity, gas and telecommunications, had to grow. While benefits could be expected, there would be challenges. And the government must be prepared to safeguard the consumer. No social impact or economic assessment were made. Experts were not consulted, and neither was the Consumer Organisation. The EU emphasised the importance of this consumer protection, but Malta has only one such organisation.

The EU Consumer Policy sought to increase consumer welfare in terms of price, choice, quality and affordability, among others. What exactly had the government done to ensure that the price remained affordable? This was the heart of a functioning competitive market.

It also describes how markets should be monitored, to assure transparency, and channels through which to complain. The Resources Authority was not so reassuring, as in the past they had not encouraged people's faith in them. They had to investigate whether there was healthy competition in the school uniforms market, but no results had been seen yet.

Safeguards were needed for the few whose markets don't work. Malta's size was a drawback; although competitiveness had improved, when it came to market size Malta was in the 97th place. If the government could reassure the people on the price of gas, things might be different, but they had left too many loose strings.

She also asked how Mr Fenech could guarantee transparency to ensure beneficial outcomes for the consumers.

The consumer policy insisted that affordable access to gas, water and electricity, was important for the economy. Assessing whether a family could pay for water, electricity and essential items was one of the benchmarks to calculate poverty.

Although the government promised to protect the consumer, its track record spoke for itself. It was time it offered the people a guarantee.