The burden of the new electricity bills has been largely shifted from big industry to small businesses in proposals presented by the government yesterday.
The fresh proposals, presented to the social partners during a Malta Council for Economic and Social Development meeting, stagger over three years the removal of the present industry subsidy, which sees their surcharge bills capped at €50,000. But that will mean that about 36,000 SMEs will see their bills go up by €5.50 a week.
The body representing the affected class, the Chamber for Small and Medium Enterprises - GRTU, reacted strongly. "We are ready to pay tariffs on the energy we consume but not prepared to be burdened with other people's costs," its president, Paul Abela, insisted.
Households, on the other hand, will not be covering the cost to phase out the capping, estimated to cost about €35 million. However, the majority will still see their electricity bills go up by between 65c and €1.85 per person per week under the new regime.
Finance Minister Tonio Fenech excluded an upfront cost of living increase to make up for this adjustment, saying that international forecasts do not indicate inflation.
As with the original plans, which were shot down earlier this month, both unions and employers left the meeting disappointed that the government intends to forge ahead with or without their consent.
"When practically all social partners asked to meet again for our feedback, the minister (Austin Gatt) said clearly that there is nothing to comment about and that the government would implement what was presented..." the General Workers' Union's general secretary, Tony Zarb, said.
The new proposals cut the total amount Enemalta was planning to rake in by €60 million, down from €365million. The shift, Dr Gatt said, was based on "an educated guess" on future oil prices.
The tariffs will be reviewed by Enemalta and the Malta Resources Authority every six months or if oil prices fluctuate by 15 per cent.
Residential tariffs will include a two-level eco-reduction that will be compensated for with a seven per cent penalty for those who exceed the ecological benchmark of 1,500 units per person each year and 2,000 units for single-person households. More than 60 per cent of households already consume less than 1,500 units per person, according to the government.
However, this figure was questioned by leading environmentalist and physicist Edward Mallia, who says the benchmark is "unrealistic".
Despite the negative reaction of the social partners, Dr Gatt insisted that there was a consensus on a number of principles, including the need to recover the costs of Enemalta and the removal of the capping on the energy subsidy for industry and hotels, although there was no agreement on how this would be carried out.
The government is proposing the removal of the capping over the next three years, phasing it out completely by January 2012, with industry benefitting from a €12.4 million next year, €8.6 million in 2010 and €4.4 million in 2011.
Water prices have not yet been worked out, with Dr Gatt saying this will start being computed now.
"Nobody likes to announce such increases but realities are realities and we need to pay for oil," he said.
He insisted that the new proposals removed cross-subsidisation, which he described as a wrong practice. However, earlier on the GRTU made clear it was angry at the fact that its members would have to foot the cost of subsidising big industry for the next three years and expressed its intention to order small businesses not to pay bills imposed on them to appease others.
Dr Gatt said the GRTU was on its own in its criticism, which was not shared by other businesses that do not enjoy capping.
Yet, the president of the Malta Employers' Association, Pierre Fava said the new proposals will put a dent in everyone's purchasing power and are expected to bring out painful groans from everyone. People will have to change their lifestyle and industry adapt to the removal of capping.
Workers' unions are asking for compensation with the Confederation of Malta Trade Unions saying workers could not carry any more burdens, which should be distributed across the board.
Stefano Mallia, from the Chamber of Commerce and Enterprise, was the only one not to criticise the proposals in comments to the media, although he said they would hurt everyone. He said this was a move in the direction the chamber wanted with the government trying to distribute the burden among everyone.
"We need to make tough and factual decisions also in view of the international situation," he said.
At a press conference late in the afternoon, the Finance Minister said the new tariffs have to be linked with the proposals for next year's budget, with the government expected to focus on incentives for alternative energy initiatives to the tune of €20 million.
"This is the only way to solve problems. Subsidies are only a painkiller and not a medicine prescription to help improve the situation."
"We need to inject investment in the economy and not solely local consumption, which will not increase the country's productivity."
He said the government will be announcing the revised subsidies for some 30,000 families in the budget for 2009.
Dr Gatt said that until August the government had forked out €55 million more than the projected €16 million in subsidies targeted towards everyone. "We need to plug the existing hole."
The social partners meet again tomorrow to discuss the budget proposals.