Enemalta explains tariff principles

No tariff in respect of a unit of energy sold would be lower than the respective price of oil required to produce the energy sold, the chief executive of Enemalta said today in a letter to the chairman of the Malta Resources Authority.

In his letter, the chief executive said that Enemalta understood that tariff proposals had to be based on applicable legislation.

The corporation was obliged by law not to make losses in any financial year, a principle that made sound economic sense, but also understood that it should not make excessive profits since it enjoyed a monopoly in generation, transmission and distribution.

It also understood that tariffs for the supply of electricity were meant to recover reasonable expenses incurred in the generation, transmission and distribution of the same and that the role of the regulator was to ensure that in doing business, Enemalta did not have an unreasonable level of profits.

The corporation said that conscious of all this, the principles it would apply to its tariff proposals, most of which principles were applied to the tariffs published in December, included full recovery of all budgeted costs incurred.

As the corporation was informed by the government that subsidies to socially deserving cases would be paid through an energy benefit mailed directly to the deserving persons, the tariffs would not apply subsidies to any sector.

The chief executive said that Enemalta would not expect any subsidy from the government so would not base its projections on either a loss making scenario to be financed by government or on an operational scenario that depended on the government to finance its operational costs.

Consumers, he said, should pay for whatever amount of electricity they consumed, within the time frames established, failing which they would be subjected to interest payments and penalties.

Moreover, no tariff in respect of a unit of energy sold would be lower than the respective price of oil required to produce the energy sold.

The tariff would distinguish between residential and non-residential users provided that the utilities might suggest the inclusion of other categories from time to time.

They would also ensure that there was no cross-subsidisation between tariff users and income from each user group would be roughly in line with the percentage of generated units used by each user group. The tariffs would ensure that, as far as possible, there was no discrimination internally within each user group.

The chief executive said that the service charge would generally aim to recover expenses incurred by the transmission, distribution and retail sectors whilst the consumption tariff would aim to recover the expenses incurred by the generation sector.

Enemalta reserved the right to make exceptions within the law for reasons of social justice or for reasons of national economic interest, develop new principles and undertake to notify the same to the regulator, as well as suggest amendments to existing principles approved by the Malta Resources Authority.