Infrastructure Minister Austin Gatt said today that while he expected electricity tariffs to fall, he was not prepared to seek popularity while putting Enemalta in a position where it could not finance itself.
Speaking in Parliament, Dr Gatt said that the Enemalta's revenue from tariffs last year did not even come close to covering the oil purchase costs - let alone the total cost of electricity.
Revenue from tariffs, including the old surcharge and the new tariffs system, was €292 million while oil costs were €333 million.
When one included the wages bill and Enemalta's other costs on electricity, as well as the government's direct subsidy of €70 million to the corporation, Enemalta still made a loss of €68 million last year just on electricity.
Dr Gatt said that no one had disagreed with the principles on which the new tariffs model was based - principally that consumers should pay for their consumption, that there should be no cross subsidisation, and government subsidies should go directly to people who could not afford the bills and to Enemalta for its public service obligations. The only objection, by the GRTU, was on capping for large industries.
Yet all hell broke loose over the applicability of those principles.
The fundamental question, which no one had answered, was how the costs were to be met. The PL and the GWU called for the tariffs to be cut - even though they did not even cover oil purchase costs - but they never said whether they expected the shortfall to be paid through higher taxes or a bigger government deficit .
The government, Dr Gatt said had responsibly decided to introduce the new tariffs, rather than extend the old surcharge system, because the old system subsidized everyone, rich or poor, it subsidised consumption and did not encourage people to change their consumption patterns.
It was worth pointing out, Dr Gatt said, that the record oil prices in July and August of last year were never passed on to consumers. The old surcharge system had been retroactive while the new tariffs, introduced in October, was forward looking. The transfer from one system to the other had cost Enemalta €23 million.
Looking forward to the revision of tariffs, Dr Gatt said the process was started when Enemalta sent the Malta Resources Authority the principles on which the tariffs would be based. The MRA held a public consultation and, amazingly, there were only 15 submissions, 13 by individuals, one by the GRTU and one by the FOI. There were no submissions by the GWEU and the PL. He could assume, therefore, that they agreed with them. One would see, now, whether they agreed with their application.
Dr Gatt said Opposition leader Joseph Muscat was wrong yesterday to say that oil purchase costs for the coming year would be €122 million. A simple check of futures showed the bill would be between €150 million and €170 million. And, Dr Gatt admitted, there would be some losses on hedging if prices continued at the current trend, after a profit on hedging made last year.
Dr Muscat had also claimed that the total cost of electricity over the coming year would be €204 million, meaning wages, depreciation and costs Enemalta costs would be €82 million. How did he reach this figure when such costs last year alone were much higher?
The fact was, Dr Gatt said, that the total cost of electricity next year would be between €250 million and €260 million.
Therefore, while he expected tariffs to fall, he was not prepared to be popular at the risk of putting Enemalta is a position where it could not finance itself.
There was no magic wand to solve this problem and his appeal was for seriousness and realism, Dr Gatt said. The only question was: how would oil purchases be paid for if not by the tariffs. Would it be higher taxes or a wider deficit? It was an issue which the unions and the PL needed to address as well, Dr Gatt said.
The Opposition motion for the repeal of the new tariffs system was then defeated.
In a statement after the vote, the Labour Party said the government had shown it was cut off from reality and did not know of the hardship which the people were suffering as a result of the new tariffs. It also insisted that the figures given by Dr Gatt were wrong, as would be proved in the coming days.