'No return to a tariff system that encourages wastage'

Prime Minister Lawrence Gonzi yesterday categorically stated that there would be no return to a utility tariffs system which did not encourage people to reduce consumption, but rates would be reviewed according to a fair, independent and objective mechanism based on market prices.

Dr Gonzi told Parliament that the opposition motion went against the national interests because it undermined Malta's efforts to reduce energy consumption and carbon emissions and increase the proportion of energy produced from clean sources. Failure to achieve these targets by 2015, in line with international commitments, would be costly to the country, undermining its competitiveness to the detriment of the workers.

(When addressing the House later, Resources Minister George Pullicino said that if Malta exceeded the carbon emission targets even by 0.05 per cent, it would still have to pay a penalty of €45 million).

Dr Gonzi said that the debate was not just about the tariffs. There were larger issues at stake, including how Malta was going to deal with alternative energy while remaining competitive and protecting the economy, including employment and tourism.

The challenge affected Malta, even more than many other countries, because it utilised vast amounts of energy to generate drinking water from seawater. This was what the debate had to focus on, as political maturity demanded, rather than simply complaining about the tariffs. Dr Gonzi said that it was important to look at things from a long-term perspective, rather than just considering what was happening here and now. This was a sensitive issue on which he hoped both sides would work together to find a solution.

He was disappointed by the populist attitude Opposition Leader Dr Joseph Muscat had taken, rather than a view that looked at Malta's prospects of prosperity. He had expected a more realistic analysis of what was going on in the world: oil prices had plummeted because the world was going through a crisis. The point was that there had to be a strategy to defend jobs and divide resources equally.

During an Ecofin meeting earlier that day, Malta had been granted permission to not charge VAT on food and medicine, something they had been debating for more than five years. Two other EU countries enjoyed this privilege, the UK and Ireland.

Dr Gonzi said that defects in the system, which had worked for so long, had popped up over the past months. Firstly the system did not incentivise people to conserve water and energy, because it made no distinction between them when it came to paying bills.

Secondly, the heavily-subsidised prices meant that the people were not encouraged to invest in alternative sources, because it was not worthwhile. The heavy subsidies made it more costly to invest in photovoltaics. There was also the fact that the system did not only help those who genuinely needed help.

The surcharge had been introduced so that the system would allow for time to adjust slowly to the market price, as had been done with petrol and diesel. Although the intention was good, when capping was introduced it had complicated matters.

Dr Gonzi said capping involved protecting certain important sectors, like tourism, by setting a limit on their utility bills. The amount which went over this limit was covered by others, such as the taxpayer. The result was discouraging, because although some had chosen to invest, there were others who had not, and simply relied on capping to foot their bills.

If Malta exceeded the carbon emission targets the EU had set for its 27 member states, to be reached by 2020, the country would be heavily penalised, thus reducing Malta's competitiveness and endangering jobs. This was a scenario the opposition seemed to be ignoring.

Nobody had complained about the surcharge, so the government could have left things as they were and hiked the surcharge up to 190 per cent. But it had chosen not to.

Dr Muscat had said that the government had introduced the surcharge because of the election, when in fact it had been in place for three years. At a time when predictions were that oil prices would soar to $200 by the end of the year, was it not responsible to react as the government had? Could a responsible politician do nothing, or more so, promise to reduce the surcharge by half, as the opposition had pledged?

The surcharge had increased because of the exorbitant oil price, not because the election had been won. The government had realised that the surcharge system had to change, because it incentivised waste.

It was politically mature to take difficult decisions in the common interest. The government hoped this system would encourage people to change their mentality. The government had also proposed a system which rewarded those who did not waste, in the form of an eco-reduction. The scheme helped families, especially the larger ones, who deserved more backing. This had led it to propose what the opposition was today asking it to remove.

Should wastage and capping continue to be treated as if prices had not really gone up?

The true issue was about climate change. A conference in Denmark had divulged the disquieting news that the sea level was rising much more quickly than previously thought, something which would adversely affect Malta. The country should be courageous enough to help those who really needed it, but not to encourage waste.

The Prime Minister said Dr Muscat's speech, purportedly quoting Dr Gonzi's letter to the unions, had not been faithful to the real letter. Dr Gonzi said he had met all unions, not just the 11, and finally they had reached an agreement that he had subsequently reproduced in writing. There had been only one counter-amendment, and it had not been about tariffs but about the eco-reduction system for one- and two-member families.

He had asked how come the unions were not seeking to help those in need. No union had said this; they just wanted to leave everything unchanged. Dr Gonzi had asked where such a strategy would lead to.

The social justice aspect had been well taken care of, not only through the eco-reduction system but also through the energy benefit, that had existed for a long time but which had been improved. Shouldn't everyone be talking about putting pressure where it could be handled but reducing it where it needed to be reduced?

Dr Gonzi said that on November 24 he had written to the unions after the previous Saturday's all-day meeting, putting on record what had been agreed on.

The meeting had agreed on a number of principles.

Dr Gonzi said Enemalta should be in a position to rake back all costs, specifically by separating the functions for the generation and the distribution of electricity. This necessitated calculating what it cost to distribute electricity.

He was sure that even the opposition agreed with these principles.

He had also agreed with the unions that the new service charge for residences would go into effect from January 1, 2009 instead of October 1, 2008. This necessarily meant additional subsidies to cover the three months.

To lessen the impact the government had agreed to shoulder €2.4 million after having already shouldered a cost of €69.3 million. The deficit was obviously bound to increase by the same amount. But the opposition expected the government to help those in need and reduce the deficit at the same time.

Another agreement reached was that the energy benefit should be extended to three-phase installations in cases of sickness, with the government shouldering the difference between the costs of single- and three-phase.

Lone residents had had their eco-reduction increased from 20 to 25 per cent and their electricity unit from 1,500 to 2,000.

Two-member families had had the percentage of eco-reduction increased from a range of 10 to 15 per cent to a range of 20 to 25 per cent. The amount of electricity units had been increased from 1,750 to 2,500.

Dr Gonzi said he had told the unions that 15,394 more families would be qualifying for eco-reduction, or a total of 73 per cent of all residential bills, excluding garages.

Dr Muscat had said he was reading Dr Gonzi's letter, but he had not really been doing it. Interjecting, Dr Muscat said the government had always quoted a figure of 190,000, but that included factors that should not have been included.

Continuing, Dr Gonzi tabled a copy of his letter to the unions.

He said he could appreciate the 11 unions' letter before the sitting, even because it did not say MPs should vote for the opposition's motion, but just to take a position. The position he was taking was to review the developing situation according to a fair and just mechanism that he would not be involved with. It should be an independent, objective equation going by market prices.

He would have liked the 11 unions to want to see if the energy benefits were really having the desired effect, to make sure that they were really helping those in need. The UĦM had said it, and that was the sort of talk he liked to hear.

On the other hand, the old type of socialism put everybody in the same scales. But the PN had values, according to which those who could should help those who could not.

What did the unions mean by writing that the eco-reduction threshold was not treating everybody equally? Should a lone, wasteful resident get the same treatment as a family that was careful about its consumption? Where was the principle of social justice? Was this progress? Were these the new values in Malta? Unfortunately, sound values seemed to have flown out of the window, and one had ended up speaking only about numbers but not about needy families.

Dr Gonzi said he hoped pensioners and other strata of society were listening well. He would gladly vote against the opposition's motion because it went against Nationalist principles and national long-term interests. He appealed to the opposition to meet the government side and seek more detailed explanation of what the country was really facing.

The year 2015 was a very important target, within which the country must lower its carbon emissions to established levels. It was in Malta's interests to get to work on lowering emissions and increasing the use of alternative energy.

If these targets were not reached, Malta would have to pay a very high price, and all levels of the economy would suffer, not least through greatly-reduced competitivity. Everybody who meant well should come up with courageous and meaningful solutions, he concluded.