Infrastructure Minister Austin Gatt said that 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.
Speaking in Parliament on an opposition motion which termed the utility tariffs "socially unjust", Dr Gatt said 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.
The minister said 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.
The motion was defeated by 33 votes against and 31 in favour after a division.
Dr Gatt started by answering blow-by-blow "assertions" made by Opposition Leader Joseph Muscat who, he said, had misquoted both him and the Prime Minister and had drawn mistaken conclusions on mistaken suppositions.
The opposition had erroneously started from the premise that somehow the government had used oil costs between July and September for its calculations, even after Dr Gatt had repeatedly said that the budget was based on costs of €223 million. It was not true that the government had used the highest prices in its calculations. Last year it had spent much more than the €273 that KPMG had used as its highest consideration.
How had Dr Muscat concluded that the government would be spending €122 million on oil supplies next year? It should be simple to project ahead on the basis of current oil futures and come to an answer of €150 to €170 million.
Dr Gatt said there was no such thing as a secret agreement on hedging, as opposition speakers had alleged.
In the past three years the government had subsidised Enemalta with €151 million on the generation of electricity. Everybody seemed to agree that the corporation should not make losses but recoup all costs, that subsidies should go only to those who really needed them, that everybody must pay for what they consumed, and that there should be no cross-subsidisation.
This same agreement had been evident even at Dr Gatt's first meeting with the MCESD on the tariffs topic. Only the GRTU had objected to industry and tourism being subsidised at the expense of its members. But when the principles had been translated into figures, pandemonium had broken out.
In spite of a profit of €10 million on hedging, the government last year had spent €333 million on oil purchases. Nobody had volunteered any suggestions on how this should be paid, but the government was following a serious policy of refusing to increase the deficit.
Dr Gatt said that last year the government had taken €70 million from the budget to keep Enemalta afloat. Nobody had had the political courage to say that the subsidy should have gone up to €120 million.
With the outlay of €333 million in oil purchases alone, the surcharge had brought in €299 million, before the first salary at Enemalta had been paid. With the €70 million of government subsidy, wages and other costs, the corporation had ended up making a loss of €68 million.
With the €68 million loss in 2008 and €70 million in subsidy, the total shortfall between the tariffs and the costs of generation had amounted to €138 million. The tariffs alone had been nowhere near enough to finance the generation of electricity. In such a scenario, inefficiencies, overstaffing and other problems faded into insignificance.
In the three years between September 2005 and December 2008, the government had spent €153 million to subsidise electricity, and in those three years Enemalta had lost €93 million.
Dr Gatt said that tariffs, taxes, loans or servicing all came to the same end result: they must be covered by the taxpayer. No one could say the government had not tried to help over the last three years. It had forked out much more than on the dockyards, but it was still not enough to make up for oil prices.
It would be wrong to keep taking funds from the budget, because that would mean subsidising all equally and subsiding consumption. People who did not know about the government subsidy would have no incentive to cut down on waste.
Dr Gatt said the government had handled the tariffs conviction exercise badly and should have started on it earlier.
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.
Political seriousness called for decisions, explanation and patience with detractors. The government was ready to open all the books to the opposition, and 2008 would be remembered for the government's biggest-ever outlay for electricity and Enemalta's biggest loss.
Concluding, Dr Gatt said there could be no repeat of last year's shortfalls if Enemalta must continue to operate.
Winding up the two-sitting debate, Opposition Whip Joe Mizzi said the opposition could not believe the government when it never made any social impact assessment of the new tariffs. Also, it had promised, before the election, that if the oil price fell under 45 dollars a barrel, it would decrease the surcharge, something which the government failed to do.
The opposition was duty-bound to show the people that the government was deceiving them. It had squandered people's money and did nothing to tackle the energy issue over the years. He said that the PN government had known about climate change since 1992 but had not even set up any energy, water and transport policy.
Since 1993, government-appointed consultants had said that the newly-built Delimara power station did not satisfy EU directives. Nor did it satisfy EU criteria today.
The government had still not paid up €200 million in debt incurred on the Delimara power station. It now wanted to include this debt in the energy tariffs.
In 1995 the government was supposed to set up a climate change inventory and plans which to date had not materialised, even though the 1996 Labour government had set up a commission on climate change to work on this.
Mr Mizzi said that MEPA was to have set up an energy plan to have energy-saving efficiency measures in place by 2010. The government was fined because it failed to submit a comprehensive plan to the European Commission by 2005. This plan was not yet ready. The Water Resources Authority had been preparing its plan for years. Mr Mizzi accused the government of imposing the energy tariffs because it did not have enough cash flow. He said that government had dictated to chairpersons and directors and put diehard supporters in positions of authority to thwart Labour if ever it was returned to power.
While Malta was still pondering investment in solar energy, Morocco, Cyprus, Tunisia, Egypt and Turkey had invested in solar thermal projects.
The government had deceived the electorate when it promised a gas pipeline to the European mainland and now a submarine cable to join the European energy grid.
Turning to Enemalta's accounts, Mr Mizzi said that auditors had admitted that no serious auditing had been done for years. The financial accounts did not show the truth. The baseline data were never collected properly and had never been revealed. The Enemalta management accounts, which the government was now doing its utmost not to reveal, were never produced in a transparent way.
Mr Mizzi said the government was creating a monopoly in the energy sector to favour its blue-eyed boys. It breached provisions of national law, European directives, provisions on fair competition and governance of public finance. The government had also introduced duties on imported bio-diesel to favour local suppliers. It was manipulating the energy market to give a monopoly on the transport and sale of fuel products to a few.
Mr Mizzi said that he had requested 50 interim measures on energy tariffs, but no progress had been registered from the competent authorities so far.
The government had caused enormous problems and was now bringing excuses about EU regulations. These had to be obeyed.
Concluding, Mr Mizzi said the government was undermining democracy but the opposition was determined to fight for citizens' rights. Earlier, Social Policy Minister John Dalli said discussions on the utility rates had been going on for too long, and with the unions joining hands to request a revision of the new rates, uncertainty was being exacerbated.
When, as Finance Minister, he presented the 2002 budget he had said that energy consumer prices had to reflect the market. The government had set up a formula so that Enemalta would cover its recurrent and operational expenses. Environmental implications had also been taken into consideration.
During the past 12 months a new situation had arisen because of speculation in oil prices. He equated hedging to gambling and said that no reserve had been set up to cover potential losses on hedging.
Minister Dalli concluded that it was true that many were suffering hardship, but government finances had to be safeguarded.
Silvio Parnis (PL) said the government had tried to justify the tariffs, even when oil prices went down. When a Labour government had increased the tariffs, it had been accused of lacking a social conscience.
It was time to come up with a concrete strategy and educate people on conservation of energy. Enemalta should have key performance indicators to reduce the inefficiencies. A lower night rate would encourage people to set appliances on timers during the night, balancing the demand between day and night. This would increase efficiency and reduce wastage.
Mr Parnis said 20,000 million litres of treated water were literally going down the drain every year. All new properties should be equipped with alternative energy apparatus and major projects should produce at least 10 per cent of the energy they consumed from alternative sources.
The rest of the debate will be carried tomorrow.