Sustainability and transparency

In response to the Malta Resources Authority's call for an open consultation on the next electricity tariffs scheme, the Malta Chamber of Commerce, Enterprise and Industry has drawn up a position paper with its recommendations. The recommendations are based on what is seen as market failure, the principles of sustainability, transparency, certainty, time-of-use and KVAh metering and eco-friendly measures.

Malta has one entity responsible for the generation and of electricity which operates in a small and isolated network. Enterprises in Malta has no choice but to purchase electricity from Enemalta, whose operations are subject to various forms of inefficiencies. The result of this is that Malta has one of the highest non-residential electricity tariffs in the EU, with the consequence that there isn't a level playing field between locally-based enterprises and their competitors. The Chamber believes that this scenario constitutes market failure and that the non-residential tariff must be pegged with the EU average adjusted in differences in purchasing power parities and state of economic development.

The tariffs recently introduced by the government are seen to be inadequate because these focus exclusively on the immediate financial sustainability of Enemalta. The decision by the government to adjust tariffs was taken when the international price of oil was at its peak - and since then it has followed a general downward trend to levels that are no longer comparable to the 2008 peak.

While the Chamber agrees that the long-term sustainability of Enemalta should be a principal aim, tariff structures should ensure the need for an economically-efficient rate of cost recovery, taking into account rates that could be available from other electricity providers. They should also ensure that consumers are not unfairly charged for unavoidable inefficiencies arising from Malta's small and isolated grid and that employment opportunities are not compromised through sudden policy changes that fail to give adequate notice to investors to plan and adjust accordingly.

Due consideration should be given to the international economic climate and, thus, potential loss of demand of our internationally-oriented enterprises.

Finally, consumers should not be charged for hedging policies which limit flexibility of adjustments to international prices and which policies are beyond the control of consumers.

The fuel cost structure per kWh has to be transparent to the consumer and adjustments to tariffs to reflect the price of oil need to be made not more than three months apart. Allowance would also need to be made for fixed rates for bulk forward buying. It is also imperative that proper management, communication, implementation and billing (through smart metering) of the new tariffs are taken into consideration.

It is highly desirable that the new tariff system would entail time-of-use (TOU) based charges to discourage consumers from using electricity at system peak hours. Such system should encourage consumers, whether domestic, commercial and/or industrial, to move their electricity consumption, when possible, from established peak to shoulder or off-peak hours. This contributes to a more efficient use of electricity-generating equipment as cost of consumption could be reduced, simply by shifting the consumption pattern. This is seen to be also relevant to SMEs, where the flexibility of labour resources and heating/cooling systems may allow shifting to off-peak periods.

However, the peak to off-peak (night) tariff differential has to be significant and not as is the case now. The annual threshold consumption of 5GWh in order to qualify for night metering needs to be reduced or removed as this is considered by far too high for most enterprises to qualify.

We also stress that a realistic feed-in tariff is long over-due and Malta has to emulate what other countries have done to promote the use of renewable forms of energy generation.

The Chamber strongly believes that the proposed energy cable link to the European grid should be pursued with urgency. It must be emphasised that this measure should not be just a case for less expensive energy but also a move to enable Malta to achieve a much higher level of energy security and potential diversification of energy sources.

In conclusion, the Chamber insists that the uncertainty about the utility rates must be eliminated forthwith. It is imperative that any review of utility rates is concluded and announced without further delay.

Since last October, business competitiveness has been hampered relative to international competition because energy costs did not reflect prevailing developments in energy costs in the global markets.

Malta can no longer afford utility charges that are solely based on balancing the books of the utility provider that enjoys monopolistic powers. This is too high a price to pay for business.

Ms Ellul is the president of the Malta Chamber of Commerce, Enterprise and Industry.