Debates are also about answers

In his article Smart Voters And Enemalta (June 22), Lino Spiteri states that in the hours of debate on the Enemalta estimates I did not explain why tariffs were cut only in April 2009 when the price of oil actually plummeted from end of September 2008. Actually, I did give an explanation but it seems to have been missed. So here goes, again.

When the surcharge was applied, it was calculated retroactively so that the surcharge rate of 95 per cent set on July 1, 2008 was based on the oil cost of Enemalta in the previous six months: January to June 2008. July and August 2008 were the record months for oil, hitting a high of $145 at one point, and oil then started decreasing in September. Had we retained the surcharge system, on October 1, 2008 we would have revised the surcharge to account for this massive three-month increase and the surcharge was due to go up to 190 per cent - once again, a retroactive calculation.

The political decision, not to go for another surcharge but to go for a tariff revision exercise, was taken. That exercise ended in December 2008 with tariffs applicable from October 1. Those tariffs were no longer based on a retroactive calculation but, for the first time, projected forward the cost of oil to Enemalta by basing that cost on prices in the futures markets. The October tariffs actually translated into a 125/130 per cent surcharge.

Although some 60 per cent less than what the surcharge should have been at 190 per cent, the consumer never paid this increased surcharge and consequently, only saw that the October tariffs were higher than the July rates. This, at a time (in December) when oil prices were coming down. What few realise to this day is that because we did not go for the surcharge rate of 190 per cent, the Maltese consumer has never paid for the high oil prices of July, August and September 2008 because the October tariffs were based on forward prices!

That hole, plus further losses in the final three months because tariffs turned out not to be high enough, was shouldered by Enemalta in its P&L to the tune of €77 million! Add to that the €68 million the government paid to Enemalta in direct subsidies for electricity only in 2008 and you come to a total grand subsidy to the consumer of €145 million in 2008 - something that is clearly unsustainable!

One figure tells it all as to whether tariffs were too high in 2008. Enemalta's cost of oil for the full year was €330 million. However, the tariff brought in only €299 million and that includes the surcharge and the new tariffs in October 2008 and the profit on hedging. You do not need to be an economist to realise that the tariffs were not enough to even meet the cost of oil, let alone turning it into electricity and distributing it, apart from paying for wages and all the rest. By the way, last year, Enemalta made a modest profit on hedging instruments, so you cannot even blame the tariffs on that!

Opposition Leader Joseph Muscat chose not to be present for the five-hour debate! That's responsibility for you! Even worse, he spoke the following Sunday and misquoted what I said regarding the €145 million quoted above. My numbers are not taken out of thin air, like his are. Mine are taken out of the accounts laid on the table of the house, which, by the way, all opposition speakers conveniently ignored during the debate.

During the debate, I answered all the points raised by the opposition, one by one. Pity Dr Muscat chickened out.

Dr Gatt is Minister for Infrastructure, Transport and Communications.