Past losses on oil to be factored in

On top of rising oil prices, the new water and electricity tariffs, to be announced soon, will also have to make up for a loss of over €21 million that Enemalta is predicting it will incur on the bills up to next month.

The shortfall has come about because the income from the tariffs set in March did not make up for the subsequent market price of oil, a government spokesman confirmed.

Speaking in Parliament on Wednesday, Infrastructure Minister Austin Gatt said the rise in rates was necessary because, together with the price of oil, Enemalta's costs had also increased. The corporation is forecasting a loss of €21.4 million between April and December 2009.

When the electricity tariffs were revised in March, the price of crude oil was $54.7 a barrel and now it stands at $76. In the same period, the price of fuel oil increased from $314 to $469.75 per metric tonne, that of gas oil from $484 to $631.5 while the dollar fluctuated from $1.35 to $1.47 to the euro, Dr Gatt said.

The price of crude oil is expected to rise further this year and reach almost $82.34 by the end of 2010.

Revised every six months, the utility rates are closely tied to the price of oil, which has been increasing steadily over the past weeks.

The old surcharge system on utility bills was scrapped and new higher rates were introduced last December. They were revised downwards by some 20 per cent in March and are now up for review again.

An inkling that tariffs would rise again was given almost three weeks ago after Prime Minister Lawrence Gonzi pointed out that the price of oil was going up.

However, it was only on Wednesday that the government officially confirmed that they would rise, not only because the price of oil was increasing but also because there were losses that needed to be compensated for. Dr Gatt told Parliament that Enemalta and Water Services Corporation would apply to the regulator to raise the tariffs.

He said Enemalta did not have much leeway to recoup the loss by cutting other expenditure because 62 per cent of its budget went into oil.

Electricity consumption has dropped by eight per cent since the last revision and non-technical losses remained at six per cent.

A total of 28,000 households unable to shoulder the burden of the tariffs were helped through government subsidies, Dr Gatt said.

Although the first set of tariffs was approved by the Malta Resources Authority in December and back-dated to October 1, the new tariffs will not become effective retroactively.