An economist has called into question the effectiveness of the energy regulator after a gas company trumpeted its higher January prices as being well below the maximum price set by the Malta Resources Authority.
“Does this mean that before January the regulator allowed the only company that sold gas to households to charge the highest possible rates despite having enjoyed a monopoly,” Joe Vella Bonnici asked.
The company’s decision in the new year, he added, meant it either cut its previous “healthy” profit margin or else ate into its profits because of competition.
Hailed by the government as a success of market liberalisation, the decision by Liquigas – the dominant market player that took over Enemalta Corporation’s gas division – to charge prices below the limit determined by the authority was “surprising”, according to Mr Vella Bonnici.
The popular 12kg cylinder now sells at €16, up from €15.60 in December but €1.30 below the maximum price set by the authority for the month of January.
“The least people expect is for their right to know to be respected. As the regulator of a market where one player is so dominant, the MRA has to be more transparent,” Mr Vella Bonnici said.
The hefty increase in gas prices have given rise to a furore coming hot on the heels of higher fuel prices announced by Enemalta.
Unions hit out at the authority for failing to protect consumers while the Chamber for Small and Medium Enterprises - GRTU went as far as describing the lack of proper explanation for the increases as a “mistaken and insensitive” attitude.
Reacting to the criticism, the MRA defended its actions without publishing any economic impact studies.
It said despite the entry into the market of a new operator – Easygas – the incumbent company still enjoyed a dominant position, which prompted it to carry out its own analysis.
“The authority established the official price after it received all the information as it had done in previous months and carried out its calculations based also on international prices,” the MRA said.
It pointed out that the mechanism adopted to determine price levels had been published in June last year but it failed to produce a comparative chart of LPG prices in other European countries when asked by The Times.
The authority’s actions are expected to come under scrutiny in Parliament when the opposition’s motion on energy prices is discussed.
The Labour Party yesterday gave notice of a motion, which, among others, called on the government to introduce an energy benefit for this year to compensate consumers for the higher fuel and gas prices.
The motion questions the methodology used by the regulator to determine whether energy and fuel prices are justified, especially in markets where competition was nonexistent or limited.
Labour will be holding a demonstration in Valletta next week to protest against the price increases, while accusing the government of failing to defend the interests of families and businesses.
But it is not just gas and fuel prices that went up this week because consumers also started paying more for Benna’s milk products.
The overall impact has enraged unions, which argued that the €1.16 weekly wage increase announced in the last Budget was not enough to compensate families for the new hardships. As a consequence of the higher prices for basic necessities, people will probably curtail consumption in other areas, according to economist Lawrence Zammit.
People would cut consumption rather than eat into their savings, he added, out of fear that prices could continue going up in the months to come.
“If this fear creeps in, people will not spend and save for the rainy day. They will simply be more careful with how they use their money,” Mr Zammit said.