Gas distributors are running out of patience as the end-of-January deadline for a resolution to the impasse over retail licences caused by the liberalisation of the sector approaches fast.
The deadline was set on Christmas Eve when gas distributors called off a strike after the Office of Fair Trading ruled in their favour saying they could sell bottled gas of different companies.
However, the issue on the retail licences given to Liquigas and Easygas – the two companies that supply gas – was left pending.
Gas distributors and the two companies are expected to meet Resources Minister George Pullicino over the matter. Liquigas did not attend a previous meeting arguing there was no point in trying to reach an agreement when it already had a retail licence.
The 31 gas distributors insist the 1992 agreement signed with Enemalta gives them territorial exclusivity to sell gas cylinders in the community, something that has been compromised by the distribution licences issued to the two suppliers.
According to Vince Farrugia, the director general of the Chamber for Small and Medium Enterprises – GRTU, which represents the distributors, the government has two options before it.
“It can decide to honour the 1992 agreement with distributors and allow them to be the only ones to sell bottled gas or else, if it cannot close the floodgates, pay the 31 distributors compensation for withdrawing their exclusive licence,” Mr Farrugia said.
Compensation for the withdrawal of the 1992 agreement was calculated by the GRTU at about €200,000 per distributor, amounting to some €6 million.
Defending the distributors, Mr Farrugia said the government did not have an EU obligation to liberalise the sale of gas at community level.
“The Malta Resources Authority decided otherwise and it has brought about the confusion we are now in. Instead of paying compensation to withdraw the old licences before introducing a new system, the MRA issued new distribution licences superimposing the new regime on the old one,” Mr Farrugia said.
He insisted that before the last election the government had given gas distributors assurances the retail aspect of the sector would not be liberalised.
“I am disgusted because the government and the MRA said one thing before the election and did something different afterwards,” Mr Farrugia said.
During the GRTU’s annual general meeting last Sunday, a strongly-worded resolution was approved condemning the government’s handling of the gas sector’s liberalisation and the treatment afforded to gas distributors.
What the problem is
There is more than one problem, leading to a confusing situation.
The gas sector has been liberalised and two companies now provide LPG gas for household use.
Liquigas, which took over Enemalta’s gas division when this was privatised in 2008, is sharing the market with Easygas, a new operator that started importing gas cylinders last month.
The sale of bottled gas to households at village level has long been the exclusive remit of 31 distributors, who operate on a territorial basis. However, since liberalisation, the government has also issued the gas-supplying companies with a retail licence.
The first problem arose when Liquigas objected to the fact that distributors wanted to sell cylinders of different companies from the same truck. The objection was turned down by the Office of Fair Trading. The second problem arose when Easygas started selling gas cylinders from fixed locations.
The distributors objected but the company said it had a licence to sell bottled gas.
Things got more complicated when Liquigas informed distributors it also had a retail licence, which meant it did not necessarily have to make use of their services and would sell gas cylinders in direct competition with them.
What the gas distributors want
Option 1
They want the government to respect the 1992 exclusivity agreement signed with Enemalta. By virtue of the agreement, they would be solely responsible for the sale of gas cylinders at a community level. In line with that agreement and the ruling of the Office of Fair Trading, they would be able to sell gas cylinders of different companies. This means the government would have to withdraw the retail licences issued to Liquigas and Easygas.
Option 2
If the government cannot withdraw the licences of the companies, the distributors want to be compensated for losing their exclusivity. They insist the government is still bound by the 1992 agreement because Enemalta was also the regulator. Compensation could run up to €6m.