Opposition Leader Joseph Muscat told Parliament yesterday the government was following a policy of convenience in the energy sector and he could not understand why it was voting against the motion submitted by opposition whip Joe Mizzi which called on the government to introduce an energy benefit bonus in the same way as it had found the money to raise the salaries of its ministers.
Winding up a three-hour debate on the motion, Dr Muscat said the government had reverted to policies of the extreme right and was telling those hard hit by the increased fuel prices that it could not care less as last year’s energy bonus amounting to €14 million, was this year not being given.
Finance Minister Tonio Fenech denied the government was losing its social conscience. Last July, the government provided further assistance to families in need and to pensioners. The opposition motion did not acknowledge this fact.
Earlier Mr Fenech moved an amendment to the motion, which the House approved by 35 votes for and 34 against, rejecting the original motion by the same vote.
The amendment noted the hikes in fuel prices on the international market which left an impact on the country as it imported all its fuel needs. It noted also that the government should not necessarily remain an economic operator and, therefore, embarked on the liberalisation of the sector while retaining the regulatory role.
It said the Qajjenza (Birżebbuġa) gas plant could not remain viable without new investment and the government was determined to close it for the benefit of the residents.
Enemalta was subsidising gas through taxation or increasing its losses. The government wanted to arrive at financial stability and decided to stop subsidising wastage.
Instead of subsidising the product, it gave benefits to pensioners and families in need. This meant 13,000 families were given €25 each while others were given €15 in July to compensate for higher gas prices.
The amendment also noted that the Malta Resource Authority, which had the function to establish the maximum market price for gas, had made a presentation of the mechanism involved to the social partners in the MCESD. As a result of the second operator in the market, the companies accepted to lower the retail price.
The amendment requested the House to allow the MRA to make its presentation to the House Social Affairs Committee.
On a point of order, George Vella (PL) pointed out that according to Erskine May one could not move an amendment to replace a whole motion. He would not insist on a ruling by the Speaker but this was bad parliamentary practice.
Deputy Speaker Ċensu Galea noted Dr Vella’s point of order.
Minister Fenech claimed that the opposition motion ignored international realities. He said that the perception on a European level was that gas prices would continue to rise further this year.
However, Maltese consumers were paying less than UK and Italian consumers for gas products. He said that the government had strategically decided not to subsidise the product but to continue to cut the deficit, giving incentives to industry and benefits to families while decreasing income tax.
Mr Fenech said the agreement with Liquigas had stipulated that while the company built a new gas plant, Enemalta had to continue to provide the bottling service. The company, however, undertook also the distribution process.
He criticised the opposition for not participating in the consultative process held for fixing the gas price mechanism which he said did not include the return on capital employed as alleged by the opposition.
Minister Fenech said that as a result of having two companies competing in the market, the consumer gained because the companies trimmed their mark ups.
Dr Muscat said energy was a very important strategic factor for every country because it had wide economic and social implications which could boast or hamper the economy and thus threaten security.
A serious government strategic plan was missing.
Malta had two electrical energy production plants. Two years ago the Prime Minister spurred a forward-looking plan, the focus of which was that Malta had to base its energy not on fossil fuels but on gas, which was a cleaner alternative.
The government did a U-turn by procuring a €200 million oil power station which could be converted to gas. This was contrary to what was decided by Cabinet.
If there was such a radical change in the government’s plans, how was it there was no Cabinet decision, he asked. The government’s statement that it would continue to strive for the power station to work on gas was not credible.
Turning to European grid connections, Dr Muscat welcomed the EU statement that all countries in Europe had to be connected to the grid. Answering an opposition parliamentary question, Mr Fenech had said that this was not feasible and did not make sense. But the Prime Minister boasted that there could be extra European funds. This was a change of heart on the part of the government. It was not just a U-turn but a roundabout because former Economics Minister Josef Bonnici had spoken in favour of the gas pipeline.
As regards alternative energy, the government had embarked on wind-farm project, giving the impression that this was something immediate. But, one knows whether this was feasible and whether the government was still going for the project. Dr Muscat said that this delay, at a moment when time to adhere to EU policies was running out, had made the government to revert to a fall-back position.
Apart from lack of planning, the government’s policy was leading to inflation.
The Finance Minister’s declarations about subsidies were totally different from those before the elections. While two years ago the impression was given that the government had a social heart, today subsidies were evil. The government’s policy had gone back to the extreme right and no assistance to the needy was being offered. People were asked to pay more for a mediocre service.
The government, as a regulator, had to see that the consumer was not exploited. When the government privatised the gas sector, it did not take safeguards to protect consumers. Its priorities were wrong: it could not find funds to help those heavily burdened but there was money for ministers’ increases.
Moving the motion, Mr Mizzi said the government had failed in its energy politicies since it lacked a national strategic plan for the country. It was only now that a plan was being published which he described as one that was abstract, lacking costings and cost benefit analysis and financial analyses.
It was the opposition that had initiated the Parliamentary debate on the fuel price-hikes and the impact of emerging economies and the need for the House to protect consumers.
The government was at a loss as to which type of energy it was to invest in, at times referring to solar energy, wind turbines and then returning to the forgotten promise made before the 2002 election that Malta was to connect to the European gas pipeline network.
Mr Mizzi said Dr Gonzi and Mr Fenech had only one plan and that was to use the international economic and financial crisis to beef up taxes and then boast that there was no need for austerity measures. This was nothing but a strategy to abuse the people.
He referred to the opposition’s proposal for the government to use hedging, which the Prime Minister played down, saying the government would not play with people’s money. But the government had ended up doing exactly that.
He criticised the regulator for failing to take action after Mr Fenech’s admission that electricity, fuel and energy prices were being raised to make good for the deficit.
Mr Mizzi described the opposition as the true defender of the people.
He criticised the gas privatisation process saying that instead of competition and price reductions, this ended ensuring profits to a private company and no benefits to consumers.
The contract was scandalous since the company ensured a profit but did not vary any risk. Responsibility was retained by the government with the people acting as insurance. The government was using people’s money to cover its own mistakes and incompetence.
He questioned why the €25 million investment in a new gas plant had not as yet started when the private gas company had, for the last two years been making profits.
The MRA-established prices showed big inconsistencies when compared to international prices and he queried the soundness of the computation used by the authority.
Mr Mizzi also referred to the situation of the gas distributors who before the election were promised that their jobs were not at risk. The distributors were then sorely disappointed.
The motion, presented by opposition energy spokesman Joe Mizzi last month, urged the government to give an energy benefit bonus to everyone in view of the latest fuel and gas price increases in the same way as it had found the money to improve the salaries of its ministers.
Resource Minister George Pullicino said the motion did not acknowledge the present-day realities of the energy market.
While Labour governments believed in the monopoly of the sector. The nationalist government successfully privatised the sector and established competition while retaining the regulatory function.
He added that the gas facility at Qajjenza could not continue to operate without heavy new investment. This facility was a danger to residents living in a housing estate built under a Labour administration.
Mr Pullicino said that it was a Labour government which fuelled the Marsa power station with coal to the detriment of residents. The energy operations from the Delimara power station slashed the amount of carbon dioxide by 400,000 metric tons per year.
The opposition had also opposed the gas facility privatisation process. Liquigas had been chosen after a public tender wasa issued, with the company agreeing to build a new facility.
The government had continued to subsidise liquid gas up to April 2009. Today’s prices reflected those of the international market where propane and butane highly increased in price over the last two years. These two gases were used to produce liquid gas which was different and more expensive than natural gas.
The price of gas raw materials had gone up from €241 per metric tonne in December 2008 to €472 in December 2009 and €708 in December 2010. This showed a rise of nearly €500 per metric tonne over a two-year period. Gas prices varied monthly because the maximum storage supply in Malta was limited to eight weeks.
The EU had accepted Malta’s request that every member state had the right to join the European natural gas network and where the investment could not come from the market, the government could use EU funds.
Mr Pullicino spoke of the mechanism established by the MRA in establishing the price of gas products. Contrary to what the opposition claimed, the return on capital investment did not feature in the mechanism.
He tabled information which showed the composition of the price of a 12-kg gas cylinder: 66.8 per cent was for raw materials, 14.3 went for storage and bottling, 2.9 for depreciation and 3.2 per cent for operative costs. The commission to distributors amounted to 9.3 per cent while the company’s profit amounted to 3.2 per cent. The distributors’ commission was much higher than the company’s profit.
The minister said the opposition had failed to accept the invitation by the MRA to attend a presentation on how the mechanism worked. He added that this presentation would now be made to the House Social Affairs Committee and he hoped that opposition MPs on the committee would attend.
By selling gas at a lower rate than the maximum established by the MRA, both companies had renounced to higher profits.
Mr Pullicino said he did not need to apologise for his statement that the two gas operators should agree on one distribution system. A legal notice would be published establishing the deposit on a cylinder to €5 and when consumers switched from one company to another, the cylinder would be returned from the operator to its competitor.
Opposition spokesman for utilities, Marlene Pullicino said the gas sector could not be seen in isolation but in the framework of an energy plan that would lead to stability and progress. She said she was surprised to hear the minister say that Malta did not have any natural resources. What about the sun and wind which the minister did not include in the equation? The problem was a lack of planning. This was alarming because it showed the government was not even contemplating to honour Malta’s obligations as an EU member.
The minister had criticised former Labour administrations over their energy policies. Did the minister know that his party has been in office for 25 years and could well have given Malta a well-planned energy strategy.
She asked how MRA prices were reduced after the introduction of another operator to enter the market. Liberalisation was needed because the plant at Qajjenza was dangerous. For 25 years the government had been breaching EU laws.
The motion was nothing more than an appeal to the government to be more transparent and tap the available resources in a credible plan. If this were not done, Malta’s stability would be threatened.
The opposition was in favour of the Delimara power station as long as it was not a hazard to the environment and to health.
Parliamentary Secretary Chris Said said the opposition was not credible because the information being requested was available on the MRA website.
The motion asked for a revision of the available mechanism. It was with this in mind that the government had consulted the public and the social partners. But the opposition kept away from such an exercise. The government immediately accepted the GWU’s appeal for an urgent MCESD meeting last January because of further international price hikes, to which the motion did not make any reference. During this meeting, the authority once again explained the price mechanism.
Dr Said claimed that Mr Mizzi gave the impression that Labour wants to go back to the old days when the government controlled everything. The PN government was against such policies and favoured liberalisation and just competition which led to fair prices.
During the same MCESD meeting, it was agreed that the cost of living adjustment (COLA) mechanism had led to stability but must be updated to respond to present needs. The mechanism had established an increase of €1.16. Mr Mizzi did not make any reference to the €6-weekly-increase given a year earlier.The opposition seemed to be after subsidies. The government was against but was ready to compensate those mostly in need. There was also a committee working on prices.
Despite the debacle between the two operators, the MRA must always be vigilant and look at those in a dominant position.
It was not a case of taking to the streets or presenting a meaningless motion. The consultation process had began and decisions, unanimously backed by the social partners, were taken Dr Said, said.
Michael Farrugia (PL) said that it was the government which was cut off from the country’s realities. The government was preaching united families while it was insensitive to the economic hardship these same families were suffering.
This year the government did not hand out any energy benefit. Families, who got just €1.16 as a cost of living rise, were far worse than last year. Those who got a €600 increase per week could not feel this reality. The government was insensitive and ant-social.
During the privatisation debate, the government had accused the opposition of incitement when it warned that gas prices would go up. It had promised support to families but this did not materialise.
The opposition insisted on the government’s duty to inform the House and not just the Social Affairs Committee on how the MRA established the price of gas.
The government boasted of the Delimara power station but tried to hide the fact that the equipment for that power plant became outdated a few months after its installation.
On the gas plant at Qajjenza, Dr Farrugia said the 1996 Labour government had launched a study for the removal of the plant but the application to move it to another site had been turned down.