Light on electricity policy

I have read with interest articles in which commentators sometimes praise and, at other times, ridicule the Sargas proposal. Some journalists have totally rubbished this proposal on what they claim to be technical grounds, occasionally alleging personal business interests between certain politicians and these entrepreneurs.

Let us avoid making the interconnector regime another controversy- Mark Attard Montalto

Others have heaped praise on this technology, maintaining that the Sargas energy option is a valid one and that it should be given serious consideration, possibly because they believe in the company’s innovative approach and the reported energy efficiencies its system claims to provide.

I have no wish to enter into the merits and demerits of the Sargas proposal itself. In my opinion, the question that needs to be studied is a much more basic one and is one which I feel our country and its politicians need to examine carefully before a professional and objective discussion on the other matters is held.

This basic question is: Exactly, how does the government of Malta intend to open up competition in the energy sector, specifically that relating to electricity, thereby allowing third party operators – whether local or foreign – to operate in the market?

Malta is a European Union member state, bound with strict rules on competition and with a plethora of regulations and directives in the electricity and energy sectors, among others. Although lip service is given to these principles of competition and although the electricity regimes are in place and have been transposed, by and large, into Maltese domestic legislation by way of legal notice 166/2011, the government has remained rather tight-lipped on this fundamental question.

This is the issue that needs to be addressed and this is the issue that requires analysis before a deeper discussion is even contemplated.

It is pointless to state that one has an energy and electricity policy in place while simultaneously keeping certain key decisions and agreements confidential and hidden from public scrutiny. This prevents competitors from effectively making the necessary plans on how to formulate a strategy on the implementation of the service that they wish to provide, a move which will, ultimately, improve the efficiency of the service for the Maltese population.

Keeping a tight fist on essential figures, facts and agreements that most obviously have a bearing on all and sundry, not least to competitors of Enemalta, represents a veritable barrier to new players on the market. This, in turn, shackles investment and dissuades other companies from offering their proposed improvements to our electricity service.

I have first-hand experience of this as I have tried on various occasions to enquire about Malta’s electricity interconnection between Malta and Italy and its agreement with the European Commission. The only detail that is public knowledge is that there is a €20 million fund granted to Enemalta and Terna Spa by the European Commission, under the economic recovery package, for the purpose of constructing and installing this electricity interconnector.

It is unacceptable that Malta’s agreement with the EU and Enemalta’s agreement/s with Terna Spa remain totally and absolutely confidential and unknown. This because the strict confidentiality of such agreements run counter to the spirit and objectives of Council Directive 2009/72/EC and, particularly, to article 43, which deals with, inter alia, transparency of agreements.

It is public knowledge that the energy and electricity markets are big business worldwide because nearly every individual in industrialised countries is a daily consumer of electricity. There are matters that must not remain concealed indefinitely because such information may give an unfair advantage to certain operators who may already have access to certain figures. These figures include individual users’ consumption, amortisation rules and other issues that may emanate from such agreements, all of which have a bearing on Malta’s future electricity market.

A level playing field must exist for all and sundry within the parameters and the scope of the agreement signed. Third parties must be allowed to examine (in part, at least) certain details of the agreements to be able to understand the mechanisms to be used to access the interconnector, the costs involved, etc.

This basic question, and the various ancillary ones that surround it, remain unanswered. They require a reply at the earliest if we are to attract other suppliers to our shores and address the various options that will follow.

This lack of information also discourages other operators from researching and tapping into other available EU funds in the energy sector. One of these is the European NER 300 scheme, which provides huge incentives for electricity operators to enter the market competitively in a scenario where traditionally established operators are present.

Among other things, these schemes provide funds for the installation of innovative renewable energy solutions in accordance with certain conditions. It is pertinent to note that these schemes are only available until the second half of 2012, so it is of paramount importance for the details in discussion to be released to the interested parties at the very earliest. This would allow private industry and entrepreneurs to involve themselves in the process of offering services in the field of electricity and energy to the government of Malta.

This undue delay may give certain individuals or organisations an unfair advantage, especially if such individuals/organisations are well connected to the Administration. It could conceivably give rise to the possibility of discrimination between certain operators in the electricity market.

This is most certainly contrary to the spirit of Europe’s legislation in competition for electricity, a fact which the government cannot ignore.

Once this basic question is answered, the debate on the pros and cons of each alternative may commence in earnest. When this happens it would also be wise to consider how the government intends to supply 400MW of electricity, the estimated requirement for the peak consumption in summer 2013 and the years thereafter. This consideration should be made in the light of the fact that Enemalta’s Marsaxlokk power station generates well below this capacity.

It would also be pertinent to enquire whether the government intends to fill this shortfall by means of a public tender and, if so, when and under what criteria?

A clear and precise reply within a brief period of time will put paid to the possibility of any possible abuses or unfair advantages and also provide operators with the time required to assess and calculate the various market forces. Malta has already had its fair share of public procurement controversies in the electricity sector. Let us avoid making the interconnector regime another controversy.

Malta must bear in mind that public procurement regulations have become far more stringent across Europe. In fact, the European Commission is already planning the establishment of dedicated legal offices to investigate and prosecute abuse in public tenders involving EU funds directly or indirectly.

It would most certainly be counter-productive and contrary to Malta’s best interest if the government were to fail to divulge its energy and electricity policies without any further delay and this in a clear and precise manner.

Dr Attard Montalto is a lawyer who specialises in European and energy law affairs.