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Labour announces its plan to cut utility bills

€370m scheme to convert Delimara power station to gas

Labour yesterday unveiled a detailed €370 million plan to convert the Delimara power station to a gas-fired plant, which it says will lead to an average 25 per cent reduction in utility bills.

The alternative was doing nothing and allowing water and electricity tariffs to increase. This isn’t an option

Launched on the second official day of the electoral campaign, Labour announced that it would complete the project within a two-year timeframe and effect savings for private households next year.

Meanwhile, water bills would be reduced by five per cent through savings made from reduced electricity bills.

Addressing a two-hour press conference at the PL headquarters in Ħamrun, Joseph Muscat said that as Prime Minister he would personally take charge of the project’s implementation along with an energy minister.

The plan proposes to replace the Delimara power station with a 200MW gas-fired plant costing €166 million. In addition to this, a gas handling facility would be built at a cost of €142 million while the Delimara extension, built by Danish company BWSC and which started operating in December, will also be converted to run on gas at a cost of €68 million.

Under Labour’s proposal, the new plant will be financed and run by the private sector after a public call for expression of interest, while the BWSC extension will remain the property of Enemalta.

A Labour government would enter into a 10-year fixed-term electricity contract with the company chosen to build the new plant, during which Enemalta will buy the electricity produced.

This agreement, according to the PL model, will enable the private company to recoup its investment and make a profit while electricity will still be supplied at a unit cost that is much lower than today. Dr Muscat said there was “strong interest” from the private sector in the proposal, insisting it was a safe investment because Enemalta would buy the electricity generated by the proposed plant.

However, he did not provide further details.

Asked whether Labour had a fall back position if private investors snubbed the plan, Dr Muscat said the alternative was doing nothing and allowing water and electricity tariffs to increase. “This is not an option,” he insisted.

Dr Muscat denied the Labour Party had any companies in mind.

“This is not a done deal. This is not a proposal belonging to any one company. Any company can come forward to submit its proposal,” he said.

Speaking at the end of the presentation, which included an explanation by a consultant from Dutch energy company Kema that was commissioned by Labour to cost the different models available to supply gas to the island and build the new plant, Dr Muscat said the plan provided the country with a new direction in the energy sector.

He said a new Labour Government would “hit the ground running” and issue an expression of interest by April, asking private investors to come forward.

Dr Muscat said Norwegian company Sargas, which had approached the Government with a plan to build a coal-fired power station with carbon capture technology, had no input in the plan.

Utility bills will be cut by 25 per cent, says PL

“Sargas, like any other company, can compete if it matches the parameters of this strategy, including the use of gas,” he said.

Dr Muscat said families will start benefiting from lower bills in the first year since the new Government would negotiate anticipated payments with the private company that would be passed on immediately to consumers.

Businesses will benefit from a 25 per cent reduction in bills in 2015 when the new power station is expected to be fully functional.

Asked about the ambitious timeframes, Dr Muscat said a Labour government would have the political will to see this project through.

“Just as GonziPN had the political will to invest in a new Parliament building and start the construction process almost immediately, a Labour government will have the political will to deliver on its energy plan,” he said.

Addressing utility tariffs, which were among the highest in Europe, was important to stimulate economic growth, he added.

Dr Muscat insisted a Labour government would honour all Enemalta’s debt commitments and the annual subsidy of around €25 million currently being paid to the corporation will be retained.

He said Enemalta would not be privatised and that employees’ jobs were guaranteed.

Labour candidate and energy expert Konrad Mizzi started the press conference by going through a detailed power-point presentation, mapping out the current state of affairs and the way forward. Under the heading Affordable, Reliable, Clean Energy For All, the Labour proposal sees the elimination of heavy fuel oil and its replacement with cleaner gas.

Dr Mizzi said the Labour Party had asked consultants to study three options for the delivery of gas: a pipeline from Sicily, a liquefied natural gas terminal and regassification plant and an offshore compressed natural gas receiving point.

The Labour Party’s preferred option was the LNG terminal, by which gas would be transported by tankers to Delimara. Dr Mizzi explained two large tanks could store a month’s supply of gas.

He said that if the gas pipeline became a feasible option with EU funding in the future, it was easily possible to change the method of gas delivery.

“However, the LNG terminal will give us a secure, feasible option that enables us to go for gas in a short time span,” Dr Mizzi said.

According to the Dutch consultants the cost of electricity generation – including a return on the capital investment – will drop to 9c6 per unit from the 16c it is today.

Dr Mizzi said Enemalta would be making savings of €187 million as a result of this. Of these funds, €77 million will be used to reduce the tariffs and €110 million to ensure a fair return for the private company and the repayment of Enemalta’s debts.

Asked why the investment could not have been made by the State company, Dr Mizzi said Enemalta was heavily indebted and could not afford the capital expenditure.

He pointed out consumers would still buy electricity from Enemalta and it would be responsible for the distribution network.

Dr Mizzi said a Labour government aims to close the old Delimara plant by 2015, five years ahead of an EU-imposed deadline.

He said the interconnector cable with Sicily, which the current Administration had started working on, would form part of the energy mix.

The interconnector will enable the country to buy electricity from the European grid.

As for alternative energy, a Labour government’s strategy will emphasise solar power.

Dr Mizzi said more details on the party’s plans in this area would be provided in the coming days.

Labour’s plan to cut tariffs

• Family bills to be cut by an average of 25 per cent.

• Savings can go up to 35 per cent for those who consume less.

• The heaviest users of electricity will save two per cent.

• Family cuts will come into force in March 2014.

• Businesses’ bills will be slashed by 25 per cent by March 2015.

• Old Delimara power station will close down.

• The tall chimney will be removed.

• Private sector will finance a new 200MW gas-powered unit instead.

• New plant will be run by the private company.

• Enemalta will buy electricity from the private company.

• BWSC plant will be converted to gas and remain in Enemalta’s hands.

• Enemalta will not be privatised and employees’ jobs will be safeguarded.

• Joseph Muscat will personally take charge.

• Liquefied natural gas will be delivered and stored on site at Delimara.

• The cost of every electricity unit will be 9c6 under the new set up.

The money involved

€25m Government subsidy to Enemalta that will be retained.
€68m Price Enemalta will pay to convert BWSC extension to gas.
€142m Price of the gas infrastructure to be paid by the private investor.
€166m Price of new 200MW power plant to be paid by the private investor.
€187m Savings made as a result of this plan.

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