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A rough guide to PL’s energy plans

Labour dominated the headlines during the past week with an energy roadmap described from comprehensive and doable to a plan which could bring the country to its knees. Christian Peregin attempts to simplify the plan.

What reductions is Labour proposing?

The PL says electricity prices will come down by an average of 25 per cent, while water prices will drop by five per cent. Labour claims the new set up would mean each electricity unit drops to 9c6 from its current 18 cents.

Electricity savings for households will vary from two per cent, for the heaviest consumers, to 35 per cent for the lowest, staggered in a way that discourages waste. Businesses will see their bills reduced by 25 per cent across the board from 2015.

The PN’s case against: Labour’s foreign consultants did not prepare the tariff reduction and did not endorse them. PL officials did.

How will savings be made?

The main thrust is a shift from heavy fuel oil to gas through the construction of a new gas-fired power unit and the conversion of the Delimara power station extension to gas.

For this to happen, a gas-handling terminal must be built to allow for liquefied gas storage and re-gassification.

Labour says a private company would build the power station and gas facilities in return for a 10-year purchasing agreement with Enemalta, extendable to 25 years. The interconnector with Sicily will also be part of the proposed mix.

The PN’s case against: Labour’s plant will be an unrecoverable cost which will have to be passed on to the consumer or the taxpayer. Government’s gas pipeline from Sicily to Malta will derive more savings.

Does that mean Enemalta will be privatised?

No. Labour says Enemalta will continue to generate electricity through the converted Delimara extension and it will also buy a portion of its electricity from the interconnector to Sicily being built by the Government. Enemalta will also retain its distribution and supply divisions.

How much will the project cost?

Labour insists the project would cost €370 million: €166 million to replace the Delimara power station with a new gas-fired plant, €142 million for a gas-handling facility and €68 million to convert the BWSC Delimara extension.

The PN’s case against: Labour’s plans grossly understate the capital costs by over €200 million. The total cost would amount to €600 million. It makes more sense to opt for the gas pipeline first proposed in 1999 since this could be partly financed by the EU and would eliminate the need for ships to transport gas to Malta.

When will the savings start?

Households will start benefitting by March 2014, while businesses have to wait until March 2015.

Labour says the negotiated 10-year agreement would allow a portion of the savings to apply from 2014, before the new power station is even built through an early release of savings by the private partner.

The PN’s case against: Timeframes are unrealistic considering the infrastructure investment required and the processes these would entail.

Where will the power station be built?

Labour says the power station will be built on the Delimara power station’s site. The old Delimara station (except for the BWSC extension) will be phased out and the chimney removed. A small section of the old site will be retained as a standby gasoil facility.

The PN’s case against: Questions raised about the viability of building a gas terminal on the site, primarily because of the fact that some of the area is reclaimed land which would need reinforcement. Safety concerns also raised.

Who will pay for it?

Labour says the private sector will invest in the new power station, following an expression of interest, and Enemalta will enter into a 10-year price guarantee agreement which would ensure the investment is safe and the return is fair.

The PN’s case against: The private sector will demand much higher prices than is being estimated. Investment would have to be recouped through higher tariffs.

Will a tender be issued?

No, a Labour Government would issue a call for expressions of interest. Enemalta will not be entering into a procurement process but will be removing the barriers for the generation of electricity to private operators that is already open to competition. A competitive process will be launched to select the bidder that provides the cheapest options, if more than one agrees to the terms set out by a Labour Government.

What guarantee has been given?

Labour leader Joseph Muscat says he will personally take charge of the project together with an Energy Minister. He has also pledged to step down should his Government fail to deliver on its promise.

Has a deal been struck?

Dr Muscat has denied that any deal has been struck but insists there is strong interest from the private sector.

The PN’s case against: Speculated that a favoured energy provider could have already been chosen behind closed doors.

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