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Update 2- Study shows tariffs would rise 5% under Labour - Fenech

Study was commissioned by Enemalta

Finance Minister Tonio Fenech said this afternoon that an exercise carried out by independent advisers KPMG on the basis of the information given by the Labour Party in its energy plan made clear that electricity tariffs would actually rise by 5%, rather than drop under Labour.

See report at http://www.enemalta.com.mt/enemaltastorage/images/files/miscellaneous/kpmg%20presentation.pdf

Mr Fenech said that the proposals made by Labour would not lead to a 25% reduction in tariffs. Indeed, Labour's own consultants, Kema, showed that the cheapest option was not to ship gas by tankers but to set up a gas pipeline from Sicily. Yet Labour had opted to transport gas on ships.

Furthermore Labour had proposed to build a power station which Malta did not need.

Labour's own costings, he said, were €200 million off the mark and would actually rise to over €600. This would lead to tariffs rising by 5%.

Furthermore one still had to see what 10-year gas price agreement Labour could come up with, since prices fluctuated.

Mr Fenech said the timelines laid down in the Labour plan also could not be met.

He said KPMG had been commissioned by Enemalta to draw up their report and it would be published online on the Enemalta website. The report was based on the energy mix which the PL had declared in its report and according to what was declared by its spokesmen.

Labour, he said, had said 40% of power would come from its new power station, 40% from the BWSC plant converted to gas, and 20% from the interconnector.

The operational costs and assumptions presented by Labour  did not result in a unit cost of electricity of 9c6 as the PL was saying. Rather, the cost would be 10c.8 per unit of electricity.

Then one had to add duty on power as laid down by the EU - for 12c5.

One then also needed to consider other indirect operational costs including distribution costs, return on investment, and the profit for the private operator.

This meant that, all considered, it would cost Enemalta 19c2m to distribute a unit of electricity from the power station to a client, up 5% from the current rate.  That was why tariffs had to rise, unless Labour opted to raise taxes.

This increase in price, Mr Fenech said, was the result of the increased infrastructure which Labour's own advisers had not recommended and which the country did not need.

The ministers confirmed that studies were underway with the EU on having a large offshore gas terminal which would be used to supply Europe. That would be well away from Malta but should that come about, Malta would link to it and benefit economically. The PN, he said, remained committed to offering the lowest possible tariffs. That was why it had invested in the BWSC plant and the interconnector, for more efficient supply. 

Replying to questions, Mr Fenech said that only three, possibly four ships were of sufficient size which made them suitable to ship gas to Malta in terms of the Labour plan, and one did not know if they were available for chartering. That was why the PN was arguing that dedicated ships would need to be built. And then one needed to see the cost of operating them. That would be an additional cost. Building two ships would cost some €80m each.

Asked who the people should believe, Mr Fenech said the people should believe the two independent consultants. Kema had never endorsed the Labour plan because their recommendation on the cheapest source of electricity was different from what Labour had opted for. And KPMG on the basis of Labour's own costings, had demonstrated that costs, and hence tariffs, would rise by 5%.

 

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