Enemalta’s tariffs now have to cover not only the present but also the past, Finance Minister Edward Scicluna said this morning.
The minister was replying to calls, including by the Malta Chamber of Commerce, Enterprise and Industry this morning for the government to reduce energy tariffs for all businesses in view of changing circumstances since the largest reduction of 25 per cent was first announced in 2013.
The chamber said it was mindful of Enemalta’s financial predicament but still believed that further reductions were justified.
This was because of the drop in the international price of oil from US$100 in 2013 to around US$40 in September, the company’s ability to purchase electricity at lower cost from Sicily via the interconnector, and lower energy generation production costs brought about following the coming on stream of the more efficient BWSC plant.
Further tariff reductions, the chamber said, would serve to neutralise the limited cost advantages of operating in Malta.
Such reductions, it said, were also deemed necessary in view of declining wholesale electricity prices in the rest of the European Union.
“The continued downward trend in energy prices in the EU will serve to place Malta’s main energy consumers at a competitive disadvantage… This will also neutralise the positive impact of the 25 per cent reduction which came into effect last April,” it said.
The chamber did not say by how much should the tariffs be reduced.
However, the minister explained during a business breakfast that the government had had to create a special purpose vehicle in 2012 to ensure it did not default on the payments it had to make to the German Development Bank that funded the old Delimara power station back in the late 1980s.
The loan was structured in such a way that interest should have been paid off and only once that was done was the capital repaid.
However, Enemalta were only paying the interest by taking out other loans and by the time the deadline was reached for payment of the capital there was nowhere else for Enemalta to turn, resulting in an accumulated debt of €830 million.
The minister said the government had to provide a guarantee of €320 million for the special purpose vehicle:
“What people have to understand is that we are now paying and our children would be paying for a power station which won’t even be there anymore.
"Enemalta’s tariffs now have to pay not only for the present but also for the past. This is why the benefits of the interconnector, improvements in efficiency and the cost of crude oil cannot yet be passed on to consumers," he said.
The chamber called on the government to refrain from surprising businesses with shock-measures announced in the Budget speech, as was the case last year with the introduction of excise duties on wine and pneumatic tyres.
“Measures which are introduced haphazardly and without any prior consultation clearly disrupt business activity and bring momentum to a halt in the respective sectors. The Malta Chamber therefore expects that in the 2016 Budget, a proper implementation plan and the necessary legislative backing is provided for every measure that is proposed.”
The chamber’s pre-Budget 2016 proposals document was today presented to the Finance Ministry and the MCESD.
The chamber said it shall continue to actively take part in the consultation process in preparation for the upcoming Budget.