More than two years after an agreement was signed which compensates a select group of gas distributors for any loss in sales, the government is still refusing to disclose the amount of subsidies paid from taxpayers’ money.

In May 2014, 31 door-to-door gas distributors won a 15-year concession, known as a Public Service Obligation, giving them 13c3 per kilo in case their level of sales dropped below those of 2013. The decision had been justified on the grounds that the government wanted to guarantee a service even in remote areas which were not deemed to be commercially viable.

This PSO came into force a year after the competition watchdog declared that the territorial exclusivity enjoyed by these vendors, part of a separate agreement dating back to 1992, was null as it breached competition laws. This landmark ruling, which was upheld earlier this month by the Competition Appeals Tribunal, paved the way for the liberalisation of gas distribution. Since then new door-to-door licences have been issued by the energy regulator, but none of these operators are eligible to get any subsidies.

As more players enter the market, compensation claims are set to increase

In April last year, this newspaper revealed that the first batch of payments for 2014 had been issued, with each distributor getting between €3,000 and €20,000. However, the Energy Ministry refused to disclose any information whatsoever, despite repeated enquiries by the Times of Malta.

This PSO is still shrouded in a veil of secrecy and fresh questions sent a fortnight ago were once again not answered by the time of writing, although  sources in the gas industry confirmed that further payments were issued, with each distributor getting thousands of euros.

Although under EU rules State aid is forbidden, an exception can be made if a particular sector is declared as being of “general economic interest”. In this case the Maltese government justified the move saying that energy poverty in Malta was above the EU average. It also argued that the number of households unable to keep their home warm had doubled since 2005 and, by 2011, stood at 21.7 per cent.

However, competition law experts have raised questions about the PSO mechanism, saying it was a way of getting around the 1992 exclusivity agreement once it had been declared null by a tribunal.

Asked for his reaction, a spokesman for the Regulator of Energy and Water Services confirmed that, under the present agreement, gas distributors were obliged to service “their assigned district”.

However, he pointed out that there was nothing prohibiting them from selling in other parts of the island, and hence there was no territorial exclusivity.

Meanwhile, the new licences issued by the regulator are expected to result in higher subsidies. “As more players enter the market, compensation claims are set to increase for the simple reason that these 31 vendors will suffer a greater loss of sales, to the detriment of taxpayers,” sources told this newspaper.