A 15-year deal signed two years ago to compensate a selected group of door-to-door gas distributors for any loss in sales has already cost taxpayers over €800,000.

Details of the payouts were given following a freedom of information request the Times of Malta filed in October after the government refused to give any details.

Known as a public service obligation, the concession was signed a few days before the 2014 European Parliament election. Under the agreement, 31 door-to-door gas cylinder distributors would be compensated at 13c3 per kilo if sales dropped below those of 2013.

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 government justified its decision saying it wanted to guarantee a gas distribution service even in remote areas that were not deemed to be commercially viable to serve.

This newspaper broke the news of the concession in April last year and eyebrows were soon raised in view of the fact that such service was already being offered for free by private supplier Liquigas.

Concession signed few days before 2014 European Parliament election

Subsequently, this newspaper tried on various occasions to find out what sort of subsidies were being paid through this PSO but the government was not forthcoming.

However, information obtained after the FOI request shows that between May 2014 and the same month this year the compensation amounted to €802,428. Twenty-four of the 31 distributors benefited from State aid.

In the first 12-month period, total subsidies amounted to €271,089 with the beneficiaries receiving an average of €11,295 each. The highest payout to a single distributor reached €39,646.

However, in the following year, the level of State aid almost doubled, reaching €531,340.

This increase was reflected in the average compensation paid out, which doubled to €22,139 and a particular distributor got €59,434.

This newspaper did not have access to a detailed breakdown.

Some weeks ago, industry sources had warned this newspaper that subsidies were likely to increase.

“As more players enter the market, compensation claims are set to increase for the simple reason that these 31 vendors will suffer a bigger loss of sales, to the detriment of taxpayers,” the sources, who preferred to remain anonymous, had warned.

The agreement came into force a year after the competition watchdog had declared null a territorial exclusivity agreement that went back to 1992.

The ruling, which was upheld last October by the Competition Appeals Tribunal, paved the way for the liberalisation of gas cylinders distribution.

Competition law experts have raised questions about the 2014 PSO mechanism, saying it was a way of getting around the 1992 exclusivity agreement once it had been declared null by a tribunal.

Meanwhile, new door-to-door licences have been issued by the energy regulator but the new distributors are not eligible for subsidies.