A credit rating agency has made a remark that indicates, unsurprisingly, that it is very much aware of the extent governments go to retain power. With the general election in Malta only a year away at most, the agency, Standard and Poor’s, points out that the main risk Enemalta is exposed to is the temptation on the government’s part to make further energy tariff cuts.
It argues that, given the significant impact the previous cuts have had on the demand for power, the government could well be tempted to make additional cuts. To be absolutely correct, the agency has not said that the government could do this just before the next election. However, given how badly bruised the government is today by its ugly record of bad governance, and, also, the pressure being made by industry and other economic sectors to lower the tariffs, the agency’s fears are not altogether misplaced.
Even though the Prime Minister has dismissed calls for a further cut in the tariffs, the temptation to do so when the country gets closer to the election will be stronger than it is now. Standard and Poor’s thinks the presence of a minority shareholder in Enemalta, Shanghai Electric, would reduce the risk of political interference on the tariff-setting mechanism.
The risk may have been reduced but not eliminated and if the challenge to its getting re-elected becomes even stronger than it is now, it is not improbable that the government would decide to ignore the rating agency’s fears.
As the two parties keep trading charges over government’s energy policy, the controversy over the new gas-fired power station is unlikely to end unless the government comes clean and publish all the details required for the country to make an objective assessment of the project. Since Electrogas, the consortium that has built the power station, is no ordinary company and since its service is an essential one, it is felt that the calls for transparency in its operations and in the government’s dealings with it is most appropriate.
The government has failed to answer key questions, fuelling further speculation over the agreements entered into with the consortium and raising deep concern over unnecessary costs to the taxpayer. Many find it most disheartening that the country is still debating issues that objective observers feel ought to have been settled long ago.
Does the country need the new power station or not? The government says the new power station will ensure security of supply, which is a very strong argument so long as it is professionally established that the island does need to have all this amount of generation capacity.
The Nationalist Party’s argument is that the country does not in fact need a new power station. However, its strongest argument is that the unit cost of electricity from the gas-fired plant would be twice that bought through the interconnector, a project that it had launched precisely to ensure cheaper electricity.
The government keeps boasting about the tariff cuts, but the Opposition quite pointedly argue that the reduction had been wholly due to the previous administration’s investment in the BWSC plant and the interconnector, as the main planks of the government’s energy plan have not yet begun to operate. The BWSC plant was still running on heavy fuel oil and the gas-fired power station has not started operating yet.
Meanwhile, the consumer is still paying through the nose and the power purchase agreement entered into with the consortium will ensure that this will continue to be the case until it is abrogated. Is this right?