Enemalta has not yet started to review electricity tariffs and instead is adopting a wait-and-see approach as the prospect of falling oil prices looms large on the horizon, according to Finance Minister Tonio Fenech.
Studies undertaken by Enemalta show that prospective oil prices may be lower than they are today
“Studies undertaken by Enemalta show that prospective oil prices may be lower than they are today because of the economic crisis,” he said.
Mr Fenech said that the Delimara power station extension, which is expected to be fully functional next year, would consume less fuel because of higher efficiency and this would have a positive impact on Enemalta’s costs.
“Enemalta has not even initiated the process to revise electricity rates because it does not feel the moment is right,” he said.
Mr Fenech also denied media reports that the chief executives of the two government utility companies asked to raise water and electricity rates to cover costs and avoid insolvency. MaltaToday reported yesterday that the Finance Minister shot down the requests made by the CEOs of Enemalta and Water Services Corporation at a meeting held over the weekend.
The report, which was not sourced, quoted the minister telling the top officials that it was not the right time to increase tariffs because of the “sensitive political situation”.
Mr Fenech “absolutely” denied the meeting took place and that the requests for higher tariffs were made. “This is not true,” he said.
Beyond this, however, the energy company was expected to lose €30 million this year after the benchmark price of oil on which the current rates were worked out increased by 39 per cent.
Enemalta only managed to hedge 66 per cent of its oil requirements at the benchmark price of about $80 per barrel, which means that the remaining 34 per cent were bought at higher spot market prices. Under the new tariff regime, the corporation has to recoup all its costs but Mr Fenech insisted this could only be done when the company closed its accounts and these were verified.
“The latest figures available indicate lower losses to the tune of about €18 million but these will not be recouped next year and, in any case, any change in electricity rates will have to be approved by the regulator,” he said.
Refuting the argument that water and electricity rates may be caught up in a political battle that forces the government to withhold any increases before an election, Mr Fenech insisted tariff approval was a transparent process.
“Why should political factors come into play, the government is stable,” he said in a jibe that was clearly referring to the previous day’s vote of confidence in Parliament which the government won. Enemalta’s wait-and-see attitude carries a measure of risk, according to Malta Employers’ Association director general Joe Farrugia but if it results in cheaper oil it would be better.
“Any increase in tariffs translates into higher costs for businesses but the more serious aspect is if it leads to our costs increasing more than those of our competitors because this contributes to loss of competitiveness,” Mr Farrugia said.