Employers are concerned that the overpriced gas being purchased from Electrogas by Enemalta is denting Malta’s competitiveness as this is translating into unnecessarily high utility rates for businesses and consumers.
“This is especially the case for industries which rely heavily on electricity, as it places additional production cost burdens compared to their competitors abroad,” Malta Employers Association director general Joe Farrugia said.
Similar concerns were also expressed by the Malta Chamber of Small and Medium Enterprises (GRTU).
The two constituted bodies were speaking to The Sunday Times of Malta after the newspaper sought their views about the recent revelations by the Daphne Project that Malta was losing tens of millions of euros from the new gas-fired power station deal.
Such a conclusion emerges from evidence published by the consortium of media houses looking into a cache of 680,000 files which had been leaked to Daphne Caruana Galizia prior to her assassination.
We are concerned about the matter as it affects the business sector
It transpired that last year Enemalta paid nearly twice the market rate for liquefied natural gas (LNG) supplying the power station. Experts said that if the State energy company had bought the fuel directly from Shell, rather than through Electrogas, which in turn acquired it from Socar of Azerbaijan, it could have saved €33 million.
The government is disputing this conclusion while pointing out that the project, spearheaded by former energy minister Konrad Mizzi, had been subjected to a rigorous State aid examination by the European Commission. A spokeswoman for the latter, however, noted that the Commission’s role had been to check Electrogas was not being overpaid by Enemalta, rather than inspect the deal with Socar in isolation.
Prior to this revelation, employers as well as businesses had repeatedly called on the government to lower utility rates, saying there was room for more cuts for industry following the 25 per cent reduction of 2015.
MEA director general Joe Farrugia noted that energy prices were especially crucial for Malta’s competitiveness especially those sectors which are energy intensive like the manufacturing industry.
He noted that unlike many other countries, Malta had separate rates for commercial and domestic users. “This means that businesses are subsidising households,” he pointed out.
“We are concerned about the matter as it affects the business sector. Had the increase in LNG price been the result of fluctuations in international market prices, the impact would not have been as bad, as all of Malta’s competitors would have also been affected,” he pointed out.
Mr Farrugia said that judging from the evidence in the public domain, this was not good news for both households and businesses.
GRTU president Paul Abela urged the regulator to show its teeth, while pointing out that the revelations vindicated its repeated calls on the government to cut utility rates for businesses by 25 per cent. “We have been insisting the regulator should intervene to ensure the rates reflect production and distribution costs,” he said. Mr Abela said the Regulator for Energy and Water Services should look into the matter by investigating Enemalta’s generation costs, which are significantly lower when using the Malta-Sicily interconnector, and the expenses involved in delivering power to the end users.
“This process is already being done in the gas (LPG) sector as prices are revised regularly depending on a number of variables such as international market prices,” the GRTU president noted.
Instead, there is no transparency whatsoever on how Enemalta is fixing its rates. “It is now clear that the energy mix is skewed towards the interconnector as whenever there is a fault in it, there is a blackout,” he added.
Mr Abela echoed the MEA’s argument that overpriced utility rates are putting Maltese businesses at a disadvantage with its competitors.
By the time of writing no replies were received from the regulator on the mechanism in place regulating utility tariffs.
‘One of the most challenging probes’
In 2015, the National Audit Office launched an investigation into the controversial power station deal in the wake of a formal request made by the Nationalist Party through the Public Accounts Committee.
The Opposition had raised suspicions of corruption involving the various contracts signed between the government, Electrogas, which built the new gas-fired plant, Electrogas shareholder and gas supplier Socar, and Chinese state-owned company Shangai Electric, which owns the BWSC power plant. The various deals included an 18-year agreement for the supply of LNG to Enemalta.
Three years down the line, however, the investigation is still ongoing. Asked by this newspaper if the probe would be widened to look into the Daphne Project revelations, an NAO spokesman said that no information on ongoing probes could be disclosed.
He added that the report would be publicly available once the investigation is concluded but did not provide a timeframe.
However, the NAO remarked that this was probably the most daunting task it had ever undertaken.
“All that can be said at this stage is that this is one of the most challenging investigations ever undertaken by the NAO, involving the scrutiny of a complex procurement process, the review of a substantial number of agreements that regulate the project, as well as the consideration of the financing arrangements entered into by government in relation thereto,” the spokesman said.