Over the last few months the government, the opposition, unions, employers, Enemalta and the Malta Resources Authority have been embroiled in a never-ending saga over the introduction of revised utility rates, which many domestic consumers and small businesses cannot afford. The most disturbing aspect of the whole debate was the lack of clarity as to what are the responsibilities of the government, the MRA as the regulator, and Enemalta as the operator. Moreover, it is also worrying that the debate did not focus on attempting to agree on an approach that will avoid the politicisation of utility tariffs in the future.
Unfortunately, this has resulted in the government and social partners wasting precious time on an issue that is deflecting attention from the real economic challenges hitting our services, industrial and tourism sectors. It is clear that the MRA ended up being embroiled in the whole saga in which its "real" control over the introduction of the new tariffs was at best very limited.
In going forward, the government should demonstrate commitment to ensure that all parties understand and adhere to a regulatory framework wherein the operator submits underpinned pricing proposals to the MRA, which should, in turn, consider such proposals on their own merit. On the other hand, it is the government's duty to assess whether tariffs are affordable and where necessary intervene by subsidising segments of the economy that may require relief. However, such subsidies should be financed by the government and not by Enemalta, which should run as a commercial company.
To do this, the MRA needs to have the resources required to carry out such important functions. It is incomprehensible why other regulators, such as the Malta Communications Authority, are appropriately resourced and maintain their independence while the MRA has never been able to establish effective structures and independence from ministerial interference.
The strengthening of the regulator is also required if we are to ensure that pressure is maintained on Enemalta to optimise its cost base and deliver a fuel procurement policy and tariffs structure that support economic growth rather than hamper it. In the circumstances, the public is entitled to ask what Enemalta is doing to secure optimal fuel and gas oil prices at current rock-bottom prices.
Moreover, most electricity retailers in modern economies offer consumers the option to enter into fixed-term (say, 18 month) fixed price contracts. Such an approach would enable Enemalta to hedge fuel prices at today's prices for customers who choose to opt for such contracts. Such contracts should be offered to both business and domestic users.
On a positive note, Enemalta is in the process of initiating the implementation of smart metering, a technology that, if implemented, should effectively enable automated meter reading and the elimination of estimated bills. It will also enable Enemalta and other new operators in the future to offer different client contracts that differentiate prices based on usage requirements. Moreover, this initiative may support the optimisation of electricity generation capacity and offer fairer deals to pensioners and other low consuming households struggling to afford the current tariffs.
In 2006, the Ministry for Resources and Infrastructure issued a draft energy policy that sought to ensure a secure, competitively priced and environmentally sound energy supply for Malta.
Since 2006 Enemalta has progressed to the planning stages of various new initiatives such as the cable inter-connection with Europe, new generation capacity and new metering systems. However, the implementation of such initiatives is far too slow.
Moreover, there are still many questions that remain unanswered. For instance, has a decision on the future fuel mix for electricity generation been made and, if so, how has the country progressed in the development of the supporting infrastructure to deliver such plans? What approach will be adopted to encourage competition in certain segments of the electricity market? Have we looked at more innovative approaches such as establishing inter-connections with North Africa, if and when planned developments for new generation technologies take-off in these countries?
Three years after the government published its draft energy policy we are by no means much better placed to ensure affordable and environmentally-friendly energy. The experience in other developed countries shows that energy policy is a critical enabler to economic development and, although it is often taken for granted if it succeeds, it will have deep and far reaching repercussions if it fails. The recent utility tariffs saga is a testament of this. In going forward, high level reviews such as Malta's energy policy need to be translated into a roadmap for transforming Malta's energy sector, which has bi-partisan support.
However, the government should take immediate steps to resolve the current utilities saga in weeks and not months. If this does not happen, Enemalta will be faced with significant cash flow problems arising from delayed payment of bills, which will incur significant costs to finance.
Once this issue is resolved, the roadmap for Malta's energy sector should be treated as a national priority.