Malta's biggest companies could see their electricity bills shoot up by more than 50 per cent next year amid fears that this shock could prolong the recession and threaten national competitiveness.
"Coupled with the increases in the cost-of-living adjustment, these new bills threaten to prolong the recession because many businesses will think twice before investing and it may then prolong job recovery," Malta Employers Association general director Joe Farrugia told The Times.
The new tariffs, which were published by the government late on Monday evening, have sent something of a shockwave through the business community, with many businessmen contacting the Malta Chamber of Commerce, Enterprise and Industry to express serious concern.
The utility bills posed a "significant threat to national competitiveness", the chamber said, adding that these tariffs came on top of one of the largest cost-of-living increases ever given - €5.82 per week.
Local operators are at a disadvantage, the chamber complained, because the country relies almost exclusively on fossil fuels and the distribution of utilities is governed by an inefficient monopoly, which puts users at the mercy of the provider.
Under the new tariff regime, which will come into force in January, the biggest businesses, which use five million units of electricity (including Malta's biggest exporter ST Microelectronics) will see their bills go up by some 50 per cent - from €578,000 to €868,956.
Even smaller businesses are expected to suffer. Those consuming up to 2,000 units per year will see their bills quadruple, going from €80 a year to €324. Those which consume up to 6,000 units will start paying more than €1,300, from the current €752. Businesses which consume up to 10,000 units will start paying more than €2,000, an increase of €824, while those eating up 20,000 units will have to fork out an extra €1,400.
The Malta Resources Authority actually shaved €7.29 million on the overall cost of the tariffs for consumers after it rejected some of the costs claimed by Enemalta, including some wage increases for 2010.
Mr Farrugia said the introduction of night rates for large industrial consumers could relieve the burden and the oil hedging which will keep tariffs constant for the whole of next year also lent stability.
"But having said that, the cost to business is going to be substantial," he said, adding that some clarifications were still needed to determine the full impact.
He asked whether the newly-introduced sewage tariff, which is being subsidised for this year, was laying the ground for higher costs in years to come.
Meanwhile, the Labour Party described the hike as the "second budget", saying that it would shock the economy, with the worst affected being businesses like supermarkets, butchers and grocers which need to use electricity around the clock to run fridges.
"This rise in electricity bills will be passed on to the consumers in the prices of products and services or self-employed will have to shoulder it themselves to remain competitive, with a negative impact on their profit and prospects of investment," PL economy and self-employed spokesman Gavin Gulia said in a statement.
He said the new tariffs will neutralise stimulus schemes, like microcredit and tax credits, announced in the budget.
"Businesses are already crucified with the current bills. This increase will continue to undermine competitiveness among small and medium enterprises."
Families are also in for higher electricity bills, although the blow will be somewhat softened through the one-time compensation that the government announced in the Budget. The bonus - totalling €10 million for the government - will range between €55 for a single-person household to €205 for a seven-person household.
The government is arguing that reducing consumption by even five per cent will lead to lower bills than current levels for households of up to three people, while families of four or more will need to cut down their electricity consumption by 15 per cent to pay less than they are doing now.
Unless they do so, families of five or more people will see their utility bills go up by €175, after the compensation, while four-person households will pay €210.63 more.
The General Workers' Union also joined the chorus of criticism, describing the new tariffs as further evidence of the government's arrogance. It said the introduction of the sewage tax was only the first step towards another tax burden.