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Question time: Up in arms

Why should ARMS Ltd not issue bills on a more regular basis, allowing consumers to benefit from favourable rates?

Nikita Zammit Alamango, Member of PL National Executive

Our readers remember the pre-2013 scenario. Energy tariffs were the main issue of concern in Malta, stalling families’ quality of life and businesses’ strength to invest more in human resources.  

Back then, the government’s position was clear. Austin Gatt and Tonio Fenech kept stressing that there was absolutely no way how to reduce rates and people had to get used to higher bills. Prime Minister Lawrence Gonzi voted wholeheartedly in Parliament to maintain the same tariff system which credit rating agencies mentioned as the factor which was downgrading Malta.

It was in 2014 and 2015 that a 25 per cent reduction was implemented for residential and non-residential customers respectively, in line with Joseph Muscat’s 2013 electoral manifesto. A pledge which was ridiculed by many but when enacted put millions back in the pockets of families and businesses. Today, the European Commission (July 2018 Report) notes that the inflation in Malta is still below European average due to “regulated prices in the electricity market”.

One can definitely discuss procedures. Systems are there to manage resources and provide common services.  Regular billing means regular payments. Regular payments equate to smaller payments. Smaller payments are more feasible for average- to low-income families. Therefore, with frequent bills, ARMS Ltd aims to facilitate payments especially for the vulnerable.  ARMS has drastically decreased the number of bills based on estimate consumption readings. The company is currently issuing 78 per cent of utility bills based on actual readings, up from 48 per cent  in 2013. By gradually eliminating estimates-based billing, customers are far more able to assess their changing consumption patterns and optimise their energy use accordingly.

The Labour government has managed to diversify Malta’s energy production

That said, ARMS Ltd’s billing system, including the consumption bands and the billing periods, are still the same as those introduced in 2009 whereby customers who reduce their energy consumption and consistently remain within the lower consumption bands, benefit from cheaper tariffs. The only change to the computation of utility bills in the last 10 years was in 2010 with an upward revision of 30 per cent in tariffs.  

The 2014 and 2015 tariff cuts led to substantial reductions for all customers. Bi-monthly electricity consumption cost based on actual consumption for a typical two-person household in 2017 are 30.4 per cent cheaper when compared to the same bill, with the same actual consumption readings and calculated in the same way, utilising 2013 tariffs. The reduction percentage is similar for three-person households, 29.9 per cent, for four-person households, 28.97 per cent and for five-person households, 25.37 per cent. On the other hand, water bills have seen a reduction of five per cent in 2014.

This is evidently a result of the government’s energy policy which favours more stability and less burden. Between March 2008 and February 2013, electricity prices in Malta had increased twice more than the average rise in EU. Since 2013, Malta had a decrease in energy tariffs while the European Union registered an average increase of 6.5 per cent.

Same trend applies to fuel prices. After 82 consecutive weeks of price stability despite increased international prices, with revisions announced this week, prices in Malta still remain cheaper than the EU average, 9c for petrol and 11c5 for diesel.

All in all, in under five years, the Labour government has managed to diversify Malta’s energy production, creating a mix which facilitates a more sustainable economic environment, not reliant on a sole energy source. While the Opposition was preaching against the conversion to gas, the government stuck to its promised plans and achieved results. This administration is the only guarantee for cleaner and cheaper energy.

Michael Brigulgio, Sociologist and PN Councillor in Sliema

In the past months the Nationalist Party, the independent media, academics and a new civil society group called Up in Arms showed how the government is sending higher and more frequent utility bills to many people. Some may not have noticed small increases, but others were shocked to see that they have to pay heftier bills. This further increased challenges for people who already have to content with a higher cost of living on items such as foodstuffs.

In theory, there is no problem with ARMS issuing frequent bills so long as these do not result in higher bills. Consumers should be able to pay ARMS even more often if they wish to. 

The problem is that the way in which ARMS is estimating these shorter bills results in consumers paying more at the end of the year (when they add up their bills), than they would have paid had they paid it all in one bill of six or 12 months.

Moreover, some people are still paying the cheaper (longer period) bills because ARMS allowed them to stay on a long billing period.

This is what the law states:

“Residential Premises Service shall be subject to the following consumption tariff based on a cumulative consumption per annum and which may be billed on a pro rata basis. 

“i) For every kWh of the first 2,000 kWh... €0.1047; and

“ii) For every kWh of the next 4,000 kWh ... €0.1298; and

“iii) For every kWh of the next 4,000 kWh ...€0.1607; and

“iv) For every kWh of the next 10,000 kWh ... €0.3420; and

“v) For every kWh of the remaining consumption ... €0.6076.”

This means that we have a quota of cheap electricity and water. This quota is 2,000 units a year at 10c5 and 4,000 units a year at 12c9.  

This abuse by a dominant monopolist needs to be regulated

Now ARMS cuts up of the quota into smaller bits for every period (e.g. 333 kwh at 10c47), but it does not let consumers carry forward the allowance they do not use. And next period if you use up all your quota, you pay at higher rates… even if you had left-over quota from the previous period.  

Imagine you buy a top-up card for your phone.  You buy a card for €10 and you are told that you can use it over six months. Now you are suddenly told that you must use it in two months (or less) or you will lose the credit. The way ARMS is billing is very similar to this. It is forcing consumers to use all their quota and only their quota every two months or pay more.

Even if the consumer stays within the total annual quota, they do not get a rebate at the end of the year. 

Why is this happening?

Obviously to raise revenue without letting the consumer know.

Malta boasts a monopoly (Enemalta), which employs another entity (ARMS) to issue bills at higher tariff rates than the law envisages, every two months, with a threat of accumulating interest rates and of being cut off the grid (plus fee to re-instate) if they do not pay. Other tenants are paying domestic rates rather than residential rates, which means that they have no chance to enjoy the eco-reduction and they pay at higher rates. Bills are also bulked up into shorter periods, once again ensuring that people pay more because they consume their quota quickly.

This abuse by a dominant monopolist needs to be regulated by the Regulator for Energy and Water Services (REWS), the Malta Competition and Consumer Affairs Authority (MCCAA). In the absence of such regulation, further action will be resorted to by the Nationalist Party.

If you would like to put any questions to the two parties in Parliament send an e-mail marked clearly Question Time to editor@timesofmalta.com.

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