Taxpayers have so far forked out more than €2 million in subsidies for a select group of door-to-door gas vendors under a 2014 concession agreement, even though the service is already provided for free by Liquigas.
Known as a public service obligation, the 15-year concession was granted by the government on the eve of the 2014 European Parliament election. It allows 31 vendors to claim compensation, at 13c3 per kilo, if they suffer a drop in sales below the base level, which is set at that of 2013.
The deal was justified on the ground that delivery of gas to certain remote areas of the island is not economically viable.
A fortnight before the signing, gas vendors had staged a protest demanding compensation for the losses incurred due to the termination of a long-standing territorial exclusivity agreement. This agreement had been declared null by the competition watchdog as it breached competition law.
The government’s decision to award subsidies to the vendors had raised eyebrows. Many questioned the need for such a mechanism when Liquigas (a joint venture between Liquigas S.p.A. of Italy and Multigas Ltd of Malta) which bottles and distributes LPG, makes door-to-door deliveries free of charge. The service is offered over the phone, through the company’s website and even on Facebook.
Industry sources had said at the time that the agreement smacked of State aid through the back door, an attempt to avoid landing in hot water with Brussels.
Details on the subsidies paid so far were only granted to The Sunday Times of Malta following a Freedom of Information request, after the Energy Ministry failed to reply to questions.
Between May 2014 and May 2018, a total of €2,040,942 were paid out in subsidies, with the annual amount increasing each year. It totalled €271,089 in the first year, more than doubling to reach €572,535 in the next, while between June 2016 to May 2017 it rose further to €614,358. Then, in the period June 2017 to May last year, taxpayers ended up forking out €854,049, more than three times as much as the subsidy paid in the first year.
Consequently, the average compensation per vendor also registered an increase, from €11,295 in the first year up to €30,502 in the fourth. During this period the highest subsidy given to an individual door-to-door seller shot up from €39,646 to €81,844 last year.
However, not all of the 31 licenced vendors benefitted, with the number of those receiving compensation ranging between 24 and 28. For some reason, not all of those entitled to it filed a compensation claim.
Nonetheless, the initial warning of some in the industry has been confirmed: as more players entered the gas distribution market, the level of compensation claims would rise. This is because with the presence of more licenced vendors and more fixed-sale points, these select group of door-to-door distributors are more likely to suffer a drop in sales.
State Aid is forbidden under EU rules except if a particular sector is declared to be of “general economic interest”. In the case of gas vendors, the government had justified the compensation on the basis that it wanted to guarantee the gas distribution service to remote areas deemed not to be commercially viable.
This concession came into force after the competition watchdog in 2013 had declared null an exclusivity agreement that went back to 1992. This ruling had paved the way for the liberalisation of the gas distribution sector. However, door-to-door vendors who were granted a licence after the 2014 PSO agreement are not eligible to subsidies.