George M. Mangion

While Enemalta’s inefficiencies are slowly diminishing, in the short run we must seriously start improving the government’s fragile energy strategy.

It is no consolation that it is late, yet finally the monopoly enjoyed by Enemalta will be partially disbanded. This is another leaf in the book of anti-monopolistic measures that have been driven by EU membership.
According to Article 31 of the EC Treaty, member states are obliged to adjust any state monopolies to ensure no discrimination that usually distort market competition. The recent EU directive for opening up Europe’s electricity and gas markets was adopted in 2003, and, at least in theory, industrial consumers in some member states have been able to choose freely their supplier. Does this hit us as well? After two years of deliberations the jury is out with the verdict.
We were informed last week that the government has informed the European Commission that it will lift Enemalta’s monopoly on the importation of fuel by the autumn. This comes as no surprise as energy policy has made its way to the top of the political agenda with rising oil, gas and electricity surcharges threatening to hold back economic growth. An ominous energy surcharge started hitting both households and industrial consumers, threatening jobs and slowing economic growth. EU Energy Commissioner Andris Piebalgs said that completing the internal energy market will be pivotal in achieving the EU’s objectives for a “secure, sustainable and competitive energy sector”.
A Green Paper on energy policy published by the Commission in March 2006 puts forward a series of policy initiatives in the energy field to address in a balanced way the three objectives of security of supply, competitiveness and environmental sustainability. With hindsight we may well ask, what took us so long to change our ways? Enemalta has now yielded under considerable pressure. Yet we upheld its monopoly for 18 months past the deadline imposed by the Commission. Liberalisation was originally targeted to happen at the end of March 2006.
So what happens now? Do consumers lift up their hopes and expect multiple choice of competing suppliers when buying their fuels next year? Do we expect to see a mad rush by petrol station owners to grab importation licenses from MRA? Definitely this will turn back the clock to the early seventies when owners of service stations were allowed to import their own petrol, engine oils and diesel.
For over 30 years the lucrative importation of fuel products remained the sole domain of Enemalta. The news about liberalisation just purely coincides with the proposed visit of Mr Piebalgs. Critics lamented it is not a coincidence that the island needs to roll up its sleeves to meet pressing EU energy compliance rules.
Why do we lack a sound renewable energy policy and concurrently delayed the start of a liberalisation process for the fuel importation and its wholesale market? Has the consumer not suffered long enough?
The answer can be given by Eurelectric, the union of the EU electricity industry. The union says the liberalisation process has brought considerable benefits to Europe in terms of price and cost reductions as well as labour productivity gains. Luckily, the EU emissions trading scheme to fight global warming is also being reviewed to make sure it does not put European industries at a disadvantage over international competitors.
So has the penny dropped that we need to meet the ecological challenge and manage our energy policy in a more sustainable way?
This does not come a moment too soon. It seems MRA, as regulator, is suddenly very interested in the increased incidence of asthma and bronchitis caused by global warming on our environment particularly on our air quality. A United Nations panel has predicted that as a result of pollution, this factor is accelerating global warming particularly in the Arctic. Expect more rain, droughts, heat-waves and a slow rise in sea levels that could last for more than a thousand years. The effect of decades of burning coal and oil in our power stations has exacerbated such pollutants.
The facts are crystal clear: human activity is responsible for this warming, and that it is likely irreversible for centuries, even if greenhouse gas emissions are stabilised. To be more specific one can mention how carbon dioxide is one of the major causes of global warming and is produced through burning carbon-containing fuels, such as petrol and fuel oil derivatives. In the meantime, the island is no mean sinner when it comes to our share of the blame. We procrastinated out of a false sense of economy and delayed the installation of antipollution equipment at Marsa power station and the scrubbers at the hospital chimney. Can we tolerate such attitudes much longer?
Changing the way our countryside is exploited, from natural areas to intensive agriculture, from fields to a concrete jungle of ugly apartments, has accelerated climate change. But who cares? In Malta, as elsewhere, the way to politicians’ hearts and minds is through citizens’ loyalty and what matters most is their alienation. With a running deficit we could never afford to let go on liberalisation of fuels which is a profitable part of Enemalta’s loss-making empire.
Our power generation policy was left too dependent on importation of fossil fuels and little or nothing was invested on securing alternative sources. Nobody cared much of the harmful effects of running two power plants in a densely populated island. Since the seventies, climate change never hit the headlines among the domestic agenda of the ruling political parties.
Politicians do not like to be blamed for witnessing longer, drier, hotter spells during winter and more humidity levels in summer. Just read the technical analysis about our depleted water table and we should all wake up to a reality check that our dysfunctional energy conservation policy needs an overhaul.
Reading latest EU directives one notes that member states are requested to appoint an independent national energy regulator. Of course we had the services of MRA for years. It commissioned various studies but action was lacking. These among others covered its recommendation concerning the dismantling of energy monopoly. In theory we were cautioned by the EU to the start the process of fuel liberalisation away from state control. On paper, we were invited to visualise the time when petrol stations could operate independently from Enemalta or form a network to wholesale and distribute to consumers fuel products at competitive prices. This policy would leave Enemalta solely responsible for gas and electricity generation. In addition many options will open up. Imagine we could invest in a submarine electricity cable to exploit the Central European electricity market. This seems like a pipe dream but only recently Neelie Kroes, the EU Competition Commissioner, highlighted the need for establishing a level playing field in the electricity market.
Earlier in December 2005, the Commission had set up a high-level group of regulators, business leaders and civil society organisations to provide advice on future EU energy policy proposals and related challenges linked to improving economic competitiveness and protecting the environment. Reasons for the implementation of such an initiative include the varying instability in major oil and gas supplying regions. But domestic factors such as lack of competition also play a role. The need for massive new investments in power generation and transmission capacity as well as addressing shortcomings in the EU gas and electricity markets feature high among the challenges.
However, the Greens believe that it is vital to maintain the momentum and reinforce trust in the liberalisation process. In particular, the power industry calls for the full and effective implementation of the liberalisation package by member states. Moreover, it says that regulation should be completed within the guidelines on congestion management and harmonisation of transmission tariffs. To conclude in Malta our energy liberalisation policy has been disappointing and slow.
The Greens rightly expect more rigid and coordinated actions from the party in power to listen more to its own regulators and to address inefficiencies at Enemalta. In the near future, this may also mean the eventual liberalisation in the electricity market and definitely make sure our power stations comply with the EU CO2 emissions scheme. While Enemalta’s inefficiencies are slowly diminishing, in the short run we must seriously start improving the government’s fragile energy strategy.