Tariff increases announced, industry pleas ignored
David Darmanin
Announcing new water and electricity tariffs applicable to businesses and households retroactively, Ministers Tonio Fenech and Austin Gatt yesterday afternoon held to their guns after a three-week consultation marathon with all social partners opposing plans to implement such measures.
Nothing much has changed since 3 October, when government presented the MCESD with a document drafted by audit firm KPMG to propose ways and means by which utility tariffs will be increased.
The only show of empathy to heavy industry was by means of a measure that would protect Malta’s top employers from paying more than 40 per cent increase in electricity this year.
“In order to protect employment,” Gatt said, “we are introducing a measure by which 26 companies out of the 178 benefiting from capping will be able to have any amount over 40 per cent increase on their bills subsidised by Enemalta. This measure is expected to cost Enemalta €5.2 million.”
When asked how much government is expected to fork out in view of the impact this move will have on employment figures, Gatt said: “There will be no direct effect on jobs, and if there will be any layoffs this will be due to foreign markets.”
It is not known whether the government conducted a social impact assessment on the introduction of these new rates.
“The principles driving this reform have centred around the fact that users must pay for what they consume,” Gatt stressed. “We should give out subsidies only to those who need them and we should use tax money to subsidise investment, not consumption. This reform will also lead to less resource wastage.”
Social partners haven’t opposed these principles as such. They have however, taken offence by the timing chosen for such a controversial reform to take place. Many have argued that with the number of jobs being threatened because of the global economic scenario, this reform would only help to rub salt into industry’s wounds. With higher unemployment, a striving industry and less consumption – the effects on Malta’s economy could be abysmal.
Whereas the majority of commercial establishments consuming less than 20,000 units per year are expected to start paying an extra €286.00 annually on average, those 489 commercial establishments, hotels and industries consuming between 100,001 to 200,000 units annually will start paying an additional average of €2541.24, €3088.80 and €8320 per year respectively. Heavy industries consuming between 5,000,000 and 10,000,000 units annually will have to fork out an average of €234,676 extra per year to keep up with their electricity bills.
The Ministers also warned that the increases have been driven by the assumption that the cost of fuel oil will be decreasing in the current term.
“If fuel oil prices vary by more than 3 per cent of what we expect, we will have to review these rates with the possibility of introducing a further increase,” Gatt, the Minister responsible for Enemalta said.
The announced increase on water tariffs will be negligible for most users consuming less than 6800m3 yearly. However, some of the heavy industries will be paying an extra average of €30,416 per year on water only.
As regards electricity capping, the ministers said this would be completely phased out within the next three years, while the commercial sector will be expected to make up for Enemalta’s lost revenue due to the capping mechanism by paying higher utility rates.
This principle was heavily opposed by GRTU Director-General Vince Farrugia, who recently threatened that if this had to be enacted, he would pass a directive to GRTU members not to pay the percentage amount of their electricity bill equivalent to the subsidy of larger corporations.
Several attempts were made to contact Farrugia yesterday afternoon, but to no avail. GRTU Deputy President Philip Fenech informed this newspaper that Farrugia was abroad on a union mission, and that he was not in a position to answer our questions on whether he is still intent on passing this directive.
When Austin Gatt was confronted on Farrugia’s threat, his reaction was cool, yet sarcastic.
“Vince Farrugia has every right to pass any directive he wishes. We will have to see if his members obey him or otherwise,” he challenged.
Meanwhile, Philip Fenech told us that the GRTU is still analysing figures and that it would come out with an official reaction some time today.
