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Raising water and electricity tariffs was never going to be an easy task but with the help of government-administered hype on the rising international price of crude oil in the latter part of 2004, Government had managed to convince the general public about the need to increase utility rates to stave off what was being described as a financial catastrophe for Enemalta.
Ever since August, when the first warning shots were fired by Investments Minister Austin Gatt, the public was gradually massaged into believing that Enemalta was purchasing crude oil at the exorbitant prices quoted on the international markets.
The budget came and after a rather long preamble in which he insisted the new measures were more socially just than Alfred Sant’s price revisions in 1997, Prime Minister Lawrence Gonzi announced a 17 per cent surcharge on water and electricity bills.
There was little murmur from the social partners, who had been briefed of Government’s intentions four days before the budget. But what seemed to be a relatively soft landing for such a tough measure soon turned out to be a slippery slope.
This newspaper discovered that Enemalta never imported crude oil for generating electricity and the fuel oil it did use to burn in the Marsa and Delimara power stations was cheaper in 2004 than it was in 2003.
With the price of fuel oil rarely imitating the same price fluctuations of crude oil it was unlikely that in 2005 Enemalta was going to suffer the losses Government had been quoting. In Parliament Gonzi quantified Enemalta’s losses for 2005 in the region of Lm16 million.
He blamed the situation on rising oil prices and also quoted the price of Brent crude oil to justify the surcharge.
The deception was too good to last. Government was quantifying Enemalta’s losses and additional costs utilising 1999 (the year when tariffs were last reviewed downwards) as a benchmark. This meant that the surcharge was not introduced to recoup losses that are expected to accrue because of any rise, real or imagined, in the price of fuel oil for 2005 but to make up for Enemalta’s financial shortfall since 1999.
The Investments Ministry came out with all its guns blazing to shoot down MaltaToday’s story.
To no avail, the very same report commissioned by the ministry and compiled by PricewaterhouseCoopers confirmed that fuel oil cost less in 2004 than it did in 2003 and for the purposes of calculating a surcharge, Government was using 1999 as a benchmark rather than the price of crude oil as had been often quoted by Minster Austin Gatt prior to the budget.
In a week’s time the surcharge will come into force and while consumers brace themselves for higher utility bills the social partners are still waiting for a meeting of the Malta Council for Economic and Social Development to be convened to discuss the oil surcharge.
They will be demanding a proper explanation from Government on the real reasons behind the introduction of the surcharge after being deceived into believing that it was a necessary measure because of rising crude oil prices.
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