The power surcharge has been raised to 95%, the ministry for infrastructure, transport and communications announced yesterday.
The surcharge was fixed at 50% for the past eight months. Minister Austin Gatt hinted in parliament on Monday that the surcharge was expected to hover around the 115% mark. With international oil prices reaching an unprecedented record €143 per barrel, Gatt said the real rate of the surcharge, taking into consideration the price of oil at which Enemalta had purchased it, would have stood at 160% without hedging.

Forward-buying had however enabled Enemalta to purchase fuel oil at a lower rate. While this means the applicable surcharge should be 115%, the government said it would increase its subsidy to Enemalta to ease the burden of the surcharge down to 95%.
In the three years 2005-2007 the government paid €72 million in subsidies to keep the surcharge as low as it could. This year it would pay €37 million.
Gatt also said the government will discontinue the system of applying a surcharge over energy bills, and instead apply water and electricity tariffs that “will reflect the new reality we are living.”
He said that before any such radical change would take place, the government will be consulting the social partners in the Malta Council for Economic and Social Development (MCESD) for their suggestions on the new tariffs.
Pending this change, in the next months ahead the government will still be utilising the surcharge mechanism.
The ministry yesterday said that in the last years, the price of crude oil had increased from $40 a barrel in January 2005, reaching $143 in June 2008, an increase of 357%. “This is a price never reached before in the history of the oil market,” Gatt said.
The ministry said the effect of the total expense of fuel oil on Enemalta’s cash flow were very large. The expense for oil for electricity generation had increased from €93.3 million in 2003/4, to €281.1 million this year – an increase of 201%
The last surcharge revision took place in August 2007, which set the rate at 50% when the price of crude oil was at an average of $70 a barrel. Despite the price of oil increasing month after month, Gatt said the government had kept the 50% surcharge stable in the hope that the price oil would stabilise itself.
Gatt said that the energy benefit currently enjoyed by low-income households and the capping on the surcharge for industry and hotels will remain unchanged. 82% of Maltese households can expect to see their bills rise by between €16 and €250 annually, Gatt said.
Labour leader Joseph Muscat yesterday said in a reaction that the government was looking at the issue of electricity as “an accounting exercise” and that the government should have considered the social and economic impact of the surcharge. Muscat said Labour would be discussing alternatives to the government’s decisions.