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News | Wednesday, 21 October 2009

GRTU calls on government to revise electricity revision formula

Charlot Zahra

GRTU Director-General Vince Farrugia has called on the Government to revise the formula under which electricity prices are currently revised. This was one of the promises that the Government had made to the GRTU a year ago when the two sides had finally agreed on the retail electricity tariffs in December 2008.
“We disagreed with the mechanism that was adopted for the introduction of the power tariffs last October,” Farrugia told Business Today during a press conference on Monday outlining the GRTU’s proposals for the forthcoming budget. “We had asked for the mechanism to be studied before being implemented,” he insisted.
“I appeal also to the Opposition to put pressure on the Government to re-examine the mechanism that has been adopted for the fuel tariffs,” the GRTU boss told Business Today.
When the initial set of tariffs in October last year were published, the Government had forced small businesses to subsidise the larger ones by bundling them together to phase out capping.
This had led the GRTU to issue a directive to all its members not to pay that part of the tariff which was going to subsidise the capping for large industries.
“We were not against capping per se, but you cannot put a surcharge of 25-29 per cent on top of the electricity tariffs make good for the capping of the large industries,” Farrugia insisted. That first request was accepted by Infrastructure Minister Austin Gatt.
However, GRTU’s second request, “which has not been acceded to, was for a wholesome review of Enemalta Corporation’s capital projects to see how these money are spent,” Farrugia explained.
He added: “We’re not saying that we should not renew the power station and not carry out an review of Enemalta’s costings, but we wanted to be informed.”
For instance, Farrugia explained, when the Ministry decided on a rate of return of capital of 7.9 per cent, the GRTU asked: “How has the Government decided on a return on capital of 7.9 per cent, when we are already saddled with these tariffs?”
“If you are going to charge me so much money on return on capital, could you, dear Mr Government, tell us how are you going to spend all this money?” he asked.
“Could you kindly include us in the decisions that are made by Enemalta on its procurement in this respect, so that we are aware of what is taking place?” Farrugia insisted. “Our request so far has not been acceded to” the GRTU boss lamented.
Moreover, when an increase in electricity is requested by Enemalta, the MRA should inform the users that such a request has been made and publish the studies that have been effected by the Resources Regulator in relationship with that request.
Another promise that has not been implemented by the Government has been the introduction of night tariffs for those enterprises who consume a lot of electricity at night, such as supermarkets.
“After the boom of the prices with the increase of cereals a year ago, retailers have been hit by the wave caused by the new electricity tariffs,” Farrugia explained.
“We appeal on Government to give some breath to these retailers with the introduction of a low night tariff. Enemalta can surely shoulder that, and then prices would not increase,” he insisted.
“That’s why the inflation rate is high!” Farrugia insisted. “There is no economic evidence that the retailer is to blame for the high inflation rate in Malta,” he added.
There were bottlenecks at the pixkerija and the pitkalija, the multiplier effect caused by the electricity tariffs on services, as well as the high price of diesel, the GRTU chief insisted.
Asked by Business Today about the situation at Enemalta, he insisted that the electricity corporation was “currently carrying a lot of burdens, as the recent reports have shown, both in the power station as well as in the management structure”.
“Who’s going to move?” Farrugia asked. “Enemalta is like a sacred cow! “Try to move some of the manpower structure at the power station and there will be a deluge!” he warned.
“If there is the need to cut jobs, then we must do so!” the GRTU Director-General insisted. “Otherwise we will end up paying up more tax not to touch anybody!
If Enemalta had to be managed on purely commercial lines and without any interference from the Government, “it would move much better!” Farrugia insisted. “However, as GRTU, we’re not calling for its privatisation,” he added.
As an economist, “I have strong doubts as to whether that privatisation of Government entities like MIA has led to more competition and a reduction in prices,” the GRTU boss told Business Today. “You only need to go to the airport to see this.
“The only people who are benefiting are MIA shareholders, who are now receiving dividends,” Farrugia added.
Enemalta’s procurement structure also left much to be desired, he explained, “as it is not as transparent as the EU requires it to be and open according to the requirements of the Small Business Act.
“Today it’s becoming even more difficult for small entrepreneurs to bid for Enemalta contracts – the current procurement system works against them,” Farrugia told Business Today.

czahra@mediatoday.com.mt

 

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21 October 2009
ISSUE NO. 604

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