Issue link: https://maltatoday.uberflip.com/i/1504886
3 maltatoday | WEDNESDAY • 2 AUGUST 2023 NEWS Government wants to postpone electricity distribution liberalisation to 2035 JAMES DEBONO MALTA is seeking to extend an exemption it has from EU rules requiring competition in elec- tricity distribution, Energy Min- ister Miriam Dalli has strongly hinted. Electricity distribution is to- day the sole prerogative of En- emalta, a state majority-owned company. Dalli was speaking on TVM's Xtra last Monday in a debate with Opposition spokesperson Mark Anthony Sammut, when she hinted government will seek an extension beyond the 2027 deadline. The issue came to the fore after the Opposition proposed the liberalisation of the elec- tricity distribution network in its reaction to the recent spate of electricity outages. The gov- ernment has criticised the pro- posal, insisting it will lead to higher utility bills. Malta's derogation from Ar- ticle 4 of a directive regulat- ing the energy market, which obliges member states to en- sure consumers can "purchase electricity from the supplier of their choice" will expire on 5 July 2027. But Article 66 of the same directive specifies that this period may be "extended for a further additional period, not exceeding eight years". The extension will still require the seal of approval from the Euro- pean Commission. Malta was the only country in the EU to be granted this der- ogation. On Xtra, Sammut accused the government of "burying its head in the sand" by not pre- paring for the 2027 exemption deadline. But Dalli accused the Oppo- sition of "having given up al- ready" on making a strong case for extending the derogation. Dalli insisted liberalisation in the distribution sector would result in higher utility bills. The minister also referred to past occasions where the EU had heeded Malta's arguments exempting it from other rules in the energy sector due to the country's exceptional circum- stances. Sammut argued that in view of the 2027 deadline the gov- ernment should focus on regu- lating the liberalised sector by imposing conditions on private operators like automatic com- pensation in the event of power cuts. The PN's call to liberalise energy distribution echoed a similar call made by the Cham- ber of Commerce in its budget proposals which also referred to the expiry of the derogation in 2027. Malta's EU exemptions Malta along with Cyprus and Luxembourg was also ex- empted from Article 43 of the directive which bans energy providers like Enemalta from involvement in the distribution of energy. The latter deroga- tion which has no expiry date ensures Enemalta can contin- ue producing and distributing electricity even if the sector is liberalised. Back in 2008 when Malta was negotiating the derogations, government sources had told the Times of Malta that liber- alisation in the sector is "eco- nomically unfeasible due to economies of scale". The report had quoted a Eu- ropean Commission spokes- person saying that Brussels had accepted Malta's arguments "that the island cannot have more than one supplier and distributor given its small size". The directive which amended previous EU regulations was approved in 2019. Apart from the derogations granted to Malta, Cyprus and Luxembourg the directive al- lows the Commission to grant exemptions to member States "which can demonstrate that there are substantial problems for the operation of their small connected systems and small isolated systems". The directive specifically mentions Corsica, a French island, as a region which can apply for a derogation from Article 4. How energy markets work In liberalised energy markets, different companies can access and use the shared grid infra- structure to deliver electricity to customers. The energy consumers re- ceive will be the same, regard- less of the chosen company as it all comes from the same grid. The UK was a pioneer in the process of liberalisation, which began in the late 1990s. While initially liberalisation led to a reduction in electricity prices, this was followed by a rapid in- crease. Energy companies were al- so accused of using deceptive tactics to persuade consumers, particularly vulnerable groups like the elderly to switch to their services. These tactics included misleading pricing information, false claims about potential savings, and aggres- sive or misleading sales tech- niques. The current hike in energy prices following the Ukraine war has also thrown the spot- light on the EU's energy poli- cies. In March the European Trade Union Confederation which represents 45 million mem- bers, had called on the EU to reconsider the liberalisation of the sector, which it claims has "contributed to exacerbating the energy price crisis." The ETUC called on the EU to enshrine the right of access to affordable energy as a hu- man right and to consider the distribution infrastructure "as a common good and not as a market commodity". Instead of the liberalised market the ETUC proposed a "single buyer model" consist- ing of a publicly owned entity that would purchase electricity from energy producers through long-term power agreements, allowing a planned approach to the energy transition and sta- ble prices for consumers. The Commission is current- ly considering a new directive aimed at increasing protection for vulnerable customers from being disconnected from the distrubution system but is not reconsidering the liberalisation of the sector. There are currently more than 2,500 distribution system operators across Europe rang- ing in size and scope from a few thousand to over 10 mil- lion customers and from small geographic areas up to whole countries. But the electrici- ty market in the smallest EU member states is still dominat- ed by larger companies. Although energy distribution in Cyprus has already been for- mally liberalised, with the pos- sibility of retail supply firms operating in a competitive market, the Electricity Author- ity of Cyprus (EAC) still holds most of the retail supply. In Luxembourg Encevo the main energy company controls the two main energy retailers; Eno- vos and LEO as well as Creos, the grid operator. Like Malta Cyprus and Lux- embourg were exempted from an article in the directive which precludes energy providers like Enemalta from having a stake in the distribution of electric- ity. A derogation blocking private companies from competing with Enemalta in electricity distribution will expire in 2027 but may be extended until 2035 if the European Commission accepts Malta's case PN spokesperson Mark Anthony Sammut clashed with energy minister Miriam Dalli on numerous subjects raised on Xtra