Issue link: https://maltatoday.uberflip.com/i/573382
maltatoday, SUNDAY, 20 SEPTEMBER 2015 10 News AN increase in the international price of oil remains an unlikely prospect for the present, according to most international analysts. This is because OPEC, the oil production cartel that is dominated by Saudi Arabia, refuses to cut the supply of oil even in spite of falling prices. Restricting the supply would raise prices; but if prices remain low for a year or longer, the Saudis may find it difficult to persuade other OPEC members to keep steady in the face of financial strains. And this may eventually push prices up again, even if executives think it will be years before oil returns to $90 or $100 a barrel, which was pretty much the norm over the last decade. So how would business organi- sations calling for a reduction of tariffs to reflect the falling price of oil, now expect the government to react if energy prices go up again all of a sudden? The Chamber of Commerce ac- tually has come up with a creative solution, urging the government to give consumers a choice be- tween having their tariffs fixed for a number of months, and therefore rescinding the benefits of any drop in prices; or opting for a variable tariff based on the fluctuations of the international price, and so risk a bump if energy prices rise again. It is hedging for consumers. Last week the Chamber, together with the GRTU, the chamber of small enterprises, called for further reductions in utility bills over and above the 25% reduction in tariffs, which came in place for business earlier on this year. "The Chamber keeps rigorous tabs on the fluctuations of energy prices across Europe and beyond… it is for all to see that the interna- tional price of oil has decreased." Additionally it pointed out that the cost of production has gone down since investments made by Enemalta resulted in a more effi- cient infrastructure, apart from the installation of the interconnector with Europe. The Chamber however says that it may not be that all businesses prefer price stability, to fluctuations in the price of energy. Businesses would make this choice "accord- ing to the needs and realities facing the particular business". In this way the tariff system they propose will still be beneficial to "operators that are bound by forward contracts in terms of their sales", who in fact need price stability. The Chamber's proposal of a dual tariff dates back to a five-year-old report, and now they want to see a dual tariff even after the shift to natural gas, when Enemalta will start buying LNG at a fixed price for the first seven years of an 18- year contract. Asked what it would expect the government to do if international prices go up again, GRTU president Paul Abela however would still ex- pect that Malta's energy prices re- main among the most competitive in Europe. He contends that if prices go up again, "the GRTU would expect the government to go to the MCESD and explain how it intends to pro- ceed, and seek the endorsement of social partners." "The international oil price start- ed going down mid-2014, however prices were adjusted several months later, in the second quarter of 2015. When prices were revised we still did not benefit from the full drop of the international prices. Additional reductions have therefore been due for over a year now." The GRTU therefore expects the government to make a "balanced decision" and would still expect that Malta's energy prices would be "among the most competitive and not the highest among European countries". Unlike the Chamber of Com- merce, the GRTU has also quanti- fied the reduction it expects from the government, demanding a further 30% reduction. Paul Abela contends that the GRTU carried out an analysis based on "data and information that is available pub- licly". The GRTU claims the international price of oil has since last year on average been reduced by half, and that the elec- tricity the government bought from the inter- connector costs an aver- age 4c to 7c per kWh. "This is much less than what the government had projected to have to pay when buying energy. The other element is the savings that have been made from the operation of the BWSC. This was said to re- sult in savings of millions of euros every year." So shouldn't the savings Enemalta makes from the fall in oil prices, be used to strengthen its finances? The Chamber's spokesperson says that businesses should not be pay for past mistakes and inefficiencies, however much they understood the financial predicament of Enemalta. "We value healthy and sustainable government finances, but at the same time, the government needs to appreciate that the country needs to remain competitive." He pointed out that companies in the rest of Europe were benefit- ting from cheaper utility rates and more attractive conditions for in- vestment. "The value forfeited by Enemalta due to cheaper energy prices, would be compensated for by the generation of jobs as a result of Malta remaining competitive." Paul Abela insists that the fact that it is consumers who pay for En- emalta's debt, then more transpar- ency is needed on how the corpora- tion's debts are reflected in pricing mechanisms. "Who is paying the debt? It cannot simply decide not to pass on its savings to pay for its debt. Enemalta has been made eve- rybody's problem because everyone has been paying for its inefficiencies and debt for a very long time. The least that can be done since every- one is shouldering the responsibil- ity is to be transparent and consult social partners as representatives of society." He also said businesses had done tremendous sacrifices to cover their electricity costs throughout the year and some have inevitably fallen back and never recovered. "The decision of what is done with the savings made by Enemalta must be taken together with social part- ners." Abela added that it was in the "na- tional interest" to know what users are actually for, and that Enemalta was legally obliged to submit its pricing intentions and justification to the Malta Resources Authority as the regulator. "Users must know what they are paying for. So far the price mechanism of electricity was never disclosed and this practice must change." While welcoming the 25% reduc- tion in energy prices back in March, for Paul Abela the issue ultimately boils down to competitiveness. "Re- ducing the price of electricity will make our enterprises more com- petitive and this is something that is badly needed." Since energy prices represent the highest operational cost of an en- terprise one can never accept that the electricity prices in Malta are higher than those in other Member States. As long as Malta's energy costs are higher, EU companies would have an advantage on Mal- tese companies that makes them more competitive. But the Chamber of Commerce also adds that it wants to see a 5% reduction of utility bills for water by 5%, despite evidence showing that the price of water does not reflect the environmental costs of extract- ing it. MCAST reserves the right to accept or refuse in part or in whole, any or all tenders submitted. Malta College of Arts, Science and Technology Administration Building, MCAST Main Campus, Corradino Hill, Paola PLA 9032. T: 2398 7100 F: 2398 7316 E: tenders@mcast.edu.mt www.mcast.edu.mt Invitation to tender Operational Programme II – Cohesion Policy 2007-2013 Empowering People for More Jobs and a Better Quality of Life Project part-financed by the European Union European Social Fund (ESF) Co-financing rate: 85% EU Funds; 15% National Funds Investing in your future MCAST T. 25/2015 TENDER FOR THE DESIGN, PROOFREADING AND PRINTING OF COURSE RELATED MATERIAL USING ENVIRONMENTALLY SOURCED PAPER Tender documents may be requested by email (on the email address below) or collected from the Purchasing Department at the MCAST Administration Building (at the address below), from Monday to Friday, from 08:30hrs to 16:30hrs. Tenders should be placed in the pre-addressed envelope and deposited in the appropriate tender box at the MCAST Administration Building, at the address below, by no later than Monday 28th September 2015 at 11:00hrs. The Principal of the Malta College of Arts, Science and Technology notifies that offers from interested parties will be received for: EUROPEAN SOCIAL FUND 3.102 The GRTU and Chamber of Commerce want more cuts to utility bills because of the falling price of oil. Would they, JAMES DEBONO asks, accept higher bills when the oil price rises again? Paul Abela: GRTU says Enemalta's savings should be passed on to users Businesses and tariffs: When a 25% reduction is just 'not enough'