Issue link: https://maltatoday.uberflip.com/i/721047
maltatoday, WEDNESDAY, 31 AUGUST 2016 10 Opinion …or, to put the same question another way: why did we even bother joining the European Union, if we never had any intention of enacting the most basic principles upon which that union was founded? Like competition, for instance. I have this memory of former Prime Minister Eddie Fenech Adami visiting the Magro Bros factory in Gozo, at some point before the 2003 referendum. At the time, Opposition leader Alfred Sant was sounding alarm bells over the imminent collapse of Malta's entire agricultural and industrial sectors… arguing that a small family-run tomato products factory in Gozo couldn't possibly compete on a level playing with industrial giants like Italy's Cirio. Fenech Adami countered this by saying that local firms such as Magro Bros – among other examples that now escape my memory – were not afraid of competition; they were willing to invest, to rise to the challenge, to endure and to compete, etc.. Up to a point, both these opposite views seem to have been vindicated. Some sectors of local industry did indeed cope admirably with the new market dynamics; they diversified their range of products and services, and managed to retain a faithful clientele. I, for one, would choose a local brand of 'kunserva' over an Italian variety any day… not out of any misplaced patriotism, but simply because local tomato products are indeed a lot better than their imported equivalents. (And Maltese kunserva just happens to be, hands down, the best in the goddamn Universe). By that token, what I suppose Fenech Adami really meant – and if so, I agree with him 100% – was that only those companies which actually had a product worth buying, could withstand the competition of a free market. In theory, this implies that part of what Sant said was also true. Local firms or companies selling inferior products or services – many of which have only survived because of decades of State protectionism – now have to either pull their socks up and improve their standards… or face bankruptcy. That was the deal on offer when we joined the EU in 2004. Those were the implications of signing that Accession Treaty… and though not everyone agreed at the time (47% voted against), we can't really complain that we didn't know what we were going in for. By voting 'yes' in that referendum, we collectively agreed that the State should no longer intervene to allow inferior local products to enjoy an unhealthy monopoly to the detriment of the consumer. What we only discovered afterwards, of course, was that this only applied to private enterprises run by private entrepreneurs. When it comes to monopolies enjoyed by State-owned entities… the simple truth is that we may as well not have joined the EU at all. As far as the consumer of energy in Malta goes, there has simply been no benefit from EU membership in any shape, manner or form. When the Gonzi administration raised electricity prices by a whopping 110% in 2011, the long-suffering Maltese consumer could not simply switch to another service provider… as any of his European equivalents would do under similar circumstances. Meanwhile, the lack of competition also meant that Enemalta had no incentive to ever improve its service. It could (and in fact did, for many years) charge more for a lousier service… without having to worry about losing customers to competitors as a result. So in the end, what we got was a partial EU membership instead of the Full Monty. You can buy as many foreign tomato products as you like… and pasta, and toothpaste, and chocolate, and pretty much anything else – but just like any old former Iron Curtain country, you still have to buy your water and electricity from a protected State agency. Why? Why is Enemalta allowed to retain an unfair, unjust monopoly that f lies in the face of everything the EU is supposed to be about? And why do we all simply accept the status quo, as if it were the only possible reality? As with several other things, the official answer is that Malta negotiated a 'special derogation' insofar as energy production and distribution are concerned. If true, it would be particularly odious… because Enemalta enjoys more than just one monopoly in the energy sector. In f lat defiance of European law, it owns 100% of the country's energy production capability, as well as 100% of Malta's only energy grid. Enemalta is in fact the only European utilities provider to enjoy unassailable control on all aspects of the energy sector, to the exclusion of anyone else. Personally, however, I am not at all convinced that any such derogation actually exists, or is still applicable today. This, for instance, is from a 2008 report by the Brussels-based 'New European': "Energy monopolies like Enemalta could not continue to produce and distribute energy at the same time, as this is considered by the EU as harming competition. Instead, the Commission wanted energy companies to sell off their electricity grids to third parties in order to have more competition in the distribution network of energy." The report goes on to observe that "the Maltese minister responsible for energy, George Pullicino, and the EU's Energy Commissioner Andris Piebalgs met in Brussels where the Commission granted Malta a special status in which the new rules would not apply to it. Malta argued that although in principle it agreed with more openness and liberalisation, the island's situation dictated otherwise as it was not possible for Malta to have different operators for the production and distribution of energy..." Incredibly, the European Commission actually swallowed that argument, in spite of overwhelming evidence to the contrary. What on earth did the Maltese government mean with, 'it is not possible for Malta to have different operators' in the energy sector?' Malta DOES have different operators… and that is just one of two major changes which have dramatically re- landscaped the entire energy sector since 2006. Today, there are numerous private producers of renewable energy in Malta: wind farms, solar farms, etc. The government even encourages such endeavours through tax incentives, as they help Malta achieve its renewable energy target of 10% by 2020. Contrary to Malta's official line with the Commission, plenty of different operators now exist… but unlike any where else in Europe, they are not at liberty to sell their product directly on the market. They have to sell it to Enemalta, which in turn sells it to us. Again I ask: why? Why can't we just cut out the middleman – Enemalta – and purchase that power directly from source? Part of the answer is that Enemalta owns the distribution network… but, for reasons outlined above, that is not exactly very helpful or satisfactory. Enemalta should NOT own the grid… it is actually illegal according to European law. The only reason Malta gets away with this gross anomaly is because it claims – falsely – that Enemalta is the only local producer; and that the market cannot sustain any other. To appreciate just how nonsensical that argument really is, all you have to do is look under 'energy providers' on any business directory. You will find that Malta can, and does, sustain several such entities… all of which could, and should, be in direct competition with Enemalta. So if the European Commission followed its own directives (which it very clearly doesn't)… it should be insisting that Malta liberalises the distribution network, so that all those other firms would, in fact, be able to compete. Meanwhile there is another reason for the Commission to reconsider any derogation that unfairly protects Enemalta from competition: the interconnector, which now enables Enemalta – and ONLY Enemalta – to purchase energy directly from other parts of Europe. This changes the ball-game considerably. In 2013, a former Enemalta engineer named Joe Pace pointed out that, with the interconnector between Sicily and Malta now in place, there is no longer any legal basis for the Commission to tolerate Enemalta's monopoly. "The justification for this derogation was that Malta is a small isolated system and less than five per cent of the annual electricity consumption is obtained through interconnections with other systems," he wrote in the Times. Yet in February 2015, the European Commission itself predicted that "Malta's interconnection level would go from 0% to approximately 35% with the new interconnector." Got that, folks? We have a derogation that allows Enemalta to retain its monopoly, only if it imports less than five percent of its energy from overseas. And at the same time, we are told that Enemalta will soon (if it hasn't already started) be importing no less than 35% from foreign sources. That's seven times the amount specified in the derogation. So can anyone tell me why Enemalta is still allowed to keep a harmful, unhealthy stranglehold on all aspects of power production and distribution in this country… when the conditions justif ying the derogation are clearly no longer in place? Aside from the obvious reason, of course: i.e., that we all know Enemalta wouldn't last five minutes, if consumers were actually given a choice. Raphael Vassallo Why does Enemalta still have a monopoly?