The price stability in the local energy market is now taken for granted by both the general public and the business community. The cushioning of such a major inflationary contributor has brought other factors to the fore with inflation in certain areas, such as daily consumables including food, taking centre stage.
This a major factor impinging on public sentiment. However, as significant as it may be, should Malta have followed the PN’s insistence to quickly phase out energy subsidies, everyone’s attention would have been on the energy market which would, at the moment, be sending shockwaves throughout the entire economic environment in a much more significant way.
We really don’t have to go so far back in time to remember the level of stagnation such a scenario would bring. Rewind to pre-2013 and the last painful PN legislatures, when the country’s consumption patterns used to oscillate with the electricity billing cycle. The largest chunk of household and business disposable income used to go precisely to fund a failed system in a very small market that is very ill-equipped to adapt to sharp international negative fluctuations.
Yes, the plan to significantly raise electricity tariffs has already been hatched. PN leader Bernard Grech himself first proposed, and then staunchly defended, the idea to liberalise the transmission and distribution market. In simple terms, this would mean that the network that is made of infrastructure such as substations, underground and overhead cables, etc, would become owned and operated by private operators, to offer a service, obviously at a profit.
Our bills would include a section for this new surcharged component which would have three main components: infrastructure costs, usually at around 60 per cent; system services, at around 30 per cent; and another 10 per cent to account for network losses.
Such pricing varies across countries, and the smaller the network being served the higher the associated costs with increases that could not only reverse the recent reductions in energy tariffs, but even surpass the exorbitant tariffs associated with past PN administrations. Add to this the phasing out of the current energy subsidies, and all the economic growth experienced over the last ten years would be ground to a halt in no time.
Photo: Daniel Reche