Easygas supports multi-flag system for gas cylinder distribution

The smaller player in Malta's LPG (liquefied petroleum gas) cylinder duopoly has welcomed a proposal by the Malta Resources Authority to retain the so-called 'multi-flag' system of gas distributors retaining territorial exclusivity around various parts of the island.

Easygas said the proposal will offer all customers around Malta the choice of cylinders on each truck with a one-stop shop system, allowing consumers to purchase either Liquigas or Easygas cylinders from one gas cylinder distributor and select the preferred product without the need to wait for other distributors.

Without a direct source of natural gas, Maltese consumers have to buy LPG cylinders from delivery trucks that service various parts of the island.

But market leader Liquigas, which determines the price of LPG on the market, wants to defend its right to have its own distributors servicing the island with Liquigas cylinders.

Easygas says the multi-flag system reduces distribution costs incurred by any company in the LPG business, and that the system can be improved by keeping distributors accountable on price and customer satisfaction.

"A 24/7 emergency service proposed by the MRA is also a step forward for customer safety, a proposal Easygas welcomes as a positive step," the company said.

Liquigas 'ideal system'

Liquigas has defended its right to a universal gas cylinder distribution licence, which covers the whole Maltese territory, saying the licence was issued by the MRA as a prerequisite for its €25 million investment which included the building and operation of a new LPG facility in Benghisa and which allowed for the closure and dismantling of the outdated Qajjenza plant.

"We will defend our legitimate right to retain this licence," Liquigas said after an MRA announcement that it would ensure territorial exclusivity for independent gas distributors that service the entire island.

"This goes against the ideal model for consumers, preferred by Liquigas, which includes various distribution streams, each competing to deliver the best service possible. The newly implemented direct distribution model operated by Liquigas, whereby customers phone Liquigas Call Centre on 2165 1661/5 (available 24/7), is already providing numerous benefits, including a delivery system that ensures all consumers are served with gas at a convenient time and at the normal and correct price," the company said.

Liquigas said the MRA's proposal would stop this service for Maltese consumers, which it said was especially helpful for the elderly and for those living in the peripheral 'hard to reach' areas. "This new distribution model is running in parallel with the door-to-door distribution service operated by the other distributors. This Liquigas service competes with the established distribution system and has already proved effective in ensuring that existing distributors improve their service levels," Liquigas said.

The Malta Resources Authority will start a public consultation on a policy decision by the government to retain the door-to-door retail of liquefied petroleum gas (LPG) in cylinders, "as a service of general economic interest".

Public consultation

The government said it wants to retain gas cylinder distributors as a universal service throughout Malta and Gozo so that LPG can be provided at a uniform price while offering consumers a choice of LPG cylinders.

The MRA said it will be proposing changes to the structure of the LPG retail market and propose the amendments to current holders of authorisations to retail LPG cylinders.

LPG sold in cylinders is crucial to Maltese households since there is no availability of natural gas on the market, nor are consumers serviced by a distribution grid as available in other European states.

Malta has an above-average energy poverty when compared to the EU, particularly with regards heating needs where the number of households unable to keep their home adequately warm has doubled since 2005 amounting to 21.7% of the whole population in 2011 according to the Survey on Income and Living Conditions (SILC) published by the National Statistics Office (NSO) in 2012.

Energy poverty is more pronounced within the more vulnerable sections of the Maltese population, particularly but not exclusively, low-income earners, the elderly and single parent households.

In Malta, Liquigas enjoys dominance over a two-player market of gas importers, having "disproportionate control" over the value chain of distribution, the MRA said.

The MRA said that without independent distributors, Liquigas would have less of an incentive to invest adequately in its own distribution networks, and further reinforce the barrier to new market operators.

"The separation of distribution activities from activities of production and supply will better allow for unrestricted access to new market entrants to end consumers, and likewise ensure that end consumers are in a position to freely choose their suppliers," the MRA said.

"It is paramount that end consumers enjoy the right to be supplied with LPG portable cylinder irrespective of their geographical location at reasonable, easily and clearly comparable, transparent and nondiscriminatory prices."

The period of consultation lasts until Friday, 6th December 2013.