How energy consumption near tariff band is costing households more

Maltese households with an annual electricity consumption closer to tariff band limits are likely to be paying more for their electricity, according to the results of a limited investigation carried out by MaltaToday.

Meanwhile, residences used seasonally or at irregular intervals, as well as those households that frequently receive ‘no reading’ bills, are almost certain to be paying significantly more for their electricity than they should.

Enemalta provides electricity to consumers, while ARMS, a government agency, administers the billing process. ARMS’ billing system was recently cast into the spotlight after economist Marie Briguglio started looking into complaints on social media by people who had noticed an increase in their electricity bills.

The story was picked up by the Malta Independent and after further investigation, it was revealed that ARMS was billing customers on a pro-rata basis, with bills being sent out every two months, causing consumers to be charged at a higher rate.

According to the First Schedule of the Electricity Market Regulations (S.L 545.01), consumers must be billed at 10.47c for every kWh for the first 2,000kWh used, at 12.98c for every kWh of the next 4,000kWh, 16.07c per kWh on the next 4,000kWh, 34.20c for the next 10,000kWh and at 60.76c for any consumption after that.

The law also allows for consumers to be billed on a pro-rata basis but does not oblige ARMS to refund users who have paid more than they should have over a period of 12 months.

The reason some customers might require a refund is that when ARMS bills customers every two months, it also divides their annual quota by six and spreads it equally over the six bills customers will be receiving in one calendar year.

This means that consumers cannot divide their quota of electricity at the lowest tariff over a twelve-month period as is required by their consumption pattern, but rather must contend with roughly 333 units at the lowest rate every two months.

In order to get an indication of how much more people could be paying, MaltaToday considered three distinct hypothetical scenarios for a household’s annual consumption pattern and calculated the amount due in one year if the total was calculated on the basis of six bi-monthly bills.

Different levels of annual consumption were considered in order to determine how the discrepancy changed with consumption.

Year-round use peaking in summer

In the first, a household’s consumption pattern over a year was modelled over national electricity generation statistics for 2016.

While it is not being claimed that household consumption is identical to national electricity generation, like many households, national consumption increases in hot summer months, and reaches its lowest point in the spring.

In this example, the maximum fluctuation between the lowest consumption month and the highest was roughly 37%. Households using 2000kWh a year were found to be paying a negligible 0.9% more for their electricity, equivalent to €1.92 a year.

Calculated bills for consumption between 3,000kWh and 5,000kWh were found to be equal to the amount payable for a 12-month period. Households using 9,000kWh were found to be paying roughly €24 extra, going up to €85 for those using 10,000kWh and €251.7 in households with an albeit very high consumption of 20,000kWh.

No-reading bills

The second pattern considered was one in which a household had an identical pattern of consumption to the first, but where it received a “no-reading” bill.

Some consumers have reported problems with no reading bills because when this happens, the consumption for a billing period can get added to the next billing period, resulting in a household paying for the consumption of four months using a quota for two months.

In this case, consumers were always found to be paying more for their electricity, irrespective of how much electricity they used.

Those using 2,000kWh were found to be paying €10.06, or 4.7% more, increasing to €114.17 or 6.7% in households with an annual consumption of 6,000kWh, and up to an extra €1,441.5 if consumption exceeds 20,000kWh in one year.

Seasonally-used residences

Perhaps the biggest difference was noted when analysing a scenario in which a residence is used for four months in a year.

The number of residences such a consumption pattern would apply to is unclear. However, in cases where it does, the differences are significant, especially at higher levels of consumption.

A 1000 kWh consumption, consumers would be paying an 6% or €7 on a €104 bill, going up to roughly €200 if €4,000kWh are used.

The situation with ARMS’ billing procedure is further compounded by the fact that billing periods vary according to customer as do complications related to no reading bills and estimate bills.

Meanwhile, ARMS has insisted that its billing system has not been altered since 2009 and did not suggest that it was open to introducing a refund system similar to that used for income tax calculations.

Both the Prime Minister and Energy minister have said that they had requested an investigation by ARMS into the allegations being made.