Updated | Mizzi insists power station ‘necessary’ as MP hits out at electricity strategy

Energy minister Konrad Mizzi was forced to defend his flagship LNG power station project, fending off warnings by the Opposition benches that the government is contractually tying the state down into purchasing electricity at an expensive.

“There is no other way around it; if the power station project falls through, then we’d have to return to a heavy fuel oil power-generating system and raise electricity tariffs,” Mizzi said during a parliamentary debate on the energy sector ahead of a vote on next year’s Budget. “It will be a monumental project that will improve the quality of life for residents of the South. Removing heavy fuel oil from energy production will reduce carbon dioxide emissions by a million tonnes, reduce chimney dust emissions by 90% and total air pollutant emissions by half.”

Earlier, shadow energy minister Marthese Portelli claimed that Enemalta can purchase electricity from the interconnector at a cheaper rate than the 9c6 per unit rate at which it is contracted to buy electricity from the ElectroGas consortium behind the power station.

In contrast, she said that the daily average price of electricity form the interconnector currently stands at 4c7 per unit, at 5c1 during peak hours and 4c1 during off-peak hours.

“The government has contractually tied itself down into purchasing electricity from the new LNG power station at a rate of 9c6 per unit for the next 18 years,” she said.

However, Mizzi retorted that electricity prices from the interconnector fluctuate between 4c and 18c per unit, depending on the demand in Sicily, and this over and above extra fees such as congestion charges, trader scheduling charges, maintenance costs and insurance fees.

“The interconnector is a healthy part of our energy mix, but energy demand tends to be at its highest in Sicily when it is at its highest in Sicily, which means that it will be at its most expensive when we need it most,” he said, adding that the Maltese government is pressuring Rome to set up an interconnector between Sicly and mainland Italy, that will allow Malta to be connected to the European grid.

Moreover, he pointed out that Enemalta is only contracted to purchase electricity from ElectroGas at a flat rate of 9c6 per unit for the first five years of the project. After five years, the price will be based on a “market-based strategy based on the price of crude oil”.

The ElectroGas project will offer a source of gas for both the BWSC power station and the LNG power station. The tanker is currently in Singapore being refiftted for safety controls. It will be a temporary measure, and it will eventually be replaced by a gas pipeline and we have now awarded a tender for a route identification between Malta and Gela.

In response to criticism from Opposition MP Toni Bezzina about a LNG storage tanker that will be berthed inside Marsaxlokk Harbour as part of the power station project, Mizzi insisted that the tanker –currently docked in Singapore for repairs- is simply a temporary measure until a gas pipeline is set up between Malta and Gela, Sicily.

Fresh fuel price reduction due for April

Mizzi defended the government’s fuel reduction strategy as one based on “stability” and announced his intentions to cut costs even further in April, 2016.

“You cannot compare fuel prices on a monthly basis,” in criticism of Portelli, who had earlier compared fuel prices between Malta and Luxembourg on a month to month basis. “Throughout the current legislature as a whole, Malta’s fuel prices were 11c cheaper than the EU average, while diesel prices were about equal to the EU average. Both petrol and diesel are 19c cheaper than they were under the previous administration.

As of January, the price of petrol will drop by 3c per litre and that of diesel will drop by 4c.

During her speech, Portelli rebutted Joseph Muscat’s warning about the volatility of the crude oil market, by citing a recent quarterly report by the World Bank in which it lowered its 2015 forecast for crude oil from $57 per barrel in its July report to $52 per barrel.
The World Bank’s revised forecasts were based off an oil market glut, slower global growth in China and other emerging markets, and expectations that Iranian oil exports will increase following the lifting of international sanctions.
Portelli accused the government of “hypocrisy” over fuel prices, arguing that its pledge to reduce fuel prices in January contrasts with the finance minister’s claim that fuel prices should remain high as a means to discourage traffic.
“Will the government reduce fuel prices in January because traffic would have magically disappeared by then?” she asked mockingly. “By any chance, has it entered another secret hedging deal as it had with SOCAR?”
She condemned the government’s secrecy in the energy sector, questioning why Mizzi has repeatedly refused to publish a list of his consultants and a list of direct orders granted by his ministry. 

Enemalta's financial reports for 2012, 2013 and 2014 have also not been published. 

She pointed out that DMV Kema, a consultancy firm that had advised Labour over its energy policy prior to the 2013 election, was last year awarded a direct order to support policy consultation.

“Mizzi had refused to answer a journalist’s questions as to why the contract was awarded through direct order and not through a tender,” Portelli recounted.

She claimed that the government is saving around €4 million by delaying fuel prices reduction until January, “equivalent to the Café Premier bailout”.

“Muscat had said on Tuesday that he wants Malta to reach Luxembourg’s level, which is of course positive,” she said. “However, diesel is 23c cheaper in Luxembourg than it is in Malta, while petrol is 13c cheaper.

“Moreover, the average annual wage in Malta is about €16,000, while in Luxembourg it is over €32,000 – a salary of the type enjoyed here by Muscat’s clique.”