Judge upholds claim that ARMS bill calculations are illegal

In a decision expected to have a strong ripple effect on consumers, a judge has declared that the method used by national utilities company ARMS to bill consumers for their electricity consumption was not only incorrect, but illegal.

This emerged in a judgement handed down yesterday by Madam Justice Anna Felice, presiding the First Hall of the Civil Court, deciding a case filed by two consumers against ARMS in 2017.

The plaintiffs had taken ARMS to court, claiming that the bills as calculated and issued by the company were “disloyal and misleading” after they noticed that between September 2016 and September 2017 they had been billed on a pro-rata annual basis.

The legal notice regulating electricity supply, however, explicitly stipulates that while residential buildings were to be billed on the annual cumulative consumption, which could be calculated on a pro-rata basis, that calculation had to reflect the actual amount consumed during that year.

The legal notice also provides for the payment of refunds or requests for extra payments depending on the actual consumption, pointed out the plaintiffs.

The judge observed that, on the basis of a decision taken by the government in 2010, ARMS would issue six bills every year, on a bi-monthly basis. It would calculate consumption by dividing pro-rata the five different categories established in the billing tariff included in the legal notice. “In other words, the amount of kilowatt-hours or units in every scale, is divided equally by six and every bill is calculated on the basis of a sixth of the kilowatt-hours in every scale,” said the judge.

This, together with the fact that no annual reconciliation was carried out, meant that the system opened consumers up to the possibility of being overcharged. This would happen if, during the annual period used to calculate electricity consumption, the consumer did not use enough units to qualify for a higher payment scale, but had consumed over a sixth of the units of the preceding scale in a single two-month billing period.

The plaintiff’s lawyer, Maxilene Pace, argued that the method used by ARMS to calculate electricity consumption for billing purposes was in breach of the regulations themselves, as well as being in breach of European consumer protection law. The court was asked to order the company to pay damages.

The court also heard the testimony of ARMS Director and former Enemalta CEO Engineer Frederick Azzopardi, who explained to the judge that ARMS had been created in 2009 to issue water and electricity bills and collect the relative payments from consumers.

Azzopardi said that ARMS lacked the administrative powers to change the amount billed or take decisions when the bills it issues are disputed. Disputes were referred to Enemalta plc or the Water Services Corporation for resolution, as required, he explained.

But the court also noted that when the plaintiffs had started to complain to ARMS about the way bills were being calculated, Azzopardi had offered them a sum of money to settle the dispute, which they had refused and proceeded with their court action.

Madam Justice Felice, after carrying out a close examination of all the evidence exhibited in this case, as well as the relevant sections of the Regulations cited, said she “could not but reach the conclusion that the plaintiffs are right in saying that the defendant is going against that laid down in the regulations when it issues bills solely on a pro-rata basis, without also taking the cumulative annual consumption into account.” 

Bills could be issued every two months and the tariff could be worked out pro-rata for the purposes covering that bill, said the judge, “but still, at the end of the day, the consumption has to be taken on an annual, cumulative basis.”

“Not only this, but the defendant’s interpretation could lead to a lack of transparency in the way consumption is calculated, in that the defendant, or whoever takes decisions, could one day decide to issue more or less bills in a single year, or issue a different number of bills to different consumers, and naturally the pro-rata computation will vary in such a way that the consumer can never have peace of mind on how his consumption will be calculated,”  observed the judge, adding that this was unlikely to have been the legislator’s intention.

The judge also upheld the plaintiff’s argument that ARMS was also in breach of the Energy Efficiency Regulations which spoke of “all fitting information” being made available with the bill, in order to provide the consumer with a comprehensive account of his or her current energy consumption.

Those same regulations stipulated that “bills must be issued on the basis of the actual consumption at least once a year and the information on the accounts must be made available at least once every three months,” noted the judge, ordering ARMS to review the account in question and refund any amounts overpaid.

Government and Opposition react

In a press statement issued in the wake of the judgement, the PN spokesman for Energy and Enterprise, Mark Anthony Sammut said that the PN’s long-held claim that ARMS’ billing process, introduced in 2014, was illegal had been borne out by the judgement.

"This confirms that the excuse used by the government, that this billing system was a result of a Legal Notice introduced by a PN government in 2009 is simply a lie. The court clearly declared that the method used by the Labour government in 2014 is in breach of that Legal Notice and not a result of following it.”

The PN maintained its position that the annual adjustment should apply to everyone and that every affected consumer be refunded, not just those who filed court proceedings to recover overpaid amounts.

In a statement issued by the Ministry for the Environment, Energy and Enterprise, it claimed that “the legal notice in question was introduced in 2009 and that the only change since then had been the 25% reduction in bills.” 

The ministry said it was “finalising all the aspects to put into force a new Legal Notice regulating utility bills, as promised in the Budget for this year.”

“The Court’s ruling issued in the last hours will be analysed, and what was promised in this year’s budget should in no way prejudice any action that may still be taken,” warned the Ministry, before insisting that it was the current PL government “that truly protects the consumers and has shown credibility in the energy sector,” arguing that Maltese consumers still have some of the lowest bills in the EU, in spite of the pressures of the pandemic and the Russian invasion of Ukraine.