Dalli: PN billing proposal punishes businesses by reversing gains

Energy minister Miriam Dalli has insisted a Nationalist Party proposal that would ‘annualise’ electricity bills for businesses, will end up costing commercial operators by removing a progressive scale that reduce electricity tariffs.

Dalli’s reaction came following her appearance on TVM’s Xtra, in which she faced off Nationalist shadow energy minister Ryan Callus over the PN’s campaign to refund €50 million in over-charged residential and commercial energy bills.

The pledge came on top of a National Audit Office report on energy bill samples that found consumers could have paid “extra charges” totalling €6.5 million on their electricity and water bills per year. Dalli said this week that the problem was created under a Nationalist administration due to a legal notice issued in 2009 that mandates bills to be issued every two months.

Asked to explain in further detail her claims on TVM that the PN’s counter-proposal harms business, the energy minister said that by levelling out unit prices for businesses, higher consumers cannot avail themselves of a progressive reduction in unit price the more they consume energy.

“There has been a long-standing political consensus that the commercial billing process should not hinder business growth… the PN strategy does the exact opposite: it disincentivises investment and endangers jobs and takes us back to the times when electricity tariffs were stifling growth,” Dalli told MaltaToday.

Working out the commercial tariff

The commercial tariff has nine bands to it, where the first five tariffs increase with consumption but then reduce progressively through the remaining four bands. That makes these last four bands significantly cheaper than the first five.

Dalli insists that with the PN’s proposal, businesses will first be charged for all the ‘expensive’ tariff bands before they can start benefiting from the cheaper units.

“Electricity tariffs for businesses increase progressively up to the first 60,000 units per year, reaching the peak price. When this amount is reached, tariffs start decreasing and for every additional unit, businesses pay lower rate,” she said.

Now according to the current system, bills for businesses are issued on a monthly basis. That means that it is the units consumed in each particular month that get distributed over the various bands, making it likely for high-consumption businesses to surpass the threshold allowing them benefit from the cheaper tariffs.

“With the PN’s proposed annualisation method, businesses will be forced to consume all of the more expensive bands before they can benefit from the cheaper bands. This means that Maltese and Gozitan businesses will continue to pay higher rates for a longer period and it will take them much longer to reach the lower tariffs when compared to the current system,” Dalli said.

The energy minister provided as an example a small business – a butcher’s shop or a small mechanic’s garage, or even a small restaurant or mid-sized mall – that consumes 200 units a day, which typically would pay anything between €800-€1,200 every month. At peak unit, these customers will pay 15c per unit – under the PN’s annualised system, Dalli says they would first have to consume all units at 16c1 before reaching the 15c rate. “This shift between bands will cause an increase of 7.5% in the cost of the peak units,” she insisted.

In a further example where businesses such as supermarkets, schools or elderly care homes are paying around €8,000 per month for some 2,000 units a day, Dalli sets the peak unit price at 14c. “With the PN proposal, the shift between bands will result in a peak price of 16c1 – an increase of 15% when compared to the current system,” she said.

In yet another example for larger companies employing over 50 workers like hotels or steel-making factories, again the PN’s proposal forces the companies to suffer the 16c-unit prices before benefiting from the lower rates of 15c, 14c and 13c – as opposed to the current system wherein tariffs start decreasing and for every additional unit.

“With the PN proposal, these customers would probably never benefit from the lowest rate of 10c8 as their consumption would have been distributed over the more expensive bands. The end result is thousands more in electricity bills,” Dalli told MaltaToday.

“Labour takes well-thought and studied decisions because it believes any change needs to be just and fair. It’s useless giving businesses pennies if this is going to cost them pounds. Any decision should ensure that livelihoods are protected, jobs are safeguarded and customers enjoys stability and peace of mind,” Dalli said.

PN reaction

Opposition MP Ryan Callus however has a different take on Dalli’s claims. “Labour has tried to create a deviation tactic following the injustice highlighted by the PN, involving residential and domestic households utility bills.”

The PN’s attack is on the way a new Labour administration started issuing actual bills every two months after 2013, as opposed to estimate bills which would have provided, back then, the opportunity to correct any additional charges issued over unused cheaper units.

“As residential consumers, families were additionally deprived of the eco-reduction benefit created under a PN administration which incentives diligent consumers, due to this anomaly currently in force,” Callus said.

But what about the PN’s proposal to level out units over an annual period? Callus says that when he spoke about commercial bills, he was referring to lower usage consumers.

“Minister Dalli decided to ignore this sector, referring only to the bigger commercial consumer (above 60,000 units a year).

“The smaller commercial consumer, such as the retail shop or services provider, will nonetheless continue to be ripped off. There is a probability that businesses that consume 85 units per day or less are being overcharged. It is evident that the minister has not understood this, and has in fact failed to provide examples of lower consuming commercial consumers.”

Callus says the PN will address this kind of commercial consumer, “but not by the one-size-fits-all being suggested by the Labour government.”

Callus also referred to recent Eurostat data placing Malta’s commercial rates as the fifth highest amongst all member states.

“Even worse, when one considers the pricing per unit of electricity without the tax contribution, this would make our enterprises pay the second highest electricity rates from amongst the 27 member states.

“This proves that we are paying our energy supplier - Electrogas and possibly Shangai Electric - the second highest price for electricity in Europe, and that the Electrogas contract is what’s detrimental to our enterprises’ competitiveness. Therefore, a Nationalist Government will address both the anomaly for low commercial consumers and the high price of electricity paid by commercial consumers.”

“We will not raise anyone’s bills, as the minister is implying, but give back €50 million stolen from the consumer and stop this injustice by addressing the billing mechanism.”