Cushioning surge in energy prices could cost €196 million

Softening the blow of high energy and fuel prices next year could cost the country a whopping €195.5 million, according to the budget estimates.

The amount is equivalent to 1.4% of the country’s GDP.

Energy costs across Europe are rising and forecasts for next year paint a glum picture as tight gas supplies are pushing consumer prices up.

Malta has so far escaped the impact because of a fixed-price agreement Enemalta has with Electrogas for the supply of liquefied natural gas. But this five-year agreement expires in April, effectively ending Malta’s insulation from market volatility.

The prospect of higher electricity and fuel prices looms large on the horizon but Finance Minister Clyde Caruana has pledged to cushion the blow.

In last Monday’s budget, he said government is prepared to increase next year’s deficit by 1.4% to 7% to make good for higher energy and fuel prices.

Electricity prices in Malta have remained stable since 2014, while the State-owned Enemed, which enjoys a quasi-monopoly in the fuel sector, has left the prices of petrol and diesel static since June 2020.

But things may change and Enemalta has already scaled back the use of the interconnector to purchase electricity from mainland Europe because of higher prices on offer.

The matter is of concern at EU level since energy inflation could threaten the fragile post-COVID recovery.

Last Wednesday, the European Commission outlined measures that could be used to combat surging energy prices and said it would explore joint gas purchasing to cushion the spike.

Across the EU gas prices have stifled industrial production and forced household heating bills up. Some EU countries have adopted emergency measures such as cutting energy taxes and providing subsidies for low-income households to cushion the blow.

EU leaders are expected to discuss methods to tackle energy issues at a summit later this month.