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With the budget round the corner, government will decide on Tuesday whether to raise water and electricity bills by some 102 per cent or raise fuel prices yet again. GRTU Director-General Vince Farrugia says his organisation will accept none of the two options and is calling on the EU to stop new tariffs 
Vince Farrugia doesn’t mind picking up a good fight with the government, but unlike his 1995 crusade against VAT, representing a motley crowd of tax evading self-employed whose worst case scenario was about to mean declaring their earnings for the first time, this time round he can say the entire population is enraged by the imminent hardships.
The director-general of the Chamber of Small and Medium Enterprises, better known as GRTU, is in his new temporary offices in St Zachary Street in Valletta until his headquarters get restored. On one of the bookshelves beside him there is an old gun with an axe fixed to the end of the barrel. In Farrugia’s fuming mode, it is not a desirable tool to have nearby, but luckily it is only ornamental.
“It came with the furniture when we rented the place,” Farrugia reassures me.
As I enter his office, he is on the telephone trying to get hold of the head of the EU delegation in Malta, Joanna Drake, while holding a bunch of EU directives printed in front of him. What he intends to do, it transpires, is to get the European Commission to stop the Maltese government from raising water and electricity tariffs.
“I want the EU to intervene,” he says. “I want them to tell government to cease and desist from raising these tariffs. They’re breaking EU directives.”
The water and electricity surcharge, which according to Austin Gatt will most likely rise to 102 per cent, is really a euphemism, according to Farrugia.
“It’s a tariff, it won’t go down and nobody believes the government,” the director-general says. “We disagree that the role of Enemalta is to buy fuel at any price on the international market and to pass on to the consumers. Enemalta is a State monopoly, and because of this it should be doing something else. Why on earth should we employ people at high salaries at Enemalta if their job is to transmit what exists internationally to little Malta? They should be the buffer, the protectors of the small Maltese economy, especially the small enterprises I represent.”
Equally shocking is the mix-up in figures of Enemalta’s projected losses next year because of the international rise in fuel. Gatt said the energy company will be Lm50 million in the red, Parliamentary Secretary Tonio Fenech told GRTU and other social partners it will have a shortfall of around Lm15 million.
In Farrugia’s analysis of Gatt’s own figures, the tariffs increases today should be “anything between 20 to 50 per cent, not 102 per cent”.
“So am I paying this tariff not only because of the inefficiencies of the power stations in the burning of fuels and over manning, but because of the incompetence of Enemalta to buy correctly and obtain the right advice? There is no issue about the international price of diesel, petrol and kerosene, except the past issues. We’re not confident that Enemalta, in relation to the price of fuel, is fulfilling its obligation under EU directives which force it to report and be transparent in the way it is billing its fuels. That is one side of the problem. Whatever else Gatt’s ministry is saying – and I’m concerned that the ministry is speaking as it shouldn’t be speaking about electricity and fuel tariffs – it is the responsibility of something called the Malta Resources Authority, the regulator according to EU directives, and these people are absent, completely absent.”
Farrugia has a lot to say about Enemalta’s inefficiencies and deficient vision. He barely gives you a chance to end your question as soon as he starts firing his verbose answers. But he is as highly critical of the authority that is supposed to be regulating it, including new tariffs and fuel procurement – the Malta Resources Authority – which has remained conspicuously absent from the fuel controversy.
How does he explain that?
“I don’t know. I know that for a long time there wasn’t even an energy regulator because the chairman resigned and it took them a lot of time to appoint another one, but at law it is not the individual but the authority which is responsible for regulation. There are very specific powers and obligations binding the authority, it is up to the regulatory authority to receive Enemalta’s proposals, to establish on behalf of the consumers and SMEs that there is full transparency in the generation of electricity, that is including the purchasing of the fuels, the transmission, the efficiency in running power stations, efficiency in the utilisation of fuels, in the distribution network… everything has to be assessed according to EU rules.”
And for all he knows this is not happening.
“No. It only happened up to a point. Malta Resources Authority, just a couple of years back, did what it was obliged to do, that is instigating a study by one of the leading accountancy firms, and that study was meant to identify the inefficiencies, loss of fuel, theft from the distribution network, over-manning, and all the difficulties facing Enemalta. Even the technological defects of the system, which is largely outdated, had to be analysed. We’ve got a highly outdated power station in Marsa with a very poor energy efficiency of only 25 per cent. The other one at Delimara is also technologically old and not up to EU standards. So the regulator instigated this study but up to now we don’t even know what the study states and what action was taken upon it.”
The separation of the regulator from the operator is best exemplified in Maltacom and the Malta Communications Authority, Farrugia says. Because the authority there is doing its job, Maltacom cannot just raise its tariffs at its will, cover up its inefficiencies or hide its profits. With Enemalta, it is Austin Gatt and the prime minister who are deciding the tariffs, while keeping all the information secret. Gatt told Farrugia last week that in order to meet Enemalta’s committee which buys fuel from the international market, he had to pay a bank guarantee and sign a non-disclosure contract as the information was too sensitive.
“I didn’t know who these people on Enemalta’s procurement committee were, now I know, they are the best experts on the islands, and I would like them to come over to MCESD and explain themselves. One is a lecturer at University, Professor Joe Falzon, then there is Saviour Briffa from the Central Bank, and Enemalta’s financial controller Pippo Pandolfino. But if these people are not qualified enough then we should buy expertise. We’re not talking here about the purchase of a few crates of banana for the hospital. This is big money we’re talking about and energy is so essential.
“We’re now in the EU, so we cannot continue working as we did in the old days,” Farrugia said. “We cannot have Enemalta, the government and the regulator all in one entity. There has to be a complete separation between the producer and the regulator, both in public and private business. Everything has to be transparent, to the regulator of course, but the regulator is by EU directives working specifically in the interest of all the consumers and small enterprises. The fact that Enemalta is still 100 per cent owned by government does not exclude it from this responsibility.”
Enemalta’s secret information also means that nobody knows how much profit the company is making when selling fuel to petrol stations.
“No, we don’t know,” Farrugia says. “I hope the Malta Resources Authority knows, if they don’t know then they are greatly at fault. I would like to believe that the regulator knows and is satisfied that everything is correct. But I have no idea of Enemalta’s profit margins, I just hope there are no problems there, because we do no longer trust the Maltese regulator and we’re now going to the EU regulator. We’re going straight to Brussels. We were waiting for the office of the EU director to be established properly in Malta again so that they start acting as they should do, and that is breathing down the necks of Maltese regulators.”
Before even speaking of new tariffs, Farrugia says, government should come up with a strategic plan to upgrade the old Marsa and Delimara power stations.
“Why is everyone restructuring except Enemalta?” he says.
Farrugia believes government should stick to its deficit targets and Euro adoption programme despite the fuel price hikes.
“We’ve already proposed to government to liberalise the taxation regime, push from below and give a greater spin to the economy to move faster. This country is sitting on a lot of resources, most of which belong to the state, which do not even feature on the accounts as assets. Take the Grand Harbour. The chief of Enemalta opens his office window overlooking the fantastic harbour every morning and he sees a dead quay. There are sinking ships and rusting vessels there. It’s one of the great properties that are totally unused and which can be put on the market to change its plants, but there is no imagination at all. The easiest job of our politicians is to send the bill to the Maltese taxpayers and pass on all the costs on them, at a time when there is no more money in the taxpayers’ pockets. Government entities are sitting on a lot of sites which on their books appear as liabilities but can be turned into cash cows to generate new economic wealth and allow the state to reinvest. But government is made of grey people with no imagination at all. Maltese entrepreneurs have lost faith in Malta, and please quote me on this. They are investing in the Ukraine, in Tunisia, everywhere but not in Malta.”
Ultimately, Farrugia says, any tariff increase now will be the price to pay for government’s indecision.
“I cannot understand why last year, when they introduced this euphemism called surcharge, action was not taken immediately to start taking the options available in terms of purchasing of fuel.”
Blaming former minister Josef Bonnici for “politicising the issue of hedging,” Farrugia insists there are three options which Enemalta should have adopted last year.
“You can hedge, that is to block a price, you take an insurance cover, and then you buy fuel on the market at a higher price and get the difference from the insurance company. Then there is the other option in which you pay a premium which gives you the chance to buy at the price you’ve tied, but if it goes down you lose, so it’s a bit of a gamble, but if you go down more than the premium you don’t lose anything. And it gives you also security.
“The third option is what they call a ‘collar’, where you tie to a range of prices. If prices rise beyond your highest range, then again you will be supported because you will buy at the highest tie, if it’s below you don’t benefit, but that would cover you. Any prudent manager should have taken all these three options and adopted a mixture of them.”
For electricity consumers, GRTU is proposing that Enemalta introduces different tariffs during the day, on the same lines as Maltacom’s differentiation between peak times and cheap hours.
“Why not give us a cheap tariff in the night, as Maltacom does? Power stations are running 24 hours a day but they’re underutilised at night, giving no incentive to consumers shift their patterns and reduce Enemalta’s overall fuel consumption. We won’t accept a 100 per cent tariff, definitely. Nobody will convince me it’s not to cover Enemalta’s inefficiencies. Passing it all on the consumer is not acceptable either. This is the sum total of government’s indecision. I honestly cannot understand why it took them a year to start thinking seriously about hedging and other solutions.”
As to the small businesses he represents, Farrugia’s categorical message is: “Hands off diesel”.
“We see already the consequences of what is happening with diesel. I represent a wide cross section of people in transport, small manufacturers, sprayers… these people are literally breaking their backs to pay the price of fuel as it is today. When they put kerosene on the same level of diesel and they did not provide a suitable alternative, light heating oil, it is not acceptable. Our message to government is clear: its solutions are fundamentally wrong, the economy will go down. They have to think much more, remove the grey people from government, talk to entrepreneurs and stop this bureaucracy-driven style of government.”
A man he seems to like from government is Tonio Fenech, but only as an accountant.
“I like Tonio Fenech but the less he talks about the economy the better. He’s essentially an accountant so he should stick to accounts. The same applied with John Dalli and he used to feel offended whenever I told him so. They’re damn good accountants but lousy economists.”
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