Malta's electricity prices have not gone up but Eurostat claims otherwise. Why?

It is confusing but households have used more electricity which means more of it is paid at prices in higher tariff bands

Malta's increased in average electricity prices are most likely due to an increase in the amount of electricity being used by households
Malta's increased in average electricity prices are most likely due to an increase in the amount of electricity being used by households

Eurostat figures published on Wednesday confirmed that Maltese households are paying among the lowest electricity rates across the EU.

But the statistics also showed that Maltese electricity prices increased by 7.1% between the second semester of 2016 and the same period in 2017.

According to Eurostat, electricity prices in Malta stood at €0.1274/kWh in 2016 and at €0.1364/kWh in 2017 – a 7.1% increase, which was the third highest across the bloc.

During the period, tariffs in Malta's monopolistic environment have not budged, which begs the question as to how Eurostat reached its conclusion.

Higher consumption

The most logical explanation for this, given that there was no increase in electricity tariffs, is that this is due to the fact that household electricity consumption has been continuously on the rise in recent years.

"The figure quoted by Eurostat shows a discrepancy due to the fact that overall consumption is rising from one year to another. As households' annual consumption increases, as can be witnessed through annual rise in demand, the average price per kWh quoted by Eurostat increases as  the higher consumption impinges on the higher bands," Enemalta chairman Frederick Azzopardi told MaltaToday when contacted about the apparent contradiction.

In fact, previous Eurostat releases on household electricity prices have shown Maltese prices increasing, despite there having been no change to the country’s tariffs.

According to Eurostat's methodology, for the purposes of the statistics ‘electricity prices’ refers to the average price per kWh paid by households with an annual consumption of between 2,500kWh and 5,000kWh, including taxes. The prices are weighted by national household consumption to give the EU averages.

In Malta, the first 2,000kWh consumed by households annually are paid at a rate of €0.1047/kWh, while the subsequent 4,000kWh (in other, words a households consumption from 2,001kWh to 6,000kWh) is paid at €0.1298/kWh.

To illustrate how this can lead to a higher average price per kWh, one could take a hypothetical scenario in which a household uses 2,500kWh every year.

This household is paying for 2,000kWh at the lowest rate (0.1047c/kWh), and the next 500kWh at the second highest rate (0.1298/kWh) resulting in an annual bill of €274.30. This household pays €209.40 for the first 2,000 kWh and €64.90 for the remaining 500kWh.

This means that the average price of electricity for this hypothetical household is €0.115/kWh.

An increase in consumption of 1000kWh over one year for this household would see it pay for this additional consumption at the higher rate. The first 2,000kWh would still cost the consumer €209.40, while the remaining 1500kWh would cost €194.70, bringing the total to €404.10, which is equivalent to an average of €0.121/kWh.

Therefore a household whose consumption increases from 2,500kWh to 3,500kWh in one year would experience a 5.2% increase in the price of electricity per kWh, despite there not being any change in the tariff with which it is calculated.

The working definition of a household according to Eurostat "consists of one or more people who live in the same dwelling and also share meals or living accomodation, and may consist of a single family or some other grouping of people".

As such, it is unclear whether the statistics only include customers paying residential rates, or whether they also include those paying domestic rates, which are higher.

Electricity prices have been in the news lately after it was revealed that the billing system used was resulting in some users paying more than they were obliged to for their electricity.

The Prime Minister, the Energy minister and the Nationalist Party have all requested that the regulator and relevant authorities investigate the claims.