Fabian Demicoli

Analysis of Utility Rate Tariffs

Consultation Paper issued by :KPMG Advisory Unit

                                                

On behalf of the clients: Enemalta Corporation – Water Services Corporation

                                                 

The analysis is based on the figures provided and no verification of the said figures has been made. We accordingly hold no responsibility for any further figures issued on the basis of these figures. We have tried to provide a constructive approach together with a mitigation plan , once again based on the figures provided at this stage

 

 

                                                                                                               

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because we deserve better"

Introduction

 

The Corporations themselves set the terms of reference and are the final payers of the study presented by KPMG. In itself this creates a conflict of interest vis a vis the end user of their services. This matter should have been overseen by the Regulator, the Malta Resources Authority, at all its stages.

 

Any changes in tariff price structures by these Corporations need the end approval of the Malta Resources Authority as the Regulator.

 

        Terms of Reference provided to KPMG

They did not include for a socio economic impact and neither a mitigation plan. They are also based on total recovery of costs and also future investment totaling 450.6 million between 2008 and 2012.

 

  • 1. Figures have not been verified in any manner and some basic figures are totally lacking in order to make a direct comparison.
  • 2. Discussions /meeting were held only with Corporations themselves and Government Entities (entities not specified). No meetings were held with stakeholder and as a result no mitigation plan was done or foreseen.

 

 

The EU Market

 

The market is now liberalized across The EU in respect to Energy . Figures in Italy alone show a decrease of 27% in the last calendar year despite the increase of oil price.  An EU citizen living in Malta is disadvantaged, due to lack of the competitive ability to source his energy resource as has now become normal practice across the EU.

 

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because   we deserve better"

 

The lack of initiatives not taken in the past in respect to alternative energies by irresponsible authorities now has to be forked out by the public, trade, commerce, industry and the entertainment and hospitality, industry at large and especially small enterprises.

 

The introduction of the surcharge was outlined by Government at earlier stages to be a temporary one. Enemalta and Water Services Corporation are now removing this concept completely and including this as part of a standard tariff procedure.

 

Figures in  short :

Total Costs Enemalta                                  365,392,594

 

This includes :

Return on Capital Employed                        22,431,623

 

GRTU recommends that this figure is not to be included in recovery of costs at this stage, thus allowing a direct reduction of approx 6% as tariffs as proposed by KPMG.

 

Revenue to be based on                                       342,960,971

 

Revenue to be based on this figure when this figure is audited to be correct.

 

No of Accounts   Households                      209,048

No of Accounts   Non residential                   41,855

 

Households

 

Domestic up to 3000units   Users  117003   Increase over 100%

Over 3000 to 20,000 units   Users    92045  Increase 28%to 40%

 

To be noted is the fact that these figures are given as average and as such these could end up to be misleading from many aspects.

 

 

 

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because   we deserve better"

 

Current revenue for variable receipts is not identified in the report.

 

Target Revenue for Residential/Households

Installations projected             2,758,365

Fixed (meter rent)                  17,918,400

Variable ( units)                   126,658,927

 

Total                                     147,335,692

 

The options provided by KPMG are no different, the base rate of each unit increases where Eco Rebates are being recommended, but the cumulative revenue by the Corporation remains neutral. (pg96/97)

 

Option 2 would be best suited for Residential if the figures given are correct.

 

Domestic Tariffs             The way forward

 

The way forward is based on the acceptance of the "Pay as you use principle" However it is to be noted that Malta currently lacks the infrastructure to allow its EU citizens the right to choose their energy supplier so this has to be considered when final tariffs are issued and agreed to.

 

GRTU recommends the following for Domestic Tariffs :

  1. Two basis of tariffs

a) A guaranteed price option for a minimal of 365 days. This will

    place users on a safer ground and they could plan at least for

    a calendar year. Whilst Enemalta has a right to hedge and

    dictate its basis for a long term, then the citizen should also

    the same right.

    This is a greater need in Malta where the EU Citizen does not

    Have access to the competitive market.

 

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because   we deserve better"

 

 

b) Alternative Multitier option with introduction of Peak hour Use,

    Intermediate   and Off Peak metering.

 

  • 2) Introduction of Electronic Payments against a discounted facility

Electronic bill sending also to be introduced thus reducing costs and also become more environment sensitive.

 

  • 3) Introduction of Rebates on Installation of Solar Heaters and

Photovoltaic Panels, with rebates covering minimally 70% of outlayed capital. Rebate to be given 50% through billing structure

Over 365 days and 50% in payment.

 

These rebates should be recovered through Schemes which were earmarked for use by MRA in their plan set out for Malta in respect to Renewable Energy Initiatives provided to the Commission in October 2007 and approved. 

 

  • 4) The establishment of a threshold for households depending on the

Individuals in the home. Tariffs are to be structured on this basis so that we primarily opt to conserve energy use. We need to make sure that use of electricity in units does not surpass a basis year 2005. 

 

  • 5) Conserving the use of energy is vital in making sure the above

is reached and that is why Energy Audits should be a must in households , certified by an Engineer. Energy Audited residences

should be given 50% of the cost of the audit in payment terms.

 

  • 6) The introduction by Enemalta of a loyalty card for those who

Use less then their established bench mark. The loyalty card would include a point structure that can be utilized by the end user for purchases from "Enemalta Major Partners"

 

Major partners would include providers of services or products.

 

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because   we deserve better"

 

 

The Non Residential Sector

 

Enemalta are expecting an income of  CircaEuros 217,731,926 from this category of customers. There are 41, 855 users in this category.

 

The Schedule below shows the average amount of Kwh used , their current average payment, their projected increase in monetary terms and percentage and the amount of users in this category.

.

Kwh

Current

Projected

Percentage

Daily

Projected

Users

 

 

Increase

Increase

Cost (C)

Daily C

 

-4000

357

403

Over 100%

0.98

2.08

 

4k-8k

1028

428

41%

2.82

3.99

 

8k-12k

1699

465

27%

4.65

5.93

 

12-20k

2705

539

19.9%

7.42

8.88

36874

20-40k

4712

593

12.5%

12.90

14.53

2349

40-60k

8165

862

10.5%

22.36

24.73

906

60-80k

11605

1237

10.6%

31.79

35.18

474

80-100

14797

1585

10.7%

40.53

44.88

232

100/200

22932

2217

9.7%

62.82

68.90

489

200/400

47423

3867

8.1%

129.92

140.52

247

400/600

83130

6273

7.5%

227.75

244.93

107

600/800

119163

8701

7.3%

326.47

350.30

52

800/1m

150798

10832

7.1%

413.14

442.82

22

1m-5m

297527

15301

5%

815

857

82

5m-10m

1004400

33427

3.3%

2751

2843

14

Ov 10m

1971926

47684

2.4%

5402

5533

7

 

 

 

 

 

 

 

 

 

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because   we deserve better"

 

Notes to the above Schedule

 

The amounts given are in Euros.

It is not known whether the 120 capped industry / hotels  are reflected in this report from an income point of view.

KVah units only affect 142 customers beyond 80-100k bracket.

The report does not include a breakdown of users below 20,000units

 

Capping

Whilst it is understood that capping is both not environmentally friendly and discriminatory, the report does not outline the total value in monetary terms that has been capped and thus paid by other commercial sector and industry. A report yesterday quoted as the surcharge level decreasing to 75% instead of present 95% if this capping was not in force.

 

Meter Rent

Three Phase

The meter rent now increased from Euros 55.90 to Euros 420  (4200accounts) thus increasing rent by 1 Euro per day.

Single Phase

The meter rent now increased from Euros 55.90 to Euros 420

(37,797 accounts) thus increasing rent by 1 Euro a day.

 

Mitigation Proposals

The costs are to be based on 6% less then the projected income of Euro 217 million. The Economy is currently not to include a 6% return on investment. Thus this would reduce recovery costs to App Euro 204 million.

 

Unlike other countries the commercial sector does not have an option of choice. The brunt of the current situation should not be borne solely by the  Non Residential users. It has been the responsibility of government through its Energy Corporation Enemalta to live up to its responsibility of providing a service at par with its EU counterparts  Non residential customers in the EU have a choice.

 

 

 

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because   we deserve better"

 

 

The proposal here includes a total alignment to EU Directives but on the other side the public and the non residential sector is being deprived of its right to a liberalized market.

 

While Subsidies on Electricity and Water  are not acceptable, there are no rules against providing funds from other sources in astructured manner through Eco driven incentives to make sure that users can meet their obligations , by actually paying the said billing.

 

Mitigation Initiatives for Industry/ Commerce/ Hotels/ Non residential

 

  1. Bench Mark use of these services at basis year 2005.
  2. Audits to be made by certified engineers and  payment for audit to be given in credits to all above sectors.
  3. A rebate mechanism of up to a maximum of 70% on installations of Photovoltaics and also solar energy. Other renewable energy sources to be considered according to the related sector.

This rebate is to be given back 50% by deduction in billing and 50% by payment.

Once again MRA has approved Schemes under EU funding , to provide for these payments.

  1. Non residential accounts to have a voluntary Euro 20 addition to

Their annual billing with a view of using these funds to provide Eco Driven initiatives to the same non industrial sector.

    

  1. MEPA to undertake that all buildings over 1000sq metres are to

Minimally meet the Energy Efficiency in Buildings Directive ,and further to be energy sufficient in their needs. This would mean having providers to the grid instead of the other way round. 

    

 

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because   we deserve better"

 

 

  1. The removal of the capping will without fail have an impact on

These 120 companies/ hotels. GRTU recommends that these are Energy Audited with immediate effect and recommendations are made before end of this calendar year. The costof these recommendations are to be studied by Enemalta and a structured rebate system over 10 years is to be agreed to with these industries.

 

  1. Enemalta to enter into agreements with Alternative Energy

Suppliers through a tendering process. These agreements would include price structures for products to be made available to the non residential sector at preferred rates. This would thus reduce the possibility of individual buying procedures.

 

  1. Enemalta should also offer a standard choice rate of tariffs and a

Multi tier choice of tariffs to Non residential Sector . Bench Marks should be based on 2005 annual consumption

 

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because  we deserve better"

 WATER TARIFFS

 

On the basis of the Electricity Report this study is also based on figures that have not been verified and further more this study should have been done by the Regulator and not by the Water Services Corporation. This any resulting information produced in this recommendation are deemed to be discriminatory in nature.

 

Water Cost            20,000,000 cbm @Euro .934

 

Total Recovery Projected by WSC : Euros 50,787,633.

 

Recovery includes 11.11 million for future investments (target 7.945 return on current capital employed) thus 21.8 % of total projections.

 

Electricity Costs are only Euro 10.71 million thus 21% of total cost. To note is that there is also the return on investment which is not at present included in this sum.

 

In related terms the surcharge here should have been applied on this 21% percent factor only not on the whole billing.

 

Also to note is the increase in distribution costs by 71% from basis year 2006.

 

Revenue is projected as follows :

Installations                   Fixed                    Variable      Users

1,269,691                      16,252,042          33,265,899   242, 918

 

GRTU

 

ANALYSIS OF UTILITY RATE TARIFFS

 

"because   we deserve better"

 

Current rental fees              Current          Projected

Residential                     Euros 27.95         

Non Res                         Euros 55.89

 

Residential Accounts               199,409      56.00

Non Residential Accounts          43,509     120.00

 

Domestic  Increase ( 2person household)

 

M3 QTY

Current

Projected

Percentage

Monetary

Users

Less then 33cbm

42.53

80.32

88.8%

37.79

Register for event
[contact-form-7 404 "Not Found"]
-->

What we can do for you

INFORMATION POINT

BUSINESS SERVICES

MEMBERSHIP BENEFITS

LOCAL ISSUES & LEGISLATION

B2B NETWORKING EVENTS

LEGAL ADVICE

FUNDING ASSISTANCE

COURSES

BECOME A MEMBER

The Malta Chamber of SMEs represents over 7,000 members from over 90 different sectors which in their majority are either small or medium sized companies, and such issues like the one we're experiencing right now, it's important to be united. Malta Chamber of SMEs offers a number of different services tailored to its members' individual requirements' and necessities. These range from general services offered to all members to more individual & bespoke services catered for specific requirements.

A membership with Malta Chamber of SMEs will guarantee that you are constantly updated and informed with different opportunities which will directly benefit your business and help you grow. It also entails you to a number of services which in their majority are free of charge and offered exclusively to its members (in their majority all free of charge).