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Eurofound's EU PolicyWatch collates information on the responses of government and social partners to the COVID-19 crisis, the war in Ukraine, rising inflation, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.

Factsheet for measure MT-2022-1/2177 Updated – measures in Malta

Energy prices to remain frozen in 2022

Il-prezzijiet tal-enerġija se jibqgħu l-istess fl-2022

Country Malta , applies nationwide
Time period Temporary, 01 January 2022 – 31 December 2022
Context COVID-19, War in Ukraine, Green Transition
Type Other initiatives or policies
Category Responses to inflation
– Support for energy bills
Author Luke Anthony Fiorini (University of Malta) and Eurofound
Measure added 25 February 2022 (updated 05 September 2022)

Background information

Malta makes use of a hedging agreement when purchasing the Liquified Natural Gas it needs to run its gas-fired power station. The current agreement ran for seven years and ended during March - April 2022 (the exact date varies in news reports). Malta also purchases electricity by means of an interconnector between Malta and Sicily.

In November 2021, aware that the hedging agreement was coming to an end, and also aware that there was a shortage of natural gas in Europe, the Government announced that despite this, the price of energy would remain unchanged in 2022.

Worries about the cost of energy were further enhanced by the war in Ukraine that shook global energy markets. Despite this, the cost of energy in Malta has remained unchanged, with individuals and enterprises in Malta paying the same rate of electricity since 2014.

Over the years, such price freezing has not applied to the rate consumers pay for fuel (e.g., petrol, diesel). Despite the volatility of international fuel markets, consumer prices of fuel did not rise in Malta during the first quarter of 2022.

Content of measure

In November 2021, in view of the upcoming expiry of the hedging agreement as well as in the knowledge of an upcoming natural gas crisis, the government announced that €200 million in public funds had been set aside to support Malta's national energy producer, Enemalta. In so doing, prices for households and businesses would remain unchanged during 2022.

Despite the war in the Ukraine, consumer energy prices in Malta have remained unchanged. Whilst Malta does not purchase its gas from Russia, Malta, as with other EU countries, currently faces purchasing its natural gas at elevated prices. When questioned by the media, the Prime Minister, Dr Robert Abela, was described as being evasive when asked if another hedging agreement has been agreed. However, the Economy Minister, Dr Clyde Caruana, when asked about the impact of the war in Ukraine on the economy stated that this had already cost the country €200 million in its first week, citing the additional cost of fuel and cereals, amongst others. It is not clear, however, how this money has been spent.

Furthermore, petrol and diesel prices have not risen despite fluctuating global markets. In this respect, the Prime Minister stated that a decision had been taken to reduce the tax on these, however information on this is lacking.

Updates

The following updates to this measure have been made after it came into effect.

13 August 2022

Amongst the method by which residential properties are billed for electricity, bill payers can benefit from an 'eco-reduction' where the cost of electricity is reduced if users do not exceed set quotas; these vary depending on the number of individuals living within a residence. In their 2023 pre-Budget document, the Malta Chamber (an employer's association), noted that as the Government has frozen electricity prices, it is likely that excessive consumption is also being subsidized by the Government. The Chamber therefore proposed that units that exceed the eco-reduction entitlement should not be subsidized.

Use of measure

The fixed prices benefits all individuals and organisations. No further information is available.

Target groups

Workers Businesses Citizens
Does not apply to workers Applies to all businesses Applies to all citizens

Actors and funding

Actors Funding
National government
National funds

Social partners

Social partners' role in designing the measure and form of involvement:

Trade unions Employers' organisations
Role Unknown Unknown
Form Not applicable Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

  • No involvement
  • Main level of involvement: Unknown

Involvement

Employers were vocal about electricity prices at the beginning of COVID-19. During this period, many organisations saw their income drop and subsequently struggled to cover their expenses, including their energy bills. This resulted in the government introducing an electricity grant. Conversely, currently (Q1 2022), employers have been publicly silent about electricity. This may be due to the Governments’ decision to freeze electricity prices prior to the outbreak of the war in Ukraine. It is also possible that the topic has been discussed in less public forums.

Views and reactions

No views have been expressed publicly on this topic by social partners. However, during a meeting between Malta's newly elected Government and the Malta Chamber, an employer's association, it was reported that employers expressed their concern about the general impact of the war in Ukraine upon the Maltese economy.

A report by S&P, a ratings agency, noted that the cost by which Enemalta purchases energy via the interconnector had increased by 154% in 2021. The interconnector is responsible for 25-30% of Enemalta's needs. Furthermore, it noted that Enemalta was receiving "extraordinary support" from the Government which was taking on Enemalta's exposure to price risks. The report went on to question the sustainability of this practice should challenging market conditions persist.

The Times of Malta also reported that the Government was not concerned about the support being given to Enemalta falling foul to EU state aid regulations, as Malta was the only member state with a single energy distributor and supplier, thus there was no risk of unfair competition.

Sources

  • 21 November 2021: Time of Malta - Energy prices to be frozen in 2022 as gas crisis looms (timesofmalta.com)
  • 09 January 2022: Time of Malta - Wage supplement to be extended for certain sectors (timesofmalta.com)
  • 10 March 2022: Malta Independent - Impact of Ukraine invasion this week projected to cost Malta €200 million more this year - Caruana (www.independent.com.mt)
  • 26 April 2022: Government is stepping in every month to cover Enemalta losses (timesofmalta.com)
  • 28 April 2022: No plans to raise energy tariffs, minister pledges (timesofmalta.com)
  • 13 August 2022: Malta Today - Units that surpass eco-reduction entitlement should not be subsidised, Chamber says (www.maltatoday.com.mt)

Citation

Eurofound (2022), Energy prices to remain frozen in 2022, measure MT-2022-1/2177 (measures in Malta), EU PolicyWatch, Dublin, https://static.eurofound.europa.eu/covid19db/cases/MT-2022-1_2177.html

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