Energy prices will be frozen next year as Malta stares down the barrel of a global gas-shortage crisis.

Times of Malta is informed that the government is planning to cap the prices that consumers are charged for electricity, as the country’s fuel purchasing agreements draw to a close this winter. A total of €200 million in public funds have been earmarked for the initiative, though the allocated figure might not be fully utilised.

The move comes as European leaders fear the icy repercussions of a winter with a shortage of natural gas. A perfect energy storm has been brewing during 2021, described by government insiders as “the next crisis on the horizon”. A cold winter around the world last year sent demand for gas rising, depleting reserves.

The EU’s stock of spare gas would have normally been replenished over the summer months, however several major players were hamstrung by COVID-19 lockdowns. This led to wholesale gas prices quadrupling over the past year.

Malta, meanwhile, has been largely unaffected by the crisis so far. This is because the country buys the Liquified Natural Gas it needs to run its gas-fired power station at a fixed price of €9.40 per unit. It does this through a seven-year price hedging agreement which will expire at the end of March 2022.

The agreement, signed by former energy minister Konrad Mizzi, has kept utility prices locked. And while, at times, Malta was paying above market rate, the agreement has so far kept the brewing shortage crisis away from the country’s shores. Once the hedging agreement ends, however, Malta will have to purchase the gas it needs at market rates. LNG is currently trading at more than €16 per unit, nearly double Malta’s hedged price.

LNG is currently trading at more than €16 per unit, nearly double Malta’s hedged price

Last month, Brussels announced a “tool box” to tackle the exceptional rise in global energy prices, which it says is projected to last through the winter. Short-term national measures given the green light by the European Commission include emergency income support to households, state aid for companies, and targeted tax reductions.

Government sources said that during talks with EU leaders in recent months, Prime Minister Robert Abela heard how some other member states plan on distributing cheques to households to help mitigate rising tariffs. Malta will instead freeze the prices for households and businesses, making cash injections to Enemalta from the €200 million reserve as needed.

Asked about the risks of the fuel capping and resulting cash injections possibly constituting illegal state aid, sources close to Abela said they were advised to the contrary. Given Malta is the only member state with only one distributor and supplier of energy on the market, there is no risk of unfair competition, they said.

The government will not even be seeking approval from Brussels before introducing the scheme, the sources said. They described the plan as a “short-term intervention”, saying that once prices stabilise, the government would once again seek to enter into a long-term supply agreement.

Meanwhile, Times of Malta last month reported on a shake-up of top brass at the state energy provider.  Energy Minister Miriam Dalli has so far not commented publicly on why she sacked the Enemalta chief executive, the chairman, and a number of board members. But government sources said Dalli and Abela were both unhappy with Enemalta to try to avert the looming energy crisis.

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