The PN’s contradiction on energy liberalisation

Malta’s energy debate is slipping into the realm of political convenience rather than economic coherence. The Nationalist Party (PN) has been unequivocal in its support for the liberalisation of the electricity distribution system. Yet, its proposal to abolish the electricity service charge, commonly known as the ‘meter rent’, exposes a fundamental contradiction at the heart of its own energy policy.

Malta benefits from a special EU derogation that allows it to delay full liberalisation of its electricity market until 2035. This exception recognises the country’s small size, limited economies of scale and unique infrastructure challenges. In effect, Malta has been granted time to plan, to invest and to transition carefully.

The PN, however, appears eager to accelerate this process, advocating for earlier liberalisation on grounds that it would bring in private capital and improve efficiency. However, liberalisation is not a selective process. It comes with clear and binding rules.

One key rule concerns how distribution system operators (DSOs) recover their costs. In a liberalised market, DSOs are required to operate on a cost-recovery basis. This means that all expenses related to maintaining and upgrading the electricity grid – cables, substations, transformers and other infrastructure – must be recouped directly from consumers through regulated tariffs. Across Europe, these are clearly shown on bills as a separate line item for ‘distribution costs’.

Today, in Malta, part of this cost is recovered through a fixed monthly service charge. At €5.42 per residence per month, this fee contributes to the upkeep and development of the national grid. It is not an arbitrary charge. It reflects the real, ongoing costs of ensuring that electricity reaches homes reliably and safely.

In addition to this, the government is also injecting direct public funds to top up the resources available for grid investment, effectively supplementing what is recovered from consumers.

The PN’s proposal to eliminate this charge may sound attractive at first glance. Who wouldn’t want a lower electricity bill? But this is where the contradiction becomes impossible to ignore. If Malta moves towards a liberalised system, as per PN official policy, the obligation to recover distribution costs does not disappear. It merely shifts form.

In other words, abolishing the service charge does not eliminate the underlying costs. It simply redistributes them. The €5.42 currently paid as a monthly fixed fee would, undoubtedly, reappear elsewhere in the bill, most probably as a distribution tariff.

Liberalisation is not a selective process- Jonathan Scerrie

More importantly, the proposal risks undermining regulatory clarity. Investors, who the PN hopes to attract, value predictability above all else. A policy that simultaneously promises liberalisation while disregarding its financial mechanics sends mixed signals and weakens confidence. It suggests a willingness to bend or overlook the very rules that underpin the market the PN claims to support.

There is also a broader issue of political honesty. Energy policy is inherently complex, involving trade-offs between affordability, sustainability and reliability. Simplistic measures, such as scrapping a charge without addressing the underlying economics, may win short-term approval but do little to solve long-term challenges.

Malta’s energy system requires significant investment in the coming years, not only to maintain existing infrastructure but also to integrate more renewable energy sources and improve resilience.

These investments must be paid for. There is no way around it. Whether through a fixed service charge or another distribution tariff, consumers will, ultimately, bear the cost.

The PN’s position attempts to have it both ways: embracing liberalisation while rejecting one of its fundamental principles. That is not a sustainable policy stance. If the party is serious about reform, it must present a coherent framework that aligns its economic objectives with regulatory realities.

Malta has time, thanks to its EU derogation. That time should be used wisely to design a system that is fair, efficient and realistic. Political proposals that gloss over these complexities do a disservice to the very consumers they claim to protect.

Jonathan Scerri is former chairman of Enemalta and currently works as an independent consultant on energy infrastructure.