Hedging agreements and careful planning has enabled Enemalta Corporation to make savings on its oil purchases and is, therefore, in an position to guarantee that the surcharge on electricity will remain at 50 per cent until June 2008, Public Investments Minister Austin Gatt said yesterday.
He insisted that the surcharge formula has been based solely on the difference in oil prices since it was introduced in 2004.
The government and Enemalta were taking every possible measure, including hedging and forward buying, to keep the oil imports bill low but the trend was still upwards and oil prices were expected to continue to rise next year.
Dr Gatt said the government would have spent Lm20 million by the end of this year to fund part of the surcharge on electricity. The surcharge customers should be levied should stand at 97 per cent but the government is forking out a 40 per cent subsidy while the other seven per cent are covered by hedging agreements.
The minister said that the fuel oil to run the power station went up in price by 91 per cent between January and November this year. But the hedging agreements the government has in place will guarantee that the oil will be bought at cheaper prices until the second quarter of next year.
The decision to cap the surcharge at 50 per cent until June 2008 was not taken to trawl for votes but it was the result of careful forward planning. These are conscious decisions taken because the country's finances are on a sound footing, he said.
With regard to the price of petrol and diesel, Dr Gatt said the price of LRP and unleaded fuel and that of diesel is being raised by 0c5 per litre. This price will remain unchanged until the end of June in the case of petrol and until the end of March for diesel.
The price of kerosene is also being increased by 0c3 while that of light heating oil will increase by 0c5. The price of thin fuel oil will remain unchanged. These prices are guaranteed until the end of March.
Dr Gatt said the Labour Party's proposal to cut the surcharge by half or, as leader Alfred Sant said, remove it completely, was "dangerous" for the country. Unlike the MLP, the government was taking decisions based on the real cost of oil on the international markets, which, in recent weeks, has reached the staggering price of close to $100 per barrel.
He said that the hedging agreements Enemalta has managed to conclude are ensuring that oil is being purchased at pre-established prices.