Two customers who have taken the authorities to court over the way electricity bills are calculated are insisting that according to law, clients must be refunded if they have overpaid through the course of a year. 

Darren Cordina and Melvin Polidano are challenging the authorities for breaching EU directives. These call for the calculation of bills to be based on actual annual consumption and a refund given if the customer has overpaid.

Their lawyer, Maxilene Ellul, claims the method of computation breaches at least four directives that call for transparency and fair treatment.

Furthermore, she says that since legislation states that customers should be subjected to a “tariff based on a cumulative consumption per annum and which may be billed on a pro-rata basis” this automatically implies that the cost is based on cumulative consumption per year. 

So at the end of the year, once the total consumption for that year is known by ARMS, any rebate due because of the pro-rata billing (which can only be an estimate) must be refunded.

Fears that customers are overpaying on electricity due to the billing method were recently flagged up on social networks and picked up by the local media.

The Consumers’ Association of Malta has long received complaints about the unfair way utility bills are worked out and last week told The Sunday Times of Malta that customers were being cheated out of lower tariffs. The association’s president Benny Borg Bonello also argues that consumers should be billed for cumulative consumption or else any overpayments should be refunded at the end of the year.

However, the Regulator for Energy and Water Services maintains that current legislation does not allow for reconciliation.

The regulator did not reply to the specific question of whether it was at least looking into the issue, noting instead that complaints it receives are treated on their own merits. “Any investigations carried out may differ depending on each particular circumstance of the case.”

A spokeswoman said that according to current legislation (S.L 545.01), a service can be billed on a pro-rata basis and “does not provide for reconciliation of the bills at the end of each year, and therefore interim bills calculated on actual readings are final”.

There is something very wrong, almost criminal, with the way all this is being administered

Meanwhile, Robert Agius – one of the architects of the Inland Revenue reform of the 1990s which introduced the Final Settlement System – is today proposing a tried and tested solution.

In an opinion piece, he says the “much more complex” tax deduction problem was solved by establishing a pro-rata averaging formula that ensured that fluctuations would be catered for and the exact amount of tax due was collected. (See page 19).

‘No changes since 2009’

The regulator and ARMS continue to insist in their defence that the computation methods have not changed since 2009.

 A spokeswoman said ARMS Ltd’s billing system, including the consumption bands and the billing periods, are the same as those introduced through the 2009 amendments to the Electricity Supply Regulations. The computation of bills is carried out in accordance with these regulations.

The only changes in the last 10 years were those in tariffs, with an upward revision of 30 per cent in 2010 and a 25 per cent reduction in 2014 and 2015 for residential and non-residential customers respectively, the spokeswoman said.

But Times of Malta highlighted the fact that irrespective of the amendments and the reduction, people are still missing out on the cheaper electricity units due to the way the allocation is distributed among bills.

ARMS failed to answer whether it believed this is fair and whether it was looking into revising the method of computation.

Billing frequency matters

It matters a great deal when a quota is cut up in absolute parts, as consumers lose the flexibility to use up the allocation (such as 2,000kWh at 10.47c) when the consumer needs them, according to economist Marie Briguglio, who has been very vocal on social media about the issue.

This way, she says, ARMS forces consumers to use an exact amount of units each month. “Clearly this doesn’t make sense, as you cannot, and should not, be asked to consume the same exact amount, because some months are more energy consuming than others.

“If ARMS wants to change the law so that consumers are obliged to use the same exact quota every billing period – which can be every week if they decided so – then they will have to make it clear to customers that they will lose their quota if they get out of this straightjacket.”

The cutting up of the quota into six absolute portions matters a great deal if there is no reconciliation. It means that customers have to stick within a rationed quota every 60-day period. The shorter the period, the more likely they go over the rationed allocations.

However, if customers were allowed to use their full quota, as the law states, it would make no difference how often they are billed, Ms Briguglio insists.

According to ARMS, the 2009 system encourages customers to decrease and stabilise their energy consumption and their carbon footprint, by lowering consumption throughout the year.

Eco-reduction chaos: Are 22% missing out?

The billing saga gets more complicated with the eco-reduction, which is meant to reward those who are careful with their electricity consumption.

ARMS is currently issuing 78 per cent of utility bills based on actual readings, up from 48 per cent in 2013

A reader, who flagged the issue with ARMS as far back as 2010, received a reply from the Water Services Corporation saying that the eco-reduction for electricity is calculated on the basis of an actual or consumer reading. “Estimated bills, and any calculations of eco-reduction contained therein, do not bind the corporations,” he was told. He finally managed to get the eco-reduction on his insistence.

However, ARMS has admitted that only 78 per cent of utility bills are based on actual readings, even though 97.8 per cent of electricity services are connected through smart meters.

According to its spokeswoman: “During the last few years ARMS drastically decreased the number of bills based on estimate consumption readings. The company is currently issuing 78 per cent of utility bills based on actual readings, up from 48 per cent in 2013.”

ARMS failed to confirm whether the eco-reduction for electricity is calculated on the basis of an actual reading – which would mean that roughly 22 per cent of billed customers are not benefitting from the eco-reduction.

The spokeswoman said that all residential electricity services were eligible for the eco-reduction granted by the government. “In recent years, the number of customers who benefit from this reduction by maintaining low consumption and carbon footprint levels has continued to increase.”

The regulator meanwhile said “the statement that 22 per cent of bills are not benefiting from the advertised eco-reduction” was not correct and “could be a generalisation”.

Contrary to what the newspaper reader was told, it said that households receiving bills on estimated consumption did not lose their eco-reduction.

‘I was cheated out of €70’

One reader, who has had his own share of trouble with inconsistent billing from ARMS, has started reading his electricity meter and recording the unit consumption every day.

One day, he received a bill showing zero electricity consumption, followed by a bill that “totally floored” him as it was seven times higher than the previous one.

When he complained in person over the way he was billed, the units of one bill were redistributed between two bills – and this ended up costing him some €70 less.

“I was therefore originally cheated by €70. Besides all that, I also noticed that the billing rates or ‘bands’ are always changing for both utilities…

“There is something very wrong, almost criminal, with the way all this is being administered and with the severe lack of billing clarity. All this has caused me a great deal of frustration and anxiety.”

How we are billed

ARMS (Automated Revenue Management Services) uses a staggered system to bill residents. The first 2,000 units of electricity are charged at one rate and further consumption at higher rates.

So for every kWh of the first 2,000kWh consumed in one year, residents should be charged 10.47c, while they pay 12.98c for every kWh of the next 4,000kWh, 16.07c per unit on the next 4,000kWh, and so on.

However, ARMS splits up this allocation, pro rata, among the number of bills that a consumer receives in one year.

This means that if a residence is billed every two months, the first 2,000 units are split between six bills, amounting to an allocation of 333 units per bill at 10.47c per unit.

If a residence consumes fewer than 333 units in a two-month billing period, the remaining units at the cheaper rate are not brought forward in the subsequent bills. The allocation is lost and cannot be used in the subsequent months, with the same method being applied to the higher bands as well.


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