Malta Energy Law: The New Maltese Energy Legal Framework

Chetcuti Cauchi | Published on 27 Jan 2015 | Updated on 18 Feb 2016

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Malta Energy Law: Introduction to the new Malta Energy Law Regime

Extensive changes within Malta’s energy industry have been witnessed following the largest ever foreign direct investment in the Maltese Islands made by Shanghai Electric Group Company Limited. The investment transaction  involved the part privatisation of Enemalta p.l.c. through the acquisition of a minority shareholding by Shanghai Electric Power, the acquisition of a majority stake in BWSC plant (which will be followed by the conversion of Delimara 3 plant from heavy fuel oil to gas and gasoil) as well as the collaboration of Shanghai Electric Power with Enemalta p.l.c. in the renewable energy and energy servicing fields. The transaction abolished a fully monopolised energy market in Malta.

The transaction was accompanied by a number of legal amendments. This publication provides an overview of these amendments to Malta energy law as well as an overview of the core principles of Malta energy law. 

Malta Energy Law: the Competent Authority

The Malta Resources Authority is the  regulator which is responsible for resources relating to water, energy and minerals and matters ancillary thereto or connected therewith. Chapter 423 of the laws of Malta stipulates that no person is allowed to carry out or be engaged in any activity or operation relating to energy, such as production and distribution of electricity, unless such person is in possession of a valid licence, permit or other authorisation granted by the MRA. The powers, functions and duties of the MRA remain unchanged following the transaction. 

The Authority is therefore responsible for several functions, including, the regulation, monitoring and review of all practices, operations and activities relating to energy; the granting of any licence, permit or other authorization for the purpose of carrying out any licensable operation or activity relating to energy; the safeguarding of fair competition in all practices, operations and activities and the establishment of minimum quality and security standards for such practices, operations and activities and the regulation for the purpose of ensuring public and private safety. Its functions also include regulating the price structure for activities relating to energy and the establishment of the price to be charged for the acquisition, production, manufacture, sale, storage and distribution as well as promoting the interests of consumers in Malta especially in respect of the prices charged for, the quality and variety of services in relation to energy.

Act XXXIV of 2014

Act XXXIV, the key legislative instrument that was used in order to establish the framework for a restructured energy sector in Malta was brought into effect on the 14th August 2014. This Act brought about a number of changes including the transfer of all the assets, rights, liabilities and obligations of Enemalta Corporation to Enemalta plc; the regulation of the functions of the distribution system operators; the repeal of Chapter 272 of the laws of Malta (the Enemalta Act) and made provision for any matter which is ancillary to or connected thereto. In effect, Act XXXIV of 2014 has given birth to the Enemalta (Transfer of Assets, Rights, Liabilities and Obligations) Act.[1]

In view of the removal of a monopolised electrical energy market, the Electricity Supply Regulations (S.L. 423.01), have now been amended to reflect the position that the distribution system operator does not necessarily mean Enemalta. Part Eleven of Act XXXIV establishes that the term ‘distribution system operator’ in S.L. 423.01 shall be assigned the same meaning as under the Electricity Market Regulations (S.L. 423.22)

Energy Distribution under the new Malta Energy Law

The latest amendment to the legal regime on the distribution of energy is encompassed in Part Two of Act XXXIV of 2014. This part mainly concerns the regulation of the distribution system operators in relation to matters such as the duties of a distribution system operator in relation to the supply of electrical energy; the limitation of liability and the prices to be charged.

The Enemalta (Transfer of Assets, Rights, Liabilities and Obligations) Act states that a distribution system operator may install any installation in public roads however with the approval of the Authority for Transport in Malta. The operator is therefore allowed to have any persons nominated to enter the premises wherein electrical energy has been or is to be supplied by the distribution system operator, an installation is to be made or for any other reason in connection with the supply, storage, distribution, sale or other disposal of electrical energy by the operator. The power of inspection is however limited to only such purposes which are related to its duties such as inspection, maintenance and so on.

With respect to the duties of a distribution system operator, the Act states that the operator has the discretion to reduce the quantity of energy supply to any consumer if it appears that the supply of electrical energy generated is insufficient to enable the full quantity to be conveniently supplied. This power, however, cannot be exercised arbitrarily and may be done by a distribution system operator if the supply is insufficient for any unforeseen circumstance which is beyond its control. As the position now stands, a distribution system operator would not be rendered liable for any such loss or damage due to a reduction in the supply.

Moreover, the Act exonerates a distribution system operator from liability where a loss or damage is suffered by a person or property due to a cessation of the supply of energy. The liability of the distribution system operator is however limited to those instances where the loss or damage results from an unavoidable accident, fair wear and tear, overloading to an unauthorised connection of apparatus, or to the reasonable requirements of the electrical system, or owing to a defect in an electrical installation which is not provided for by the operator itself.

Tariff fixing

The Act enables the distribution system operator to fix the prices which it is to charge for the supply of electrical energy and related services. The tariffs, though proposed by the operator itself, must be approved in writing by the MRA.

Public procurement

A distribution system operator is allowed to enter contracts for the procurements of goods, services or materials. These contracts have to be entered into in accordance with the Public Procurement of Entities, that is, Subsidiary Legislation 174.06.

Offences

The Act has added a number of offences within the Act. These offences mainly relate to the precautions which are necessarily to be taken in the execution of works by the operator and in relation to installations and other material which are supplied by the operator. It also includes other offences which mainly prohibit acts such as the obstruction by any person in respect to the operator’s carrying out of its duties.

The New Malta Energy Law Regime: Conclusion

The amendments constituting a new legal regime for electrical energy production and distribution indicate that the energy market in Malta is open to foreign investment with a view to ensuring a more competitive energy market. It highlights Malta’s attractiveness to foreign investors across the globe not only because of its geographically strategic position but also due to its receptiveness to new challenges in different industries.

 

[1] Chapter 536 of the laws of Malta


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