,There were no less than three articles on Arms in  The Malta Independent over the weekend, including Saturday's editorial.  It is good to see that finally the spotlight is on Arms and its systemic incorrect implementation of its own billing system, in highly probable contravention of the Electricity and Water Supply Regulations.  

The editorial describes how increased frequency of billing will be extremely likely to cost you more.   This is because periods of low consumption will not offset periods of higher consumption.    Incidentally this is the reason for the lengthy disclaimer on the  online Arms calculator. 

No, contrary to what some people think, the online  Arms calculator cannot ever be wrong.   The online calculator would consist of all the algorithms described in Understanding the Arms bill (1) , Understanding the Arms bill (2)  and Understanding the Arms bill (3). 

So what possible reason could there be for this disclaimer?  The answer is that the cost of your consumption of electricity and water depends very much on the billing period.   

 For an actual example, please see   here  how our annual consumption of   water and electricity over the last year cost us €1726.40 when calculated in six bills, every 2 months,  whilst using the Arms online calculator, we can see that it cost us  €1436.06, when the cost was calculated over the year.  

This is the Malta Independent editorial:    TMID editorial - Arms:  Robbing Peter to pay Paul

 In this  article of TMID journalist Helena Grech,  it is revealed that it is also the eco reduction  that is being calculated pro rata.   So consumers lose out yet again.

​I am glad to see that UHM Voice of the Workers is launching an investigation into the Arms billing scheme.  It is also asking the Malta Council for Economic and Social Development to look into this.    (see here) 

In March earlier this year, I gave this presentation to the Malta Council for Economic and Social Development, on how tenants in Malta endure extortion on top of extortion.

Followers of this blog will understand that if homeowners have it bad, tenants have it much worse.  They have no easy access to the Arms account and they usually are on the incorrectly applied summer residence tariff,  misleadingly named the domestic tariff. 

This is extortionate - there are no eco reductions applicable on this tariff and no allowances per person for water at cheaper rates.  So, no matter how many people live in a household, the cost of the water consumed is €2.19 per cubic metre for the first 33 cubic metres of water, followed by an eye watering €5.14 per cubic metre of water.   

Contrast this to the €1.40 per cubic metre payable on the 33 cubic metres of water PER PERSON per year on the correct residential tariff.   The cost of electricity  per unit is also greater compared to the cost on the correct residential tariff.  

In this presentation I also discuss the huge issue of  prepaid meters, where landlords are free to charge whatever they want.  Arms disclaims all responsibility for prepaid meters.

Every single aspect of the Arms billing system needs to be studied carefully.  These are not one off anomalies.   This is a systemic incorrect  implementation of the Arms billing system.  It is  highly likely that this billing system is in contravention of the Water and Electricity Supply Regulations.   

​Finally,  most disturbingly of all, there are strong indications that these contraventions are deliberate.  Could it be that Arms is doing whatever it takes to fulfil  its stated mission, to 

"increase the business value of its business owners and partners by: 

• Identifying and managing opportunities of revenue growth; 
• Continually improving the quality and efficiency of the services it provides; 
• And maximising its capital utilisation."?

  Arms mission statement

Why shorter Arms billing periods could be costing you
                           
Over the year 10th March, 2017 to 9th March, 2018, our household of 5 was billed six times – once every two months. These are the 6 bills we have received over the year:

10/3/2017 to 11/5/2017: €285.18
12/5/2017 to 12/7/2017 €133.54
13/7/2017 to 11/9/2017 €260.15
12/9/2017 to 10/11/2017 €106.20
11/11/2017 to 11/1/2018 €443.69
12/1/2018 to 9/3/2018 €497.64

Total: €1726.40

I added the cost of these 6 Arms bills and then compared this total to the online Arms calculation for the year.  

Interestingly, the online Arms calculator contains a very lengthy, legalistic disclaimer.  This is clearly due to the fact that Arms recognizes that the cost of the Arms bill will depend very much on the billing period in question.

When I used the online calculator to calculate the cost of our Arms bill over the billing period of this year, I found that if the billing period was 1 year instead of 2 months,  then the cost  would be €1436.06.                          

€1726.40 - €1436.06 = €290.34

So, paying for our consumption over 6 bills in 1 year is €290.34 more expensive than paying it all at the end of the year.
 
This is usually on two counts:

• The household will be less likely to hit the very expensive fourth band of €0.3420 per unit because the leftover quota for periods of lesser consumption will compensate for periods of higher consumption.  This is by far the more important count.
• The household will be more likely to be eligible for an eco reduction because, again, the leftover eco reduction applicable on periods of low consumption will compensate for periods of higher consumption.

It is inconceivable to me that Arms - the sole, state owned utility billing company -  uses all means necessary to increase the revenue from the ordinary Maltese resident.  The spirit of this billing system - if ever there were one – is being twisted completely out of all recognition.  The bottom line is that consumers of  electricity in Malta are paying well over the odds for their consumption.

The rationale behind the Arms billing system

The principle is that if you consume more, you pay at a higher price per unit.  This is commendable policy.  However, is it fair that a one-person household has the same daily allowances at each band as a household of 5, say?

As illustrated in Understanding the Arms bill (1), the daily allowances at each band are as follows:
 
For every kWh of the first 5.4794 kWh per day @ €0 .1047
For every kWh of the next 10.9589 kWh per day @ €0.1298
For every kWh of the next 10.9589 kWh per day @ €0.1607
For every kWh of the next 27.3973 kWh per day @ €0.3420
.........................................remaining kWh per day @ €0.6076
 
This means that every household needs to consume 27.3972 units per day before hitting Band 4 (€0.3420 c per day).  EVERY household. 

So a household of 1 has the same allowance of 27.3972 units per day - before hitting the high band of €0.3420 per unit - as does a household of 5. 

Now I know that a household of 5 doesn’t have five times the electricity requirement as does a household of 1.  After all, most households – large and small – have one fridge, one washing machine etc.  But still it will be obvious to most that a larger household will consume more electricity –  more heaters, more fans, more washing loads, more cooking…

Does the annual eco reduction superimposed on this stepped billing system make a difference for larger households?  Does it make it fairer for larger households? Let’s look at this more closely. 

How does the eco reduction work?  In any one year, a reduction of 25% per person will apply on the first 1,000 units and a further 15% per person will apply on the remaining 750 units consumed. 

So, converting this to a daily ceiling, there is a 25% reduction on the cost of the first 2.74 units per person per day (1000 units divided by 365 days) and a further 15% reduction on the next 2.05 units per person per day (750 units divided by 365 days).  If this daily consumption of 4.79 units per person per day is exceeded, then there is no eco reduction.
__________________________________________________________________________________________
To summarize:
How the eco reduction is calculated:

• There is a 25% reduction on the cost of the daily consumption of the first 2.74 units per person.
• There is a 15% reduction on the cost of the daily consumption of the next 2.05 units per person.
• If this daily consumption of 4.79 units per person is exceeded, then there is no eco reduction.

__________________________________________________________________________________________
 Illustration
Let’s illustrate this for a household of 5.  To be eligible for an eco-reduction, this household has to therefore consume less than 23.95 units per day (4.79 units per person multiplied by 5 persons).  If this household exceeds this 23.95 units per day, then they get no eco reduction.
__________________________________________________________________________________________

In my opinion, the annual eco reduction superimposed on a stepped cost per unit billing system is not working.  It is meaningless to have these two initiatives acting in tandem.  On the one hand, if you consume less than 27.3972 units per day (any size of household), you will not hit the very expensive €0.3420 band per unit.  On the other, a household of 5 will also get a (small) eco reduction if it does not exceed 23.95 units per day (or 4.79 units per person per day). 
 
The cost per unit jumps from €0.1607 at Band 3 to €0.342 at Band 4.  Larger households will be more likely to cross from Band 3 to Band 4.  This is a more significant factor than any compensation of an eco reduction in periods of lower consumption. 

The table below shows the detail of the Arms billing of our household's annual electrical consumption.  I looked at only the cost of our electricity consumption.  I did not look at the service charge.  We are a household of 5.  As you can see from the table below, the daily cost per day is exactly the same pre eco reduction as it is post  eco reduction.  The eco reduction is clearly not compensating.   ​
       

In my opinion, the Arms billing system needs to be completely overhauled.  Currently, it is incoherent and indecipherable.  For a household to range from paying @ €1.20 per day to €8.00 per day (see table above), depending on the period of consumption, is unjust.    Most people do not understand how this billing system works.  Heck, I have spent days deciphering it.  It shouldn't be rocket science.  A household  should not have to pay  €456.08  over a period of 57 days for its electricity consumption  because it dares occasionally use two electric heaters over the cold period.  It was far cheaper to run a centrally heated house in the depths of a Scottish winter.    This billing system is  clearly not fit for purpose.  

 How Arms calculates the cost of electricity:

From the Electricity Supply Regulations, these are the annual allowances at each band on the Residential Tariff:
​
i) For every kWh of the first 2,000 kWh ..................... €0.1047; 
ii) For every kWh of the next 4,000 kWh ................... €0.1298;
iii) For every kWh of the next 4,000 kWh ................... €0.1607; 
iv) For every kWh of the next 10,000 kWh ................. €0.3420; 
v) For every kWh of the remaining consumption ....... €0.6076.
 
Arms converts the above ANNUAL allowances at each band to DAILY allowances. 
 
For example, at Band 1, the 2000 kWh annual allowance is divided by 365 days.  This gives the consumer a daily allowance of 5.4794 kWh at €0.1047.  Below are the DAILY allowances of kWh (units) at each band: 
 
For every kWh of the first 5.4794 kWh per day @ €0 .1047
For every kWh of the next 10.9589 kWh per day @ €0.1298
For every kWh of the next 10.9589 kWh per day @ €0.1607
For every kWh of the next 27.3973 kWh per day @ €0.3420
.........................................remaining kWh per day @ €0.6076

Our 2269 units of electricity therefore cost 20.55 c per unit of electricity on average – practically double the cost per unit at Band 1 (10.47 c).

This calculation also taught me something new about the Arms billing system.  Effectively larger households obviously get through the cheaper bands more quickly than smaller households.

However, larger households get larger allowances for the eco reduction.  Next on the agenda, I will be looking at whether the larger eco reductions for the larger households compensate for the higher cost per unit (on average), when compared to smaller households.    I will also be illustrating how  being billed every two months is  costing us money.

In the meantime, folks, I would urge all of you to become experts on how the bills are calculated.  This billing system must be the most non-transparent, most unwieldy, most unnecessarily complicated billing system in the universe.  We need to understand how our bills are calculated. 

All I know is that it was cheaper to centrally heat a three-bedroom house in the depths of a Scottish winter than it is to have two electric heaters (occasionally used), two water heaters (occasionally used) and an electric oven.  We don’t have a dryer or a.c. 

A cost of €466.23 for 57 days is excessive, in my book.