(photo credit: Ariel Jerozolimski)
The Finance Ministry, the Public Utilities Authority (Electricity) and the
Environmental Protection Ministry tried to reach a deal on Sunday that will
lower the electricity rate hike at the end of this month from 19 percent to 12%.
To achieve the lower figure, the Finance Ministry will, for the first time, have
to forgo the excise on diesel during the summer months, through a
The Environmental Protection Ministry still insists on keeping
its directive that bans Israel Electric Corporation (IEC) from using fuel oil
for the generation of electricity at its Haifa and Ashkelon power stations. This
stubbornness accounts for 2%- 3% of the electricity rate hike.
initial media reports about the pending rate hike appeared on June 29. Anyone
who thought that the politicians would be shocked was disappointed. A rate hike
that will cost tens or hundreds of shekels per family shocks the public far less
than the extra pennies it is paying for cottage cheese.
There is a simple
reason for this: The price of electricity is a mystery that only geniuses can
figure out. Egyptian natural gas, fuel oil and the excise on diesel are all
mixed up in the minds of Israel’s public during the summer heat, and the public
chalks up the rate hike to fate. Any child, however, can price cottage cheese,
and there is no way to explain its higher price except by the greed of those who
But reality is more complicated. Higher electricity
prices will also affect the price of cottage cheese and water, costs in industry
and will reach every corner of the economy.
Is the blow avoidable? Could
Israel have been better prepared for the halt in Egyptian gas deliveries? Should
Israel have purchased natural-gas reserves or diverted investment from the
construction of IEC power stations? Only independent experts can say. The
disruptions in Egyptian gas deliveries was a known scenario repeatedly gamed by
Nonetheless, the deliveries were considered stable enough
by Israel Corporation CEO Nir Gilad to sign a huge gas-supply contract a moment
before the collapse.
The answer to these questions will probably never be
known, but the message to the politicians is unequivocal: Batter consumers with
higher electricity prices, but don’t touch their cottage cheese!