‘Electricity prices to rise 18 percent’

IEC out of natural gas due to disruptions of deliveries from Egypt.

July 11, 2011 23:48
1 minute read.
An electrical power grid.

electrical gird 311. (photo credit: Ariel Jerozolimski)

“Electricity rates will rise by 18 percent,” Public Utilities Authority chairman Amnon Shapiro told a special session of the Knesset Economic Affairs Committee on Monday.

He attributed the rate hike to: disruption of natural-gas deliveries from Egypt (7%), the directive by Environmental Protection Minister Gilad Erdan for Israel Electric Corporation (IEC) to use diesel instead of fuel oil (7%) and a routine update because of delays in the construction of power stations (4%).

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The Finance Ministry’s intention to levy excise on diesel used for electricity production was “greed and insensitivity in the face of the difficulties facing Israeli households,” Economics Committee chairman MK Carmel Shama (Likud) said at the start of the meeting about the forecast of a 20% rise in electricity rates.

Disruptions in gas deliveries from Egypt have forced IEC to increase its use of diesel seven-fold. The utility pays NIS 3,300 in excise and VAT per ton of diesel it consumes, compared with NIS 14 per ton for fuel oil.

Erdan’s directive forces IEC to greatly restrict its use of fuel oil and almost exclusively use diesel.

Consequently, the Treasury will reap billions of shekels in unplanned tax revenues from a 20% hike in electricity rates – a rise that have an effects on prices throughout the economy because electricity is a basic input for most products manufactured in Israel.

Shama said he had asked Finance Minister Yuval Steinitz to cancel the excise on diesel for electricity production, adding that the Economics Committee would “go to war” over the issue.

IEC chairman Yiftach Ron-Tal said: “If there is no solution to the purchase of diesel, how will I generate electricity? We have diesel reserves for four to six weeks. Under current circumstances, we’re receiving only half of the natural gas, and we don’t have the money to buy diesel. In 2012, due to the absence of Egyptian gas, we’ll be drawing more from the dwindling Yam Tethys reserves, which will run out in early 2012.”

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