Electricity prices to drop by 9.6 percent on February 15

Environment Ministry and Energy Forum warn: Lower costs will increase consumption.

February 2, 2010 00:19
2 minute read.
The Reading power station north of Tel Aviv.

reading power station 311. (photo credit: Yossi Weiss)

The Public Utilities Authority electricity plenum updated the electricity prices for the next five years on Monday. As a result, the price for home consumers is expected to drop dramatically by 9.6 percent and the price for industrial use by an even greater 16.3%.

The price for household use will go from NIS 0.4571 per kilowatt hour to NIS 0.4132, while industrial use will drop from NIS 0.5208 to NIS 0.4359 per kilowatt hour.

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The Utilities Authority is responsible for updating the basis for electricity prices every five years. According to a Utilities Authority statement, the new prices would allow the Israel Electric Corporation to maintain its growth if it stuck to the price scheme.

The major reason for the drastic reduction in price is the phasing out of expensive diesel and fuel oil in favor of natural gas, which is much cheaper. While the Electric Corporation’s operating costs did rise somewhat in recent years, the cheaper cost of natural gas more than made up the difference, the Utilities Authority said.

Israel’s electricity reserves are dangerously low, which has prompted the urgent need for more power plants and energy efficiency initiatives.

The Utilities Authority said it would also keep a closer watch on the Electric Corporation in order to ensure that power stations were built on schedule, something the Electric Corporation has had trouble accomplishing in the past. It also recognized the need for pollution reduction technology at power plants and was prepared to deal with the costs associated with the upgrade.

However, the Environmental Protection Ministry and the Israel Energy Forum called the decision “a serious mistake,” arguing that reducing prices would encourage people to use more electricity. While in the short run, the public would benefit from lower prices, in the long run the increased demand would necessitate building more polluting power stations, for which the public would bear the costs – both health and monetary – the ministry contended.

The ministry declared that the best way to return the decrease to the consumer was to subsidize energy efficient appliances, much like similar programs around the world.

The National Infrastructures Ministry, which sets energy policy, responded along similar lines, if much more restrained.

“We hope that when the Utilities Authority set the prices, they took into account the development needs of the electricity market, especially the need to build power plants and transmission and distribution lines. We also hope the effect lowering prices will have on demand and the subsequent necessity to build more power plants than was planned was also taken into account,” the ministry said in a statement.

The Energy Forum accused the government of contradicting itself – on the one hand encouraging energy efficiency and attempting to reduce demand, while on the other hand lowering electricity prices.

Last week, a source close to National Infrastructures Minister Uzi Landau accused the Utilities Authority of sabotaging the ministry’s efficiency agenda. The ministry contended the extra money from electricity prices should be set aside to fund energy efficiency projects. The Authority contended, however, that such a move was illegal without a change in the law.

A Utilities Authority spokeswoman said it was the ministry’s responsibility to get the law changed, but that it has failed to do so. The source close to Landau said the Authority knew of the ministry’s efforts to change the law, but was going ahead with the price reduction regardless.

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