Woe to ordinary individuals audited by the taxman if enigmatic gaps are
discovered in their paperwork. But when the Israel Electric Corporation manages
to mysteriously lose NIS 1.4 billion down its administrative labyrinth, it can
simply increase the burden on already overburdened consumers or demand more
outlays from the Treasury, thereby indirectly putting the bite once again on
The IEC’s persistent pattern was just repeated. The
government has caved in to pressure and will give an additional billion shekels
in new guarantees to the corporation to help it cover the shortfall. This
represents a steep increase beyond the NIS 5.5b. already guaranteed this year.
Without this, warns the utility, it would be unable to purchase all the fuel
essential for electricity generation.
The likelihood, though, is that IEC
will be forced to put up assets as collateral. The company tenaciously holds on
to lucrative real estate around the Reading Power Plant in north Tel Aviv and to
its outdated, no longer functioning compound in central Tel Aviv.
the causes for the IEC’s growing deficits are clear. The cutoff from Egyptian
natural gas supplies and the need to rely on far costlier fuels are
incontrovertible and continuing drains on resources. The trouble, though, is
that the public had already paid for that and keeps on paying. It also pays when
oil prices rise. Therefore, attempts to recurrently hike fees while citing the
identical pretexts are more than a bit suspicious.
Something is very
wrong in the IEC’s management and this extends far deeper than objective
difficulties which nobody disputes. The IEC upper echelon pledges to conduct
exhaustive investigations and complains about criticism already leveled at it
before its probes had gotten off the ground. But the critics aren’t unfair. The
“disappearance” of colossal sums isn’t an incidental accounting
No matter how it’s eventually explained, the IEC’s acute
financial crisis betokens either lack of transparency or outright failure to put
in place elementary controls and fail-safe mechanisms that are easily available
in our hi-tech environment. This is simply something which should not happen in
a properly run establishment, particularly one dependent on the public
The episode has sent the Finance Ministry into a veritable
tizzy. The Accountant-General’s Department fears that higher guarantees will
negatively impact Israel’s credit rating. The IEC’s debt – a whopping NIS 70b. –
is already the state’s second-largest, outdone only by the government itself. In
other words, this is extremely serious and dire business, as very distinct from
the prices of cottage cheese or eggs.
The Treasury is in a bind. The
incumbent government cannot afford electricity supply issues
Moreover, its political prospects can only be damaged by
another fee hike, especially hot on the heels of a scathing state comptroller’s
report which took IEC to task for, among others, dubious bookkeeping to conceal
a NIS 2.1b. stash for the anyhow overpaid employees.
None of the
prodigiously promised reorganization moves has yet been put in place. The IEC
continues to pay the highest average salaries in Israel (NIS 21,000 monthly per
employee). An IMF comparative study found the IEC’s salaries higher by 4 percent
than in all other countries included in the survey. The “misplaced” NIS 1.4b.
was incidentally located in a fund to bankroll future employee
There is much amiss when a gargantuan concern that can’t make ends
meet also refrains from reforming itself. The IEC should be required to
prove that it hadn’t actually colluded in defrauding the public. In a more ideal
world taxpayers might rightly expect to be reimbursed, yet brazenly the IEC is
intent on collecting more from us.
Among the must-have remedies is more
competition for the IEC. Only if more electricity producers emerge, will there
be incentive for the IEC to improve its act.
Some major firms like
Azrieli and Strauss have already disconnected from the grid and switched to
alternative power suppliers. Licensing procedures must be streamlined for
private operators. Yet above all else, the message to the IEC’s top
executives should be that none of them is irreplaceable, even when indispensable
services are involved.