Consumers to bear burden of electric reform

Costs could rise 20-40%, experts say.

By SHARON WROBEL
July 19, 2007 06:29
2 minute read.
uri ben noon 88 298

uri ben noon 88 298. (photo credit: Rony Schutzer/Courtesy IEC)

Minister of National Infrastructures, Binyamin Ben-Eliezer, warned on Wednesday that the country's electricity market was in danger if reforms don't take effect, even as the industry and Histadrut Labor Federation challenged the ability of the current reform model to succeed in boosting competition and reducing electricity tariffs. "Today our electricity market is in danger. We need to produce an additional 8,000 megawatts in future years," Ben-Eliezer said at the electricity conference organized by the Institute of Management Consultants in Ramat Gan. "The reform is complex and in the short-term, we can expect electricity prices to go up. Today's electricity tariffs do not represent the real cost of electricity production, but without the reform prices will go up even higher and the Israel Electric Company would be at the verge of a financial crisis." Ben-Eliezer added that over the next few weeks, the government will hold negotiations with the electricity workers on the changes in the structure of the company as a result of the reform and to reach an accord on the workers' entitlements. Regarding the timetable of the reform, Ben-Eliezer revealed that implementation would take two years longer than originally calculated, or in 2015 instead of 2013. "The government reform as it stands now will not come into effect," said Uri Ben-Noon, acting CEO of the IEC in his first public appearance since he announced his resignation last week. "It's a mission impossible with a timetable that cannot be met and, therefore, I decided to leave. The conference discussed the question of who would have to pay the price of the electricity reform, and there was sound consensus among the industry, Histadrut and academics that at the end of the day it would be the consumer that pays the price of higher tariffs, which could go up between 20 to 40 percent as a reformed electricity market according to the current model would not enable competition due to the shortage of electricity reserves. "We are not against reform in the electricity market but our belief is that this reform will not stand a chance and will not succeed in cutting tariffs," said President of the Manufacturers Association of Israel, Shraga Brosh. "Therefore we urge Ben-Eliezer to postpone the reform of the structure of the IEC until we have electricity production reserves of a minimum of 25% compared to the 5% we have today and an additional coal plant." With a shortage of electricity reserves, the reform would not be able to create real competition and a reduction in prices as supply would be scarce and thus tariffs would only rise, Brosh added. Similarly, Histadrut Chairman Ofer Eini, challenged the feasibility of the reform to start coming into place under the current timetable of two years. "Negotiations between the government and the workers have not even started and without an agreement with the workers, the implementation of the reform is impossible."


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