Hirschson pledges to pursue electricity [pg. 17]

By DANIEL KENNEMER
June 14, 2006 01:16
2 minute read.

Finance Minister Avraham Hirchson on Tuesday said he would set up a special task force to implement reforms in the electricity sector, stressing his determination "to carry out the necessary changes" in the wake of the most recent outcries following power shortages last week. Hirchson made the statements after a Monday evening meeting with Finance Ministry staff at which he instructed ministry officials to "make every effort and act with determination and without delay in order to advance the reform and carry it out on schedule." He also told Finance Ministry director-general Yossi Bachar, Government Company Authority director Eyal Gabbai and Budget Supervisor Kobi Haber to work with the National Infrastructures Ministry and the Public Utilities Authority towards implementation of the reform. The minister added that the existing outline for the reform set down in legislation would serve as the only model for carrying it out, without delay and without deviation. "Any change in the electricity system or [suggestion to construct and] operate additional power stations will be examined in accordance with the outline for reform of the electricity system," Hirchson said. Hirchson met Tuesday with experts from KPMG Consulting, who presented him with the conclusions of their study commissioned under former finance minister Binyamin Netanyahu as to the specifics of the reform required for Israel's electricity system, which were expressed in the reform outline. According to the plan, the Israel Electric Company's production system would be divided into five competing electricity producers of similar size and with a similar mix of power stations, and each company would have stations fueled by carbon, crude oil and natural gas. Israel Electric's distribution system would be divided into three distribution companies and one company in charge of conveying the electricity. A tenth company would be in charge of managing the system and ensuring its stability. KPMG said the structure proposed would allow for competition among producers and distributors of electricity in Israel, and that the division would allow the regulator to compare between the companies and require the companies to operate efficiently and transparently, on par with international standards. KPMG concurred with consultants hired by Israel Electric itself, who found that inefficiency in the company's handling of operations and investments led to unnecessary expenses ultimately borne by consumers. As one instance of Israel Electric's "great potential for [becoming more] efficient," it was found that wages costs within the company - totalling about NIS 3.5 billion - were some NIS 800 million higher than they would be if Israel Electric were operating according to international standards. KPMG had stressed that if the reform were not carried out as soon as possible, the electricity system could reach a crisis condition in which households would have to pay significantly higher fees and the state would be forced to spend billions of shekels. National Infrastructures Minister Binyamin Ben-Eliezer said he would support reforms, but insisted that the state must maintain control of at least 51% of Israel Electric's stock, even if up to 49% is sold or offered for trading on the Tel Aviv Stock Exchange. Separately, the committee assembled by Ben-Eliezer to investigate last week's power outages has released preliminary findings on circumstances surrounding the events. Contrary to widespread accusations at the time, the committee found that there was no conspiracy or "hand directing" the chain of events that led to the shortage in production capacity during the recent heatwave. "The definitive statements voiced [to that effect] apparently have no basis," the committee's statement said, adding that performance of workers at the power stations to handle the malfunctions that were discovered was "professional, rapid and dedicated."


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