Landau: Privatizing Israeli electricity would be risky

"If the meaning of a free market is that the retail price ends up being unreasonable, then it cannot be allowed,” national infrastructures minister says during Australia visit.

By NADAV SHEMER
electrical gird 311 (photo credit: Ariel Jerozolimski)
electrical gird 311
(photo credit: Ariel Jerozolimski)
CANBERRA – National Infrastructures Minister Uzi Landau met with Australian government ministers in the capital of Australia Monday, where he discussed with them their experiences with the electricity, natural gas and water industries.
Landau, who is on a 10-day fact-finding mission Down Under, said one of the lessons he learned from a meeting with Federal Resources and Energy Minister Martin Ferguson is that privatizing electricity can lead to an increase in the price paid by consumers.
“Here [in Australia] the consumer pays 20-21 cents per kilowatt hour. In Israel the consumer pays less than that; with today’s dollar [it stands at] around 17-18 cents,” Landau told The Jerusalem Post in between meetings at Parliament House in Canberra.
“From that perspective, it’s a little astounding given that Australia has vast resources of coal and natural gas. They don’t interfere with anything connected to the price of natural gas, they let the market determine it. And the result is that in the end the prices are not so cheap.”
Turning to Israel, where the price of electricity is currently under the microscope, Landau said: “We need to be very cautious regarding the decisions we make. If the meaning of a free market is that the retail price ends up being unreasonable, then it cannot be allowed.”
The state-owned Israel Electric Corporation raised the price of electricity by 10 percent earlier in August, and an IEC official warned the Knesset’s Finance Committee a couple of days later that it could increase even further on January 1.
Landau also sought advice on how Australia has dealt with the exportation of its massive natural gas reserves, in light of the offshore discoveries made by Israel in the past few years. He warned that becoming an exporter of natural gas could have the unintended effect of raising the price of the commodity to Israeli consumers, as has been the case in Australia, which produces around 9% of global liquefied natural gas.
“With the moderate amount of gas that they can sell [in Australia], it is worthwhile for them to sell it abroad instead of here,” he said.
Landau noted that as with the electricity industry, Australia has adopted a free market approach when it comes to natural gas, saying: “We discovered that they have basically allowed the market to manage itself, only that here they complain about prices, which are high.”
Under Australian law, natural gas companies must allocate at least 15% of production to the local market, but Landau said Israel would have to make decisions based on what is suitable for its own set of circumstances.
Landau also met in Canberra with Federal Infrastructure and Transport Minister Anthony Albanese, who raised the possibility of cooperation in developing mechanisms to defend offshore gas production facilities against terrorism. During a meeting last week with mining giant Rio Tinto in Perth, Landau was shown how they have introduced remote operation of machinery into a large part of their mining, and said the Israeli government was also looking into how to strengthen Israel’s capabilities in that area.
The minister began his trip with a three-day stay in the resource-rich state of Western Australia. There he met with local government ministers responsible for the energy sector and travelled to Karratha, where he was briefed at the headquarters of Woodside, whose North West Shelf Venture facilities account for more than 40% of Australia’s oil and gas production.
Landau also visited Sydney, and was scheduled to meet with more energy and mining experts in Melbourne, including representatives of Deutsche Bank and the vice president of the world’s largest mining company, BHP Billiton, before returning to Israel.