Why do we so disdain the electricity corporation, and what can its new PR consultant do to help?

Reform is biggest challenge facing the IEC, former infrastructures director-general says.

September 3, 2009 22:38
Why do we so disdain the electricity corporation, and what can its new PR consultant do to help?

Lee 88. (photo credit: )

The Israel Electric Corporation closed the tender for a new public relations consultant last week. So what issues will the new PR consultant have to contend with, and how might his job be made easier through real action on the part of the IEC? "The company's public image problems derive from the fact that it is a 100-percent monopoly and its wage structure is among the highest in the public sector," Hezi Kugler told The Jerusalem Post this week. He spent three years as director-general of the National Infrastructures Ministry until a few months ago and has now started his own company, Kugler Development and Investment. Relations between the powerful union and the IEC have been the topic of numerous press articles and even dominated Knesset hearings meant to discuss the shortage of electricity. Because it's basically the sole provider of the country's power, a strike there has the ability to affect the entire public. Add to that all the talk about free electricity for employees and very high salaries, and the public starts out with a negative image of the company. "Even when it [the company] is right and a cabinet decision or action may actually affect it adversely, it is often greeted with skepticism. It starts out with a handicap," according to Kugler. So what can the IEC do to change its image? According to Kugler, what is absolutely essential, from an image perspective, but, more importantly, from a substantive perspective, is reform. "Its image problem will improve once there really is a reform and it can point to change," the former D-G opined. "Right now, the workers are holding the company hostage, however, even though the union has been in favor of cooperating with private initiatives. There was a possible reform agreed to a few months ago and the company and the union were supposed to start negotiating now. However, I've read that because of the dispute over the pensions, the negotiations have been delayed." Last week the Israel Securities Authority ordered the IEC to immediately cancel NIS 6 billion worth of undertakings to its pension fund, because for the past decade the corporation consistently inflated its actuarial debt to its retirees' pension fund. "Reform used to be called privatization," but now it's more like partial privatization, Kugler continued. "Without reform, it's impossible to have a competitive electricity market." When he was still at the ministry, he and then-infrastructures minister Binyamin Ben-Eliezer (Labor) "spent hours upon hours of negotiations with the union and with the company. Eventually we worked out an agreement both of them were satisfied with, but the Finance Ministry rejected it." So "we are basically back at square one. Now there's a change in leadership [at the ministry], so there might be new approaches. But I think there's a chance of reaching agreement, and I urge the entire political leadership to work toward such an agreement. To get there requires a great deal of long-term political leadership from the prime minister, the finance minister and of course the national infrastructures minister [Uzi Landau of Israel Beiteinu]," Kugler said. He also vehemently rejected the notion that the IEC charged exorbitant prices for electricity. "Prices are average, even a little low, in Israel. Prices are not artificially inflated," he said. Moreover, Kugler opposes lowering prices in accordance with fuel prices. "The regulator should not be adjusting electricity prices when fuel prices go down, or there's a change in the composition of the fuel basket. Lower prices encourage excessive use. That's not a good thing considering Israel's reserves sometimes hover at less than 3% and we have no backing from adjacent grids," he said. Instead, "the savings should be used for infrastructure, for a renewable energy portfolio, and to making sure the ambitious program of building natural gas power plants goes up on time," he said. Actually, that's IEC Chairman Moti Friedman's preferred strategy, Kugler added. Regarding the controversial plan to build another coal-fired power plant in Ashkelon by 2014, Kugler contended that it was necessary. "By 2014, Israel will be faced with a potential electricity shortage. There are three ways to guarantee what's called the baseload, which needs to be constantly available: coal, nuclear power and hydroelectric. Israel only has coal, so the best thing is to keep it down to 50% of the energy basket, as opposed to the 70% it was several years ago. So the plant is definitely necessary and as demand rises, more such plants will be needed," he said. However, future plants could be built with pollution-reduction technologies as they become available, which would limit the damage, he added. While Kugler believes that alternative energy could produce 20% of Israel's energy needs, "that's a long-term goal and there's no way it can be met by 2014-15." Even the cabinet decision which set out 10% by 2020 is an ambitious target, according to Kugler. Yael Cohen-Paran, executive director of the Israel Energy Forum, an NGO that encourages a sustainable energy policy, suggested letting the IEC compete for alternative energy projects and undertake real efficiency initiatives. "The biggest challenge facing the company is the energy crisis in Israel. No one views the IEC as a company which encourages efficiency, except on a PR level. If it embarked on true efficiency projects, like reducing use in industry and households, then its image would improve," she told the Post on Thursday. A cabinet decision has kept the IEC out of renewable energy and that's a problem, according to Cohen-Paran. Such projects shouldn't be restricted solely to the IEC, but "if it had been allowed into the market, then there would have been more alternative energy in use in large quantities for a while now." "If it were allowed to try to meet the government's 10% goal, then it would have been taking the necessary steps, but instead alternative energy is not proceeding as it should," she added. Cohen-Paran stressed that responsibility did not lay solely with the IEC - much of what she advocated required cabinet decisions and support, she acknowledged. However, the company should have been putting more pressure on the government to institute efficiency programs and to allow the IEC to get into the renewables market, she said. "[Of course] the company has an image problem if it is restricted to dealing in polluting energies alone. Furthermore, the small companies would all benefit if the IEC used its influence to change regulations in favor of alternative energy," she concluded. The IEC responded to a request for its list of priorities regarding its image and its goals by saying it could not furnish it until after the process of restrategizing had been completed.

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