Final decision: Electricity rates to rise 5%

Public Utilities Authority rejects Israel Electric Company's request for 10% increase.

iec electric pole 88 298 (photo credit: Ariel Jerozolimski)
iec electric pole 88 298
(photo credit: Ariel Jerozolimski)
The Public Utilities Authority late Wednesday approved a five-percent electricity rate increase for one year beginning in September, denying the 10% increase requested from the Israel Electric Company. "We have received the decision and we are now studying it," said the IEC in its official response. Deviating from its original plan to reexamine the rate increases in January 2008, the PUA only said in its decision that Israel Electric must publish its basis for tariff increases by the first of the year, but did not stipulate that the tariffs would be reexamined at that time. In its original plan, formulated last week following meetings with IEC representatives, the Authority voted to increase the rates for half a year and to decide in January whether the rates would be permanently slashed or retained. Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, called the PUA's year-long 5% increase unfair. "This is not originally what we had discussed," he said. "The original proposal from the Authority was to increase the rates 5% until January 1, 2008, and then examine if the rates should be kept, cut or raised." According to the Authority's plan, the rates will be raised for a maximum of one year, beginning on September 8, in order to provides funds to allow the IEC to expand and upgrade its facilities and service. The IEC will have until the middle of November to formulate and present a detailed plan to the Public Utilities Authority, explaining how it will use the additional funds. Upon the conclusion of the rate increase, the Authority said it would oversee a process that would require the IEC to pay back, what technically served as a loan, to its customers. "The IEC must demonstrate how they are going to use the additional funds and how this increase will be used for new investments," Lynn told The Jerusalem Post, adding that, in no way, should the additional monies be used towards increasing the salaries of IEC employees, who are already among the country's highest compensated workers. In its statement, the PUA said a year was sufficient time for Israel Electric to use the additional monies for the improvements and investments that need to be made. Separately this week, the Knesset Economics Committee called upon the government to take steps in order to increase competition in the country's energy market and to provide private energy companies with assistance in entering the market, now dominated by the IEC. "I don't expect that the country will suffer from power shortages until the year 2010 as the capacity is currently enough to handle our needs, said Hezi Kugler, director-general of the National Infrastructures Ministry. "But, if more power plants are not brought on line soon, I do think that we will face the real threat of power outages." Additionally, the committee voted to introduce a graded tariff on all electricity consumers, instead of the current set-up in which only those who use a significant amount of energy are hit with the added tax. The proposed legislation will be sent to the Knesset plenum for a first reading