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The National Labor Court yesterday rejected a petition by the Israel Electric Corporation (IEC) to overturn a decision by the Haifa Labor Court and order an end to labor sanctions at the company.

The IEC union is demanding a new work agreement that would increase salaries and state that no changes would be made in the structure of the electricity sector without union consent.

IEC officials said that as a result of the decision, they might be forced to initiate deliberate power outages at times of peak demand this summer, which would lead to "severe damage to clients and the economy."

The company estimated damage to the IEC and the economy from the labor sanctions at NIS 145 million so far, approximately $1 million a day.

Most of the damage has come from a reduction in the production of inexpensive electricity from coal-fired plants because of delays by IEC workers in unloading ships bringing the fuel from overseas. Consequently, the IEC has been compelled to increase use of diesel, the most expensive fuel used by the company.

Additional damage has come from delays in repairing breakdowns at power plants caused by the sanctions.

Meanwhile at a ceremony in Cairo today, Infrastructure Minister Benjamin Ben-Eliezer and Egyptian Oil Minister Sameh Fahmi will pave the way for a ground-breaking cooperative agreement between Egypt and Israel on gas supply. The two will sign a document providing state guarantees for the supply of Egyptian natural gas to the IEC .

Under the deal, EMG, an Egyptian-Israeli consortium partly owned by Israeli businessman Yosef Maiman, will sell natural gas to the IEC worth $2.5-3 billion over 15 to 20 years. According to the memorandum, if EMG fails to live up to its commitments, the Egyptian government will step in and supply the gas through the Egyptian National Gas Company.

IEC chairman Shlomo Rothman has not been invited to the ceremony. Sources close to Ben-Eliezer said that only those directly connected to the negotiations were invited. The minister and Rothman are known to be in disgreement on several issues, and communication between the two is almost nonexistent. The principal disagreement concerns the selection of a new CEO for the IEC. They also have disagreed on how the IEC should go about raising capital. Sources say that the minister has told Rothman twice that he intended to have him removed from his position.

Tomorrow, Ben-Eliezer will meet with Egyptian President Hosni Mubarak.