Home power rates to drop

The Electricity Authority unanimously approved new rates yesterday, as the natural gas revolution begins to take hold in the energy sector.

As of February 15 the electricity rate for residential consumers will drop by 9.6% to 41.32 agorot per kilowatt hour, down from 43.59 agorot per kilowatt hour. Rates for commercial and public institutions are dropping by 16.3% to 43.59 agorot per kilowatt from the current rate of 52.09 agorot.

The rate for large-scale electricity consumers will fall by 8.6% to 12.5%, based on the voltage supplied.

The Electricity Authority's plenum convened one week after TheMarker revealed that the authority was planning the sharpest rate cut ever seen in Israel, and was attended by all four members.

The meeting had been delayed from last week after the National Infrastructures Ministry and the national utility protested the planned rate cuts, and National Infrastructures Minister Uzi Landau announced he would oust the authority's chairman, Amnon Shapira.

Landau says Shapira had promised him that electricity prices would not be cut, and summoned him for a one-hour meeting.

But the Manufacturers Association, the Federation of Israeli Chambers of Commerce and the Israel Consumer Council all called for the cut in electricity rates to go through, to reflect the real cost of production as required.

In response to the announcement, the National Infrastructures Ministry reiterated that cutting electricity rates would result in a dramatic increase in electricity consumption.

"We hope that the development needs of the electricity sector have been taken into consideration in the decision to lower electricity rates, and mainly, the ability to finance and build power stations and electrical grids needed for the economy's growth, as well as the effect of increased demand for electricity, due to the decreased rates, on the need for more power stations," the ministry said.

Nevertheless, the plenum accepted an expert opinion prepared by Dr. Ilan Maoz, who said that an increase in electricity demand would still leave the company with double-digit production reserves.

The rate decrease reflects a NIS 2.2 billion decline in the IEC's annual fuel budget due to a greater reliance on natural gas, which comprises about 40% of its fuel consumption. Natural gas is also more efficient for electricity production. In total, the IEC's fuel costs have been reduced by 24.6%.

The rate adjustment was to have been implemented in April 2009, but was delayed.

The Electricity Authority also adjusted the IEC's rate base for the first time since 2002. The rate base is a group of basic assumptions used to calculate the long-term price of electricity production, conduction and delivery, and serves as the foundation for setting consumer rates. The authority adjusted only operating costs, which increased by 7.8%, offseting the lower fuel costs. Conduction and delivery elements will be adjusted later this year.

The authority also adjusted its seasonal and peak consumption pricing method for large-scale consumers. It changed peak, shoulder and off-peak consumption load times, which are the basis for their rates. The winter season was reduced from four to three months, and summer from three to two months. Electricity rates in these seasons at peak hours increased by 11% to 13% (in winter) and 17% (in summer). Rates for heavy consumption times during the rest of the year, which is now seven months, were cut by 16% to 23%, and at peak hours by 35%.