The Electricity Authority approved Monday a 6.3% increase in home electricity rates, saying the state-owned Israel Electric Corporation needed the extra revenue to cover the high cost of imported fuel in the two years before cheaper natural gas became available from the Tamar field.
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On average, electricity rates, including those for institutions and streetlights, will go up by 5.5%, a lower increase than the one announced a month and a half ago, the authority said on Monday. The increases will go into effect before the end of May.
Although the Tamar field began delivering gas to IEC in late March, bringing down the price of electricity significantly, IEC paid about NIS 25 billion for fuel in 2012. Electricity rates at the time were not high enough to cover the full cost. IEC found itself without its expected sources of fuel to power its generating stations starting in late 2011 after Egypt cut off supplies of natural gas to Israel and the Tethys Sea gas field gradually depleted.
IEC had expected that the higher costs it was saddled with would win it a 50% rate hike, but the authority agreed to raise it by only 8.9% in April 2012. Further increases were scheduled for 2013 and 2014, while the government gave guarantees that enabled the IEC to purchase fuel.
IEC said several factors led to a lower rate increase than planned. The Tamar field began delivering gas earlier than had been expected and energy prices have been falling globally, which has lowered IEC’s costs for diesel fuel and heavy oil.
In addition, the authority said it is toughening the conditions for IEC’s compensating customers who were overcharged some NIS 2 billion in recent years because it failed to lower rates fully. The compensation will be disbursed in the form of a lower rate between now and 2017 instead of 2025, as had been decided previously.