Israel and Palestinian Authority Reach Accord on Electricity Debt and Sales

Finance Minister Moshe Kahlon hails deal as 'historic', but the Palestinian Authority has failed to honor debt agreements in the past and the test of this one will be its implementation

Electricians install new power transmission lines at a construction site in the West Bank city of Ramallah September 3, 2012
REUTERS

Israel Electric Corporation reached an agreement in principle Tuesday with the Palestinian Electricity Transmission Company that aims to settle 1 billion shekels ($280 million) in debt the Palestinians owe and sets terms for the sale of power to the Palestinians over the next 15 years.

The draft agreement, which was initialed Tuesday, was hailed by Finance Minister Moshe Kahlon as “historic,” but the Palestinian Authority has failed to honor debt agreements in the past and the test of this one will be its implementation.

“The agreement signed today is pathbreaking, both in terms of repaying Palestinian debt to IEC and the State of Israel and from the perspective of regularizing relations in the future in a way that will prevent debts from accumulating. When it is signed we will be able to advance the development of a modern power grid for the Palestinians.

“The agreement ... frees the Palestinian electricity sector of complete Israeli control, which has lasted for decades,” said a statement issued in the name of Hussein Al-Sheikh, head of the PA’s civil affairs agency.

West Bank Palestinians rely on Israel for their electricity, with Jordan providing power to the Jericho area in the Jordan Valley.

The deal does not apply to the Gaza Strip, whose two million Palestinians suffer frequent blackouts due to e fuel shortages and power-sharing disputes between Hamas and the PA

>> What it's like living with only 4 hours of power a day in Gaza || WATCH >>

Israel and the PA have sparred repeatedly over unpaid PA debts to the IEC, causing Israel to offset the debt from the customs it collects on behalf of the PA at Israeli ports. The offsets were controversial and elicited much international criticism.

Under the terms of the accord, which is pending approval from the IEC board and Israeli regulators, the PA will repay a 915 million shekel debt to state-owned IEC in 48 equal installments. The deal includes collateral and a guarantee mechanism to ensure the IEC is paid.

That represents most of the debt the Palestinians had run up before the two sides had reached an agreement in September 2016 under which the PA agreed to repay some 2 billion shekels in debt.

The second part of the accord calls for IEC to supply PETC with 2.8 billion shekels of power annually. The electricity will be supplied via four high-voltage substations that will be built by IEC for the Palestinian company and other facilities. That will enable PETC to take charge of electricity distribution to West Bank Palestinians.

“[The agreement] brings about a new reality in the Palestinians’ energy sector, reduces restrictions on electricity supply, strengthens economic stability ... and opens a new era in economic relations between the two sides,” said Israeli Finance Ministry Director General Shai Babad.

Palestinians in Gaza suffer up to 18 hours of power cuts per day due to fuel shortages. The electricity Gaza gets from Israel, Egypt and a local power plant remains under half 600 megawatts that would satisfy daily needs.

The timing of Tuesday’s agreement is interesting because it comes amid heightened tensions between Israel and Hamas, where weekly “March of Return” protests on the border have led to the killing of 44 Palestinians.