Israel, PA to Sign Deal Resolving Massive Palestinian Electric Debt

Palestinian Authority will repay $130 million to Israel Electric Corporation immediately, but a further $130 million of the $530 million debt will be erased.

ברק רביד - צרובה
Barak Ravid
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A power outage in Bethlehem, April 2016, after the Israel Electric Corporation cut supply to parts of the West Bank.
A power outage in Bethlehem, April 2016, after the Israel Electric Corporation cut supply to parts of the West Bank.Credit: Mahmoud Alian
ברק רביד - צרובה
Barak Ravid

Israel and the Palestinian Authority will sign an agreement Tuesday that will finally resolve a long-standing dispute over the Palestinians’ enormous debts to the Israel Electric Corporation.

A senior Israeli official said the agreement will involve erasing hundreds of millions of shekels of the debt, which currently runs to around 2 billion shekels ($530 million).

The senior official, who asked to remain anonymous, said the PA will agree to pay about 500 million shekels to the IEC immediately. In addition, it will commit to paying another billion shekels in installments spread over a long period of time. The remaining 500 million shekels will be erased, so the PA will never have to repay it.

“As with every debt rescheduling that banks do with their customers, sometimes you give up on a small portion of the debt in order to get most of it back,” the official said.

The agreement was first reported on Channel 2 News on Monday.

The agreement also requires the PA to set up a mechanism for collecting unpaid electricity bills from Palestinian customers in the West Bank — something that doesn’t currently exist. The PA will then become the only Palestinian agency the IEC has to deal with, and will assume full responsibility for paying the electric company.

Currently, the IEC has to collect payments from several different local electricity companies in the West Bank, and those payments have often been delayed because the local companies had trouble collecting from customers.

The senior official said this situation is one of the main reasons the IEC ran up such enormous Palestinian debts. Israel hopes the new agreement will solve this problem, or at least significantly reduce it.

The agreement will be signed by Maj. Gen. Yoav Mordechai, Israel’s coordinator of government activities in the territories, and PA Civil Affairs Minister Hussein al-Sheikh. It was achieved after almost a year of negotiations involving Finance Minister Moshe Kahlon, senior Finance Ministry officials, COGAT officers and Palestinian representatives.

Prime Minister Benjamin Netanyahu and Defense Minister Avigdor Lieberman have been briefed on the agreement. But the diplomatic-security cabinet has not held any discussions on it or even been briefed about it.

Norway, which heads the forum of donor states to the PA, oversaw the negotiations and sometimes even took an active role in mediating between the parties and submitting bridging proposals. The Norwegians pressured both sides to complete the agreement before a conference of donor states that’s slated to take place on September 19, on the sidelines of the UN General Assembly.

Norwegian Foreign Minister Borge Brende raised this issue when he met Netanyahu in Jerusalem last week, urging the prime minister to intervene and resolve the remaining disputes. Netanyahu then asked Isaac Molho, his special envoy for the peace process, to join the talks and ensure that they reached a rapid conclusion.

Though the Palestinian debt to the IEC began strictly as a business dispute, over the years it has become a sensitive diplomatic issue. The debt, which kept growing from month to month, led the IEC to temporarily cut power to various parts of the West Bank on several occasions. These power outages created heavy international pressure on the Israeli government to find a solution to the matter.

Mordechai warned several times that the blackouts could also worsen the security situation. Netanyahu’s bureau therefore tried to find various temporary solutions — such as ordering the IEC to stop the power cuts — while simultaneously deducting some of the money the IEC was owed from the taxes Israel collects on the PA’s behalf. It used this to pay the company instead of transferring it to the PA.

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