The Israel Electric Corporation, which is facing staggering debts and a serious cash flow issue cause by a massive accounting error, has outlined its government-mandated corporate restructuring program, and it's going to cost the consumer.
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The average Israeli household can expect to owe a new NIS 400 in electricity bills, thanks to estimated costs for bonuses to workers staying on following the IEC's reshuffle. This doesn't include the indirect costs that will arise from businesses being charged more for electricity, charges that are routinely passed on to consumers. Consumers had actually been expecting a windfall of savings, as the company switches from natural gas to the Tamar gas field, but those savings have now been put on hold.
Instead, standard rates will continue to be charged to create an additional NIS 3 billion for distribution to workers staying on at the company. According to the restructuring plan, about 2,000 workers leaving the company will receive roughly NIS 3.5 billion in severance pay. The company expects to cover these costs from its own budget, but might also have to slash infrastructure investments.
According to company figures, the residential sector accounts for about one-third of revenues, so households can be expected to pay NIS 1 billion that will be transferred to remaining workers to compensate them for the restructuring. The company has about 2.5 million company customers but only 10,000 aren't residential. Therefore each household is expected to directly contribute about NIS 400 through their electricity rates.
The commercial and public sectors account for another 34% of the company's revenue so these are also expected to amount to NIS 1 billion, costs that will invariably be passed down to consumers through taxes and prices for goods and services.
Industry accounts for 19 percent of the electric company's revenues, so it can be expected to pony up another NIS 556 million. Water bills, which are based on cost structure, are also expected to rise in order to cover another NIS 135 million.
The electric company, in the framework of the reform, is also asking the government to forgive it debts amounting to NIS 6.5 billion in the form of perpetual bonds and convert it all into equity.