Israel Electric, Top Executives Face Giant Antitrust Penalty

Utility could be liable for $3.3 million foe for abusing monopoly status.

Avi Bar-Eli
Avi Bar-Eli
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Israel Electric Corp.’s Hadera power station.
Israel Electric Corp.’s Hadera power station.Credit: Tal Cohen
Avi Bar-Eli
Avi Bar-Eli

Israel Electric Corporation, the government company that has a near-monopoly on electric power, faces a huge penalty for providing inferior service to large business customers that switched to private power companies.

The Antitrust Authority said on Tuesday that IEC could be liable for a fine of 13 million shekels ($3.3 million), unless it can convince officials otherwise at a hearing, for abusing its monopoly power over a two-year period starting in the middle of 2013.

In addition, three former and current executives at the utility face personal fines: Yakov Hain, a former vice president for customer relations, faces a 165,000-shekel penalty; Yitzhak Belmas, who now holds the job, faces a 110,000-shekel charge; and CEO Ofer Bloch a fine of 65,000 shekels, even though he joined the company relatively recently.

Although the accusations against IEC refer mainly to two years ago and they received warnings of possible violations at the time, neither then-CEO Eli Glickman nor Director Yiftah Ron-Tal were included in the charges.

IEC denied the charges. The utility “provides excellent service, without discrimination and in accordance with all laws, to all customers, including those who have moved to buy power from private providers,” it said, saying the accusations were baseless and were made by “interest groups.”

IEC once had a complete lock hold on power generation in Israel, but over the past decade a handful of private power companies have emerged to compete with it and now provide about a tenth of the country’s electricity to big institutional users like factories and shopping centers.

IEC, which still has a monopoly on the power grid, has fought hand-in-hand with its unions to deter competition.

At issue is whether IEC stopped providing assistance to big users whose power was interrupted, either by accident or due to phased brownouts at a times of surging demand. While households can call the utility’s 103 help line, big users coordinate with IEC account managers about coping with power cuts and assessing damage.

The Antitrust Authority alleges that starting in mid-2013, IEC ceased offering the services of customer account managers to users who had gone over to one of the private power companies, apparently Dorad. The customers affected included some of Israel’s biggest companies, like food makers Tnuva Osem and Strauss Group, as well as the Africa Israel group and the Fattal and Isrotel hotel chains.

IEC restored the service at the start of last year, but only partially and temporarily, the authority alleges. Last June it finally set up a help line for big business users, but it only offered partial service. Only at the end of last year, after the authority warned the utility that it may be abusing its monopoly status, did IEC begin providing full service.