Palestinians Ask to Forgive $150m Electricity Bill

The Palestinian Authority has asked Israel to cancel half of its 1.1 billion shekel debt to the state-owned Israel Electric Corporation, TheMarker has learned.

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In a letter to the Israeli government, PA Finance Minister Shukri Bishara requested that 550 million shekels of the debt, which it owes for power supplied to the West Bank and East Jerusalem, be forgiven, with repayment of the remaining 550 million shekels spread over a period of 20 years.

Israeli government sources told TheMarker that officials were angered by the proposal, which they described as “insulting” and not even a starting position for negotiations. The Palestinian request is also worrying, as some of the government’s plans for rescuing the financially troubled IEC depend on the PA’s paying their bills.

Isaac Molho, personal envoy to Prime Minister Benjamin Netanyahu, has been assigned to handle the issue, which in the past few weeks has been the subject of discussions in the Prime Minister’s Office and in the office of Finance Ministry Director General Yael Andorn.

The PA is suffering a severe financial crisis as international aid has delcined and economic growth has slowed.

In a September rpeort, the International Monetary Fund recurrent fiscal deficit widened to 14.2% of gross dometic product last year and is likely to be nbigger in 2013. GDP growth slowed to 2.7% year on year in the West Bank and Gaza while unemplpoyement reached 17% in the West Bank alone.

IEC sells nearly four billion kilowatt-hours to the Palestinians annually - around 7% of production. One billion kW goes to the Gaza Strip, and is paid for out of the taxes Israel collects on behalf of the Palestinians. The remaining three billion kW is supplied to Jerusalem District Electric Company in East Jerusalem and PA power facilities in the West Bank. JDECO is estimated to owe the IEC 700 million shekels, while the PA owes the rest.

JDECO, which was established with a concession granted during the British Mandate, supplies power to East Jerusalem, Bethlehem, Ramallah, Jericho and other Palestinian cities. It supplies 30% of the electricity used by Palestinians and has 200,000 registered customers. The company does not have its own generating stations, instead purchasing electricity from the IEC and from Jordan.

The Palestinians’ debt to the IEC has ballooned over the years because the PA and JDECO fail to collect money from their customers. In addition, many users steal electricity through illegal hookups.

As a result, according to Israeli sources, Palestinians have grown accustomed to not paying for electricity.

Bill collection rates dropped even further some years ago, after former PA Prime Minister Salam Fayyad agreed to forgive debts owed by customers who began paying for their power.

A year ago, Israel tried to collect JDECO’s debts by deducting from tax receipts collected by Israel on the PA’s behalf, but it reversed the decision after several weeks because JDECO is a private company.

In November 2012 several Knesset members proposed confiscating the money owed by Palestinians to the IEC in order to ease the utility’s cash crunch.