Electricity Authority Seeking to Spur Private Power Competition

Israel's electricity regulatory authority decides to limit the market share of future private electricity providers.

Avi Bar-Eli
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As the generation of electricity by private companies increases, the country's electricity regulatory authority is taking steps to ensure that competition in the private sector is not stifled, and that private electricity generation is not limited to just a few players.

Last week, the regulator - which is formally known as the Public Utilities Authority: Electricity - decided to impose regulations that would bar private operators from grabbing too large a share of the emerging market. The rules would not be retroactive and would not limit the market share of companies already active in the sector. It could, however, deprive them of other preferential terms. The private sector complements electricity generation by the Israel Electric Corporation, which is a public utility.

The regulator is shortly expected to issue draft regulations that would block incentives to new private electricity firms seeking more than a 30% market share - although depending on the nature of the supply, the proposed regulations would only come into effect in some instances if more than a 40% market share was being sought. The rules would be aimed at ensuring at least three players in each type of electricity production market.

Industry observers say that in the absence of regulations in the field, it would be difficult for new entrants into the market to attract necessary financing. Earlier rules enacted for the sector were suspended two years ago so they could be reexamined. The latest move by the electricity authority appears to have been prompted by the expectation that existing private electricity producers would greatly boost production.

Israel Corporation's OPC firm, for example, has already expressed an interest in establishing a second power station to supplement the 440-megawatt plant that is to begin production next month at Mishor Rotem, in the south.

When it comes to private companies seeking to generate electricity through conventional means - for example, through the use of natural gas-powered production - the proposed rules would limit any one player's share to 30%, in a market with at least five players, if the company wishes to keep government incentives. The private conventional electricity-generation market currently only has three players.

In the separate market for electricity that is co-generated with steam - a market generally involving major industrial producers - the proposed market share would be capped at 40% before incentives would be cut off, assuming the market segment has at least six players.

The proposed rules would limit any single player in the solar electricity generation field to a 40% share of a market with at least four players.

Israel Electric Corporation's control center in Haifa. Credit: Tomer Neuberg