Fear of Higher Energy Rates Greets New Utility Reform Plan

Yogev report says firings at Israel Electric Corp. would cover cost of massive payouts to workers, but offers no details.

Avi Bar-Eli
Avi Bar-Eli
Avi Bar-Eli
Avi Bar-Eli

The anxiously awaited interim recommendations of the panel tasked with reforming the Israel Electric Corporation came in yesterday, and they threaten even higher electricity bills for consumers.

The report by the Yogev committee, named for chairman Uri Yogev, also head of the Government Corportations Authority, calls for payouts of billions of shekels to IEC workers, both those who would be fired and those who would remain. Although the report says the cuts to the payroll would cover that cost, it provides no details to back up its contention, and the fear is that the massive payments to workers would actually be covered by higher electricity rates for the public.

The panel’s recommendations would not split up the IEC or privatize it, and the utility would remain a monopoly with limited competition — for at least until 2025. The report recommends limiting the IEC to generating 58% of Israel’s electricity, compared to some 90% today, and having private power producers supply the rest.

In return, the IEC would be required to take harsh steps to improve efficiency — by firing approximately 2,000 workers (though no exact number was given). In addition, some 15% of the IEC’s management would be laid off. The unions would also be forced to allow the electric company greater flexibility in firing workers. In return for all this, employees would receive billions of shekels (again, no exact amounts were mentioned) in compensation for their agreement. The free electricity benefit for employees, however, would end.

The IEC would remain a vertical monopoly in the industry’s three major areas: power production, transmission and distribution — though it would give up part of its management of the electricity grid to an external government company.

The Yogev report also represents a major retreat from previous reform plans already approved by the cabinet and Knesset, and that included a much more severe narrowing of the the IEC’s monopoly.

The major questions still unanswered by the report — and often blatantly left unclear and without detail — include how much the reforms would cost the public and state budget; how the reforms would affect electricity rates and by how much; how many employees the IEC would have to fire; why major bonuses would be paid to remaining workers in return for their agreement to a reform plan that should work to their benefit; and how to guarantee that the IEC carries out its side of the bargain and doesn’t simply raise rates.

The Yogev committee, which was established seven months ago, released the report even though its members did not agree on the conclusions, and did so without the backing of the IEC, the unions or the Histadrut labor federation.

The various government ministries and authorities involved in the issue — finance; energy and water resources; and the Public Utilities Authority-Electricity — object to much of the report and the committee’s actions. Various units in the Finance Ministry are fighting each other over the recommendations. Because of these disputes, the report’s release was delayed several times.

The report will now be opened for public comment for 30 days, after which the committee will continue its negotiations with the IEC and the unions. Drawing up a detailed plan for the reforms — if that is indeed possible — is expected to take many more months.

An IEC engineer effects repairs at an apartment building. But who will fix the company's finances?Credit: Yossi Weiss

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