In About-face, Power Rates to Rise in January

Electricity Authority cites sharp rise in coal prices but promises tariffs will remain unchanged until 2018.

Dan Keinan

Just two months after announcing that electricity rates would be falling at the start of the year, the Electricity Authority did an about-face yesterday and said they would instead be going up 3.7% because of the surging price of coal used to fire Israel Electric Corporation’s power plants.

The tariff increase ends a string of declines that began in May 2013, when the first deliveries of natural gas from Israel’s Tamar field began reaching ICE plants. But on Monday, the authority cited a 43% increase in the global price of coal for its decision to raise rates and warned that the price of coal would probably keep rising next year.

The tariff increase, the authority explained, is aimed at “increasing certainty for the economy and reducin volatility in tariffs, so that over the course of 2017 there will be no additional rate hikes and the next adjustments will go into effect in 2018.”

However, IEC and government officials have been lobbying heavily over the last several months to head off a tariff reduction in order to help the state-owned utility’s shaky finances. Private power companies, which now supply about 10% of Israel’s electricity through IEC, also supported the tariff hike because their rates will rise in tandem.

“In light of changes in the structure of the sector in recent years, the authority has been working to update its methodology. Because of that it will not make any additional tariff adjustments until December 2017. At that time, the authority will use a new methodology adapted to the current market structure that will better reflect the distribution of costs among the players,” said Electricity Authority Chairman Asaf Eilat.

After reforms made in the authority’s structure at the start of this year, the government now controls its board with four members from the Energy Ministry and the treasury.