Israelis Face Big Hikes in Electricity and Water Bills

Government says power rates could rise up to 8.1 percent, while lawyers estimate the increase could reach 10 percent

Lightning strikes over a power plant belonging to Israel Electric Company in Ashdod.
\ Ilan Assayag

Israelis face big jumps in their electricity and water bills starting next month. In the case of electricity, it turns out that the bill could be even higher that the Electricity Authority has said it will be.

At the start of the month, the agency said energy rates would be rising a sharp 6% in January, subject to public hearings. That set off a firestorm of protests. But research by Nadav Olgan, a partner at the Tel Aviv law firm of Erdinast, Ben Nathan, Toledano & Co., showed that the authority’s figure was far too modest.

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The authority is adopting a new method for calculating electricity bills, which splits the monthly charge into actual power usage and a fixed fee for the cost of connecting a home or business to the electricity grid.

The new system is designed to ensure that all customers — including households and businesses that are not currently using electricity from the grid, either because the properties are not in use or are using alternative energy sources — are helping to cover the network’s infrastructure costs.

What Olgan found was that between the two components, electricity rates will rise more steeply than the authority originally estimated. However, how much is still subject to dispute.

In a revised estimate released Tuesday, the Electivity Authority said rates would rise by 6.5% to 6.9% for users with single-phase electricity and 8.1% for those using 3-phase electricity.

Olgan, however, said that it still an underestimate. “Because the tariff is being separated into two components (fixed and variable), rates won’t be rising at the 6% rate the authority announced, to 49 agorot (13 cents) per kilowatt-hour, but rather by between 7.5% and 10%,” he said.

On Tuesday, the authority refused to own up to any error. Rather, it said its original announcement referred only to the official rise of the tariff, without taking into account the new formula for calculating it.

The Manufacturers Association of Israel trade group said the rate hike was excessive and that the infrastructure component should be adjusted to make the overall rise more reasonable.

“The business sector is vehemently opposed to the rate rise and is demanding that the authority raise the rate is a responsible and measured way, It needs to spread out the planned increase in power rates over several years,” said the president of the organization, Shraga Brosh.

As if all that were not enough, on Wednesday the Water Authority said that water rates would go up 4.56% from January. That was higher than the 3.25% increase the authority had originally estimated would be imposed.

The increase is due to the fact that Israel is buying an additional 70 million cubic meters of costly desalinated water, the consequence of a five-year drought Israel has experienced. In addition, the authority said, the water and sewage system needs to expanded population growth and a surfeit of new housing projects.

The water hike quickly elicited a protest from the Federation of Israeli Chambers of Commerce, which estimated its members would be paying an extra 81 million shekels in water costs annually.

“Slowly its becoming clear that higher prices for consumer goods and the rising cost of living isn’t the fault of the business sector but the inability of the government to fight price increases originating in state-owned monopolies,” said the organization’s president, Uriel Lynn.

In fact, business have been raising prices for four months. Food manufacturer Osem announced Tuesday that it would raise prices for about a third of its products by 2% to 4.5% at the start of next year. That incluees popular products such as the Bamba peanut snack, ketchup and powdered soups.

Tnuva, Israel’s biggest maker of dairy products, said it would raise prices for the first time since the social-justice protests of 2011. Citing a rise in the cost of raw milk, the company said prices for many of its products not subject to price controls would rise an average of 2.2%. Other dairy manufacturers have followed suit.