Editorial |

Danger: Market Concentration

Haaretz Editorial
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The Ashkelon power plant is seen in the background at the Zikim beach in southern Israel, in May.
The Ashkelon power plant is seen in the background at the Zikim beach in southern Israel, in May.Credit: Ilan Assayag
Haaretz Editorial

The Electricity Authority and the Competition Authority are currently considering whether to allow a consortium comprised of two companies, Edeltech and Shikun & Binui, to buy a controlling stake in the Eshkol power plant. Both these companies already own several other power plants, and they currently produce about a third of Israel’s electricity (that is, electricity produced from natural gas). The purchase of Eshkol would make them Israel’s dominant power producers, and that means they could deal a mortal blow to the competitive private electricity market – a market that hasn’t yet developed, but is supposed to be based on competition among providers of various types of power at any given moment.

For decades, Israel has tried to reduce the monopolistic power of the Israel Electric Corporation and make the country’s electricity market competitive. It has been moving in this direction since 2008, when the government decided to reduce the IEC’s share of power production to just 35 percent. The rest of the needed power was slated to come from private producers who would compete with each other. But this entire, important effort may go down the drain if the IEC’s monopoly – which was at least subject to government regulation – is replaced by a concentrated market of private electricity producers who aren’t subject to anything except their own bottom lines.

Israel could have learned something about this issue from Lina Khan, the chairwoman of the U.S. Federal Trade Commission, who has been shaking up the antitrust world. Khan decided to bar American technology behemoths from buying small tech companies, on the theory that the excessive market concentration this would lead to should be prevented while it remains small. The thing is that Khan was influenced to a large extent by ground-breaking Israeli legislation – Israel’s Concentration Law was the first in the world to reflect the understanding that concentration isn’t just about a particular business sector, but about the entire economy, and therefore it’s necessary to prevent the growth of overly powerful corporations. The problem is that the moment this law was enacted, Israel stopped fighting concentration.

So, here’s the critical test case that should be decided soon: Will Israel allow its electricity economy, which until now has been controlled by a destructive government monopoly (the IEC), to pass to the control of a group of private companies that is no less threatening?

Banning Edeltech and Shikun & Binui from bidding for the Eshkol power plant would admittedly lower the bids received and therefore the state’s income. It would also make it impossible to lower the price of electricity before the election, since income from the sale of Eshkol was supposed to play a role in lowering the IEC’s rates. But competition in the electricity market over the coming decades is more important than electoral considerations. We should learn from the Americans and, above all, from the Israel of a decade ago – market concentration must be prevented, right now.

The above article is Haaretz's lead editorial, as published in the Hebrew and English newspapers in Israel.

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