The Antitrust Authority will be willing to grant an exemption from an agreement in restraint of trade to the association of private electricity producers that are expected to compete with the Israel Electric Corporation (IEC) once the market is opened to competition. The purpose of the exemption will be to lower the price of natural gas that they currently have to pay.
Antitrust Authority representative Liat Zak made the undertaking at yesterday’s meeting of the Knesset Economics Committee, which convened to hear a progress report on the natural gas project. Zak was responding to complaints from producers who said they would be unable to compete with IEC, as long as they were required to pay gas price that is 65% higher than that charged to IEC ($4.25 per million BTU compared to $2.75).
The electricity producers, who are expected to produce 20% of Israel’s electricity supply, claim that lower prices will give them bargaining power and enable them to obtain a lower and more competitive tariff, without harming competition. The committee decided at the end of the meeting to support the organization in its bid to jointly acquire natural gas, provided that the Antitrust Authority director Ronit Kan gives her approval.
In response to the statement by the Antitrust Authority representative regarding the likely exemption from an agreement in restraint of trade for private producers, Economics Committee chairman MK Moshe Kahlon (Likud) said he was convinced they were in a position that was “grossly inferior” to that of IEC. He added that mistakes had been made in the project, and that there were failings. He was supported by former BG Group (NYSE: BRG; LSE: BG) (British Gas) Israel manager Gina Cohen, who also attended the session.
Cohen was critical of the government’s conduct in passing up the opportunity to bring British Gas to Israel. “The state made a terrible mistake,” she said. “We wanted to sell at $2.30 per million BTU, and now IEC is buying from Yam Thetis and Egypt at $2.75. Things have changed since then and prices have doubled. The state missed an opportunity and now it’s hard to join the competition over electricity production. What happened here was despicable, even worse than stupid, since the state will pay more than $100 million a year in the next 20 years.”
Published by Globes [online], Israel business news - www.globes.co.il - on June 27, 2006
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