Electricity rates will rise by nearly 9% in February, under a deal reached between Israel Electric Corporation (IEC) (TASE: ELEC.B22) CEO Eli Glickman and Ministry of Finance officials today. The Public Utilities Authority (Electricity) still has to approve the rate hike.
The pending rate hike is intended to blunt the expected 30% rate electricity hike due in April. The rate hike is in response to IEC's financial crisis, which has been aggravated by the suspension of natural gas deliveries from Egypt.
A Ministry of Finance team headed by acting director general Doron Cohen proposed spreading the rate out in three steps of 10% each, to avoid the economic disruptions of a one-time 30% rate hike.
Ministry of Energy and Water director general Shaul Tzemach warns that 2012 will be the toughest year in the history of Israel's energy market. He told a meeting of the National Planning and Building Commission today that IEC was forced to buy unprecedented quantities of diesel to offset the loss of Egyptian gas. Further damage has been caused by over-pumping from the Yam Tethys natural gas reservoir, resulting in a faster than expected depletion.
"We will pay an extra NIS 10 billion in 2012 for fuel for electricity, compared with last year," Tzemach said. "Natural gas costs a fifth of diesel, before the excise, and a ninth of the price of diesel, including the excise."
Published by Globes [online], Israel business news - www.globes-online.com - on January 3, 2012
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