Electricity rates will rise from 2015, unless the Natural Gas Authority's decision on the distribution of gas from the Tamar pipeline is changed, the Israel Electric Corporation (IEC) (TASE: ELEC.B22) warned today. On of November 29, 2012, the Natural Gas Authority ruled on the distribution of gas to customers because of the limited capacity of the pipeline from the rig to the Ashdod terminal.
IEC claims that this decision worsened its relative position because it increases gas allocations to other consumers, which have priority over IEC in the event of a gas shortage. IEC says that in the absence of a satisfactory solution, beginning with the construction of a second gas pipeline, implementation of the gas distribution decision will greatly increase its electricity production costs beginning in 2015, because of increased use of alternative, and more expensive, fuels. The utility provisionally estimates these higher costs at hundreds of millions of shekels a year from 2015, and says that the Public Utilities Authority (Electricity) will have to recognize these costs, resulting in higher rates.
IEC also says that the decision creates many difficulties in laying a second pipeline from the Tamar gas field, let alone a pipeline from another gas field, to a second onshore terminal. Use of a single pipeline from Tamar affects the reliability of gas deliveries and therefore the reliability of IEC's electricity production, as well as the survivability of the system in the event of a breakdown.
Published by Globes [online], Israel business news - www.globes-online.com - on February 14, 2013
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