Tamar gas will ease electricity rate hike

Deliveries are due to begin on schedule in two weeks, ahead of Public Utilities Authority and IEC's cautionary assumption of a late June starting date.

An inquiry by "Globes" has found that the reason why the electricity rate hike for households will be 5-10% in 2013 less than the previous estimates of 10-15%, is because of the earlier than scheduled date for the start of natural gas deliveries from the Tamar reservoir. Deliveries are due to begin on schedule in two weeks, ahead of Public Utilities Authority (Electricity) and Israel Electric Corporation's (IEC) (TASE: ELEC.B22) cautionary assumption of a late June starting date.

Each month of gas deliveries from Tamar reduces IEC's expense for buying fuel for the production of electricity by NIS 200 million, almost 1% of its income from electricity rates. The earlier starting date for Tamar deliveries permits a 2% reduction in the upcoming rate hike. <>The Public Utilities Authority (Electricity) will today approve a hearing for the draft update of electricity rates in 2013. Income Minister of Finance Yair Lapid cannot influence the electricity rate hike, which is set by the Public Utilities Authority plenum, and independent body which has complete autonomy to set the rate. The new minister can, however, propose a different structure of rate hikes, just as Ministry of Finance director general Doron Cohen did a year ago.

Even after the reduced rate hike, electricity rates will have risen 30% in less than two years. Half of the increase is fixed, and half is temporary, and attributed to the natural gas shortage, which is due to end with the start of deliveries from Tamar.

The Public Utilities Authority has two options: keep the Cohen rate hike structure, which requires a further 3.7% hike in 2014; or consolidate the next two rate hikes into one. The original hikes were proposed by a team Cohen chaired in 2012 which was set up in response to IEC's demand for a 40% rate hike to cover higher fuel costs caused by the termination of gas deliveries from Egypt, after the fall of President Hosni Mubarak in February 2011. Cohen estimated the financial cost to Israel of the termination at NIS 15 billion.

Published by Globes [online], Israel business news - www.globes-online.com - on March 11, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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