The electricity rate hike will be reduced "significantly" following the Ministry of Finance's agreement to cut taxes on fuel purchased by Israel Electric Corporation (IEC) (TASE: ELEC.B22), the Public Utilities Authority (electricity) announced yesterday in response to the Ministry of Finance's announcement. The original planned price hike of 6-8% for home consumers was designed mostly to compensate for a NIS 1.3 billion rise in the cost of fuel (natural gas, coal, and liquefied natural gas) that IEC is due to purchase in 2019; the added cost accounted for 5.9% out of the 6-8%, so the rate increase will now be only 3%.
IEC will save NIS 300 million as a result of the cancelation of the excise tax on coal, and will also receive NIS 400 million from a class action against Siemens. These two items will offset over half of the increase in fuel costs.
The Ministry of Finance yesterday announced that Minister of Finance Moshe Kahlon, the Ministry of Finance director general, and other senior ministry employees were working intensively to stem the current wave of price increases. The announcement stated, "The Public Utilities Authority (electricity) will be informed of a number of measures, the most important of which is cancelation of the planned increase in excise tax. As part of the understandings with the Public Utilities Authority (electricity), this external effect will substantially reduce the cost of electricity production inputs, thereby dramatically easing the planned hike in electricity prices. This measure, recommended by the Public Utilities Authority (electricity), together with others, will be brought before the Public Utilities Authority (electricity), which will discuss the matter and publish its decision in the coming days."
Zionist Union leader Avi Gabbay responded to the reduction in the electricity rate hike by saying, "This is another case of sleight of hand. The government will pay IEC. Where will the money come from? It doesn't have any. It's our money. It will come from housing, education, and welfare. The money is ours. This can be changed. The price of gas can simply be cut, which will reduce the price of electricity in Israel by 20%. That's the right price for the gas companies, and the right price for us as consumers. Instead of the sleight of hand, they can simply lower the price of gas."
Published by Globes, Israel business news - en.globes.co.il - on December 20, 2018
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