Report: Water rates can be reduced 8%

Mekorot

The Belinkov Report says Mekorot is inefficient, wasteful, and causes high water rates for consumers.

The excessively high profits recorded by Mekorot National Water Company, the heavy and exaggerated costs on which its calculations are based, and the ongoing inefficiency in its conduct as a water monopoly are causing exorbitant water rates for consumers and waste of resources, among other things, while Mekorot is repeatedly demanding water rate hikes for all consumers. These findings were reported by the consultant committee for long-term economic regulation for the water sector, headed by chairman and former Ministry of the Interior director general and Ministry of Finance budget director Ram Belinkov. Among other things, Belinkov is currently also chairman of Israel Ports Development & Assets Company Ltd..

The full report, including short and long-term regulatory proposals and legislative amendments, was presented two weeks ago to Water Authority Director Alexander Kushnir, and subsequently to members of the Water Council, Minister of National Infrastructures, Energy, and Water Resources Silvan Shalom, and Minister of Finance Yair Lapid. The ministerial committee states that if all the recommendations are adopted, water rates can be expected to fall by 7-8%.

As soon as the report was presented, and actually even before, when Mekorot management understood/suspected the direction of the questions asked by the committee members, Mekorot's management and workers committee began to exert heavy pressure on the minister's offices and members of the Israel Water Authority Council, the agency responsible for water policy according to the Water Law. Mekorot and its officials warned about the risk of a downgrade in its credit rating, although the report clearly addresses this point, but most of its pressure is political, concerning layoffs and a general strike in the water sector with the support of the strong labor unions at government companies and agencies, such as Israel Electric Corporation (IEC) (TASE: ELEC.B22), Israel Ports Authority, Israel Airports Authority, civil services unions, and possibly other unions.

Mekorot said in response, "Mekorot is one of the world's leading and most efficient companies in its field. Mekorot has been undergoing constant streamlining for many years, including the retirement of 500 employees in the past seven years and 30% saving on energy costs. Mekorot is studying the Belinkov Report, and welcomes many of its recommendations, but regrets that a number of substantial matters in its recommendations are liable to have a negative impact on both the company's financial soundness and the water sector. Another ministerial committee, headed by the Ministry of Finance Budget Director and the Ministry of National Infrastructures, Energy, and Water Resources director general, is currently studying streamlining in the water sector, and will also examine the Belinkov Committee recommendations.

"Mekorot presented the ministerial committee with a number of ways for streamlining the water sector - ways that would lead to a cut of over 20% in consumer water rates. We believe that the committee will examine in depth these proposals, which will lead to the right way of cutting costs in Israel's water sector, and will correct some of the professional errors appearing in the Belinkov Report that are liable to cause significant damage to the water sector."

The Public Utilities Authority (Water) said in response, "The report has indeed been signed and delivered to the Public Utilities Authority (Water). In the current stage, members of the Water Council are studying the report and its possible significance and consequences for the water sector. As is known, the Minister of National Infrastructures, Energy, and Water Resources and Finance have established a ministerial team, and it can be assumed that the team members will also study the report and formulate recommendations to the ministers. After studying the report and assessing its conclusions and recommendations, discussion and examining ways of implementing it will begin."

The Ministry of National Infrastructures, Energy, and Water Resources said, "The Belinkov Report recommendations will be discussed, in addition to other matters, during the discussion of the team for examining the water and sewage sector established by the Ministers of National Infrastructures, Energy, and Water Resources and Finance, a team that is currently doing its work. The team will submit its conclusions and recommendations to the ministers."

Published by Globes [online], Israel business news - www.globes-online.com - on October 1, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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