“We relieved the nation of its water concerns. Up until a few years ago there was a water crisis in Israel, but today I have an OECD representative coming to learn how we were able to overcome the crisis and manage the market as we do. The World Bank is constantly asking how we managed to do it,” says Water Authority director Alex Kushnir - who will be wrapping up his five-year term in August - with pride.
Kushnir has much to unpack from his time and one central warning.
The Israeli market consumes each year 2.2 billion cubic meters by 8 million people, 14,000 farms, and more than a 1,000 industrial plants. The water and sewage needs of Israel generate NIS 10 billion per year including operating expenses, development, and the procurement of desalinated water.
The market is run by a slew of suppliers including Mekorot, 56 corporations, more than a 1,000 local suppliers, and dozens of local authorities.
Kushnir recalls 2013-2014, when Israel was forced to deal with some of the harshest drought incidents in the past 100 years, but “thanks to proper water sector management” successfully navigated the challenge. He claims “Israel is considered among the leading countries in the world if not the leader in water industry management.”
“The tariff can be reduced substantially”
The director of the Water Authority may have an inherent interest in praising the sector he regulates, but the Israeli water industry truly wins plaudits across the world.
In a “Globes” interview published last October with Seth Siegel, the Jewish-American businessman who published “Let There Be Water: Israel’s Solution for a Water-Starved World”, said the country was able to transform from a small desert country to what experts call “the leading water power in the world”.
Siegel claimed Israel has the best and most advanced water management system in the world which it worked hard to achieve. It recycles water, desalinates sea and salt water, utilizes flood water, teaches its population on proper consumption, streamlines the use of water in industry and agriculture, and invests in finding leaks.
Kushnir says one of Israel’s achievements was the industrial manufacture of water and the recovery of sewage water and its reuse, which allows the country to avoid dipping in to the limited natural water resources. He says Israel created 4.5 billion cubic meters of water in the past five years.
Another important achievement he mentions is the significant savings from home consumption. Up until a few years ago, average consumption was 102 cubic meters per year which is now down to 87 cubic meters annually, a savings of 15%.
“The savings we achieve delay the need for desalinating water at a volume equal to the annual production of a large desalination plant,” claims the Water Authority director. In the past three years, the water tariff dropped by 18% Kushnir says it could be still reduced substantially.
He claims that if the tariffs were reinvested back in the water sector to make it more efficient, instead of being pocketed by the treasury, “then the water tariff for home consumption would drop by 14.5%.” He further says ending water subsidies to the Palestinian Authority and the agriculture sector would allow an additional 10% decrease in the price paid by consumers.
“Keep the Water Authority independent”
The topic of the failed reform to reduce the number of water companies is a sensitive issue for Kushnir and the authority. The reform began in 2001 and was under the responsibility of the Ministry of the Interior until 2009. It was intended to reduce the number from 57 to 10. It never happened, not even after the responsibility was transferred to the authority; Kushnir blames the water companies themselves.
“The moment we started preparing for implementation, the water companies turned up the pressure and managed to freeze the proceedings for two years. A reduced number of corporations and a smaller number of managers would have made the market more efficient, and lowered prices for consumers.”
But the central warning Kushnir had to impart before leaving: keep the regulatory independence of the Water Authority. The warning isn’t a blind shot in the dark. A few months ago, it was decided to place the Electricity Authority which had served as an independent regulator under the authority of the Minister of Energy. The move garnered much criticism from sources and players in the local market.
Speaking to “Globes”, John Astrop, a senior official in the global electricity industry, claimed the move was dangerous and that the moment politicians have influence over the electricity tariff and the electricity regulator policies, “those policies change each time the politicians do.”
“I am worried from what happened in the electricity sector, I am worried the government will suddenly be tempted to the same to the water sector,” admits Kushnir. “The Water Authority is there to assure a fair price for the consumer, and to assure the stability of the market in the long term. It’s always easy to say ‘we’ll lower prices’ but it’s not always true. If the Water Authority is subservient at any point to the Ministry of Energy, it will be exposed to pressures and considerations which should not be part of the decision-making process.
“The water suppliers, like Mekorot and the water and sewage companies, city and local authorities, they operate as a monopoly; as such, they have much influence in the public and political spheres.”
Kushnir claims it isn’t enough to maintain the independence of the authority he suggests expanding the number of public representatives on its council. “It’s what is accepted in the developed world; there’s no reason it shouldn’t happen here. We should be focused on water, water, and nothing but water.
Published by Globes [online], Israel business news - www.globes-online.com - on May 17, 2016
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