Now it’s official, electricity prices for the Israeli consumer will increase starting in January at a rate of 8.2%, the Electricity Authority has decided. The prices should have gone up even more, but due to changes in the calculation method for the electric company, the increase in price was moderated.
This is an additional increase in price that comes after the prices already jumped earlier this year by 9.6%, which means that the prices make up for an 18% increase in just one year.
However, the prices in Israel are still low compared to the rest of the world, here is a comparison of the prices, from the Electricity Authority:
According to the Electricity Authority, it is updating the electricity rates for 2023 as well as the rate base for the production segment for the electricity company for the years 2022-2027. The Authority explains that changing the calculation method will save the consumer a cost of NIS 1.3 billion: “The decision to update the model for calculating the production costs for the Electric Company consists of a large number of changes, among them a 35% reduction in the rate of return recognized by the Electric Company on equity, so that it will now stand at 6.8% instead 10.4%, which saves approximately 250 million shekels per year; reduction of consumer payments for operating costs, management and company headquarters, worth approximately 150 million shekels per year; changing the method of return to capital, so that it will be spread over many years, while reducing the annual burden on consumers in the amount of about 750 million shekels per year and more. Also, the application of the decision from 2022 allows the debt for coal to be offset so that it will drop from 4 billion shekels to 2.5 billion shekels.”
The Authority obviously does not operate in a vacuum and makes the decision at the same time as the blow it lands on households: an 8.2% increase in prices. The authority says that “without these amendments, the increase in the electricity tariff for the consumer would have been expected to be much higher.”
The Authority points a finger of blame at the Electric Company and the Ministry of Environmental Quality: “Other factors that led to the increase in the tariff are a delay in the construction of the gas-fired power plants that will allow the closing of the polluting coal-fired plants (1-4) in Orot Rabin; a delay in the project to convert the remaining coal-fired units from coal-fired generation to gas-fired generation and the failure to grant permission for additional production hours due to the emission permit issued by the Ministry of Environmental Protection for units 6-9 at the Eshkol site of the Electric Company, a sharp increase in the exchange rate; a continuous increase in the consumer price index; and interest rate increases in Israel and around the world.”
The authority says that the decision was made to “balance between the need to maintain the financial stability of the electricity sector and the mitigation of the impact on consumers in the economy, the authority decided on the spread of the debt created due to the sharp increase in the cost of coal in 2022 over three years. This is based on a cautious assumption that in the next three years will be reduced The use of the vast majority of coal in the production of electricity for the Israeli economy.”
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