2023-07-02 21:41:17
The Electricity Authority Plans to Reduce Electricity Tariff for Consumers
The Electricity Authority has announced its intention to reduce the electricity tariff for consumers in order to put an end to the ongoing tender for the sale of the Eshkol power station. With the expected convening of the process in the coming month and the decline in coal prices, the Authority aims to discuss options for reducing the electricity tariff. In an effort to expedite the process, the Authority has decided to initiate a public hearing lasting several weeks, signaling its impatience with further delays from the Electric Company.
Dalia Energy’s original offer of 12.4 billion shekels for the power station is no longer valid, having received a negative response from the capital market. Instead, an updated offer of 9 billion shekels has been submitted, along with a promise of further additions for the Eshkol 2 station once it is built. However, it remains uncertain whether the electric company can legally accept an offer that deviates from the original bid. Dalia Energy benefits from the postponed deadline for increasing the guarantee from NIS 100 million to NIS 200 million, as ordered in the original tender. If the guarantee is not increased by the set date, OPC-Kern Noi’s proposal of approximately 7 billion shekels will replace Dalia Energy as the winner.
The sale of the Eshkol power station is part of the ongoing electricity sector reform, following the sale of Alon Tavor, Ramat Hovav, and Hagit Mizrah power stations. The surplus from these sales has been transferred to consumers, resulting in significant reductions in the electricity tariff. Out of the NIS 1.9 billion from the sale of Alon Tavor, NIS 1 billion has been returned to consumers. Similarly, from the NIS 4.3 billion sale of Ramat Hovav, consumers received NIS 1.2 billion in 2021 and are expected to receive another NIS 1.2 billion in 2022. The sale of Hagit Mizrah for NIS 1.6 billion will contribute an additional NIS 1.2 billion towards reducing electricity costs.
The current battle over the Eshkol power station has significant implications for the reduction of electricity tariffs. While a higher bid will result in a larger reduction for consumers, failure to comply with tender laws could have long-term consequences for future tenders. The OPC-Karen Noy group is expected to petition for a restraining order if the electric company agrees to revise the pricing with Dalia Energy, further delaying the Authority’s ambition to lower electricity rates.
Estimates suggest that out of the winning bid, 3-3.5 billion shekels will remain with the electric company, while the rest will be utilized to reduce the electricity tariff. This amounts to approximately 4 billion shekels in the case of the OPC-Kern Noi proposal and at least 6 billion shekels for Dalia Energy’s updated proposal. These funds will be used for prolonged tariff reduction, similar to previous tenders. The OPC-Kern Noi offer is expected to enable a 3% reduction in the electricity tariff for four years, while Dalia Energy’s bid would lead to a 3% reduction for approximately six years.
These developments align with the government’s objective to swiftly reduce the cost of living. Additionally, Minister of Energy and Infrastructure Israel Katz is expected to transition to the Ministry of Foreign Affairs in December, exchanging roles with Minister Eli Cohen. Minister Katz seeks to register a decrease in the electricity tariff before his term concludes, further emphasizing the significance of the decision regarding the Eshkol power station sale.
The Eshkol power station is the largest in Israel and has an installed capacity of approximately 1,693 megawatts. It operates two state-of-the-art generators and four older units that will be decommissioned in the coming years. The site also has the potential for significant storage facilities, in line with government policy.
In conclusion, the Electricity Authority’s aim to reduce the electricity tariff for consumers is a response to the ongoing tender for the sale of the Eshkol power station. While the process faces complications and delays, the Authority remains determined to alleviate the burden on consumers and expedite the reduction of electricity costs.
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