Minister of Finance, Bezalel Smotrichintends to moderate the increase The price of electricity Through the extension of the exemption from the excise tax on coal – this is according to the draft excise order published today (Tuesday) by the Ministry of Finance for public comments. The move will deduct from the state coffers revenues estimated at 440 million shekels throughout the year 2023.
● Final: the price of electricity will increase by 8.2% at the beginning of the year
This amount will be enough to moderate the increase in the price of electricity for the consumer, which went into effect at the beginning of the year at a rate of 8.2%, to a level of about 6.5%. Another possibility is that the money will be used as the budgetary source for a slight postponement of the increase in the price of electricity bills.
This move by Smotrich comes shortly after the incoming finance minister managed to get his hands on a “small pot”, amounting to NIS 2.25 billion, to address immediate problems such as the rising cost of electricity. Or alternatively, as a solution to coalition constraints, such as the abolition of taxes on disposable dishes and sugary drinks. All of these will be financed by Smotrich from funds that were supposed to go to the property tax compensation fund. The need to find such a creative budgetary source arose due to the fact that since the beginning of the year the government has been run without an approved state budget.
The small cut in the increase in electricity prices may allow Smotrich and Prime Minister Binyamin Netanyahu to mark V on the latter’s election promise to freeze price increases. As I recall, Netanyahu promised to stop the increase in fuel prices as well, and it is not impossible that the same NIS 2.25 billion fund will also be sufficient to extend the reduction of the excise tax on fuel. This reduction, as well as the cancellation of the excise tax on coal (used to generate electricity), was determined by the previous finance minister, Avigdor Lieberman, during last year.
The increase in the price of electricity, for the third time since the beginning of 2022, is largely due to a jump in the cost of coal in the world, against the background of the fighting in Ukraine. The State of Israel is indeed blessed with reserves of natural gas that is much cheaper and cleaner than coal, but delays in the conversion of the Hadera power plant force the electric company to still burn large amounts of coal, and consumers pay the price in their bimonthly bill. Accordingly, the exemption from the payment of excise tax on coal, which is planned to be in effect until the end of the year, will reduce the known inputs for electricity production as well as the rate for the consumer.