Electricity Prices in Israel to Skyrocket Because of Coal and IEC Irresponsibility

In 2012, Israeli taxpayers can expect to pay between 4 and 20 percent more on their electricity bills because of a sneaky tax the Ministry of Finance imposed in December 2010.

The new tax is one on coal at the amount of NIS 66 per ton. The expected revenue from the tax is around NIS 1 billion and is to take effect August 1.

Earlier this week, Public Utility Chairman Amnon Shapira hinted at a price hike of about 18%. Last Thursday, an emergency meeting was held because IEC reported that it required NIS 3.5 billion to purchase oil from countries other than Egypt because of the constant disruptions and was at risk of losing its credit rating.

The Ministry of Finance originally wanted to raise the tax on oil and did so in 2010, but the public and major corporations vehemently protested and the government backed down. In addition, Association president Shraga Brosh had some threatening words to say over the fuel tax hike which made the government reduce the tax significantly. However, they did not have to do so with this tax.

In December 2010, there was a debate about the new tax. Opponents were invited to the discussion, although the debate was never publicized and the only person who showed was the representative of the IEC, Shimshon Brockman. When the MKs hosting the discussion reached the issue of the tax, there was no debate and Brockman apparently replied to MK Moshe Gafni’s question if he objected simply saying it was a tax.

The coal is ironically a brilliant move on the Israeli government’s part. Only one company in the country uses coal, the Israel Electric Corporation (IEC), mainly because of the noncompetitive nature of the electricity industry. IEC only burns 12 million tons of coal per year. Because the entire nation uses electricity from IEC, the company can deflect the tax to the general public and avoid paying it altogether.

The Public Utilities Authority is giving the public two weeks to object before it raises the prices retroactively and starts back charging the public from the beginning of 2011.