Despite natural gas boost, electricity to rise 6.5% next month
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Despite natural gas boost, electricity to rise 6.5% next month

With Israel now moving towards energy independence, Energy Minister Silvan Shalom hopes this will be last price hike

Energy and Water Minister Silvan Shalom visits a special processing plant off the coast of Ashdod in March, set to receive gas from the Tamar deposit for the first time in four years. (photo credit: Moshe Binyamin/Energy and Water Ministry)
Energy and Water Minister Silvan Shalom visits a special processing plant off the coast of Ashdod in March, set to receive gas from the Tamar deposit for the first time in four years. (photo credit: Moshe Binyamin/Energy and Water Ministry)

Electricity prices in Israel will rise 6.5% next month, despite the large influx of natural gas being pumped to Israel.

Minister of Energy and Water Resources, Silvan Shalom, expressed hopes that this will be the last time under his tenure that the price of electricity in Israel goes up. However, reports suggest a further 2-3% hike may follow in a few months.

On Saturday, Israel began pumping natural gas from the offshore Tamar field, which was discovered in 2009. The deposit, approximately 90 kilometers (56 miles) west of Haifa, holds an estimated 8.5 trillion cubic feet of natural gas.

In an interview on Israel Radio, Shalom, who took over the ministry on March 19, said that what Israel now needs is for the large private companies that produce electricity to benefit from the much lower costs of production, due to the natural gas flow. Those savings, in turn, will be transferred to the Israeli public in the form of lower costs, he added.

As the gas pumping from the Tamar field was ahead of schedule, the 6.5% price hike is lower than that originally planned.

The gas from Tamar is expected to help meet Israel’s energy needs for the next 20 years, and will save the economy some NIS 13 billion ($3.5 billion) per year.

In addition to Tamar, in 2010 an even larger deposit, the Leviathan — which boasts an estimated 16-18 trillion cubic feet of gas — was discovered 130 kilometers (81 miles) west of Haifa. It is expected to become operational in 2016, at which time Israel expects to begin exporting natural gas.

In the past, Egypt supplied Israel with natural gas. After more than a dozen incidents of sabotage on the Egypt-Israel natural gas pipeline, last April Egypt decided to terminate the 20-year gas deal with Israel, which led to an increase in electricity rates. At the time, Egyptian officials said that the move was a business decision, as opposed to a political one.

Last week, Globes reported that one of the factors in the recent price hikes in Israel was the NIS 730-million ($200 million) debt owed to the Israel Electric Corporation (IEC) by the Palestinian Authority. For several months after the Palestinian Authority gained nonmember observer status in the United Nations, Israel responded by withholding Palestinian tax revenues that would cover some of money owed to the IEC.

However, after US President Barack Obama’s recent visit to Israel, Prime Minister Benjamin Netanyahu agreed to release the funds as a goodwill gesture to the Palestinian Authority.

Former finance minister Yuval Steinitz said that the flow of natural gas from Tamar will enable Israel to have inexpensive and environmentally friendly energy. Steinitz — who is now minister for international relations, intelligence, and strategic threats — also said that the gas will provide Israel over the next 25 years with some NIS 450 billion ($123 billion) in revenues from exports.

On Sunday morning, President Shimon Peres praised controlling Tamar shareholder, Yitzhak Tshuva, for his “initiative, stubbornness and vision” in pushing the Tamar project. While paying a Passover visit to Shas spiritual leader Rabbi Ovadia Yosef and the two chief rabbis, Shlomo Amar and Yona Metzger, Peres acknowledged that “it was a mistake” to begin drilling on Shabbat. “I don’t know why they did it,” Peres told the ultra-Orthodox press.

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