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Electricity prices to rise by 8.6% next month, says electric company

More moderate price hike reached after talks with Environmental Protection Ministry which controls permits for burning fossil fuels; IEC to seek ways to reduce coal use

A worker from the Israel Electric Corporation is seen repairing a faulty line, August 29, 2020. (Yossi Aloni/FLASH90)
A worker from the Israel Electric Corporation is seen repairing a faulty line, August 29, 2020. (Yossi Aloni/FLASH90)

The Israel Electric Corporation (IEC) said Wednesday it had agreed to a slightly more moderate price hike in August — 8.6% instead of 9.6% announced by the Electricity Authority earlier this month — as part of a deal that will allow the company to expand the use of natural gas in generating power.

The IEC said the 8.6% price hike would take effect in August. In exchange, the Environment Protection Ministry will okay greater use of natural gas at the Eshkol power station. The agreement also includes a commitment by the IEC to make efforts to reduce its use of coal at other plants, the company said in a statement.

Israel is sitting on major reserves of natural gas, but the Environmental Protection Ministry has pushed for the use of fossil fuels to be phased out in favor of renewable sources of energy, mainly solar. Although cleaner than coal, gas-fired power plants are often located in more highly-populated areas and still pollute.

Energy prices have been skyrocketing around the world partly as a consequence of Russia’s ongoing war on Ukraine. Russia is a leading global energy exporter.

Earlier this month, the Israel Electricity Authority, the national regulator, said an electricity price hike was necessary as approximately 23% of Israel’s power output still relies on coal.

The authority blamed the price hike on the global energy crisis, which began in 2021, and has been exacerbated by the war in Ukraine. It includes a dramatic rise in the cost of hydrocarbons needed for power plants, despite the fact that Israel now extracts its own natural gas for export.

In February, electricity prices rose by 5.7%.

The Manufacturers Association of Israel welcomed the news Wednesday of the 8.6% increase for electricity prices, saying it was “happy that the campaign we waged to reduce the hike in the electric rates bore fruit,” public broadcaster Kan reported.

Though the development is a “step in the right direction”, the association urged a further reduction of the price hike, warning that the coming jump will hurt those dealing with financial insecurity most of all, as well as small- and medium-sized businesses.

The association suggested the price rise could be kept as low as 4.6% for households and 5% for businesses.

While inflation in Israel has been more modest than in other countries in the developed world, it has seen steep jumps in the cost of living, from food to building materials. The country is also struggling to rein in rocketing real estate prices.

Last month, fuel prices jumped to NIS 8 per liter ($8.69 a gallon) after floating under the peak for the past few months.

The cost of dairy products under government price controls increased by 4.9% two weeks ago, and the average for price-controlled eggs increased by 6.5% on Friday, for the first time since January 2019.

A planned increase in bread prices was eventually negotiated to be more modest with the price of a basic, uncut, dark loaf to go up by 5%.

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