Government gives green light to ‘biggest and best’ electricity sector reform
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Government gives green light to ‘biggest and best’ electricity sector reform

Cabinet unanimously backs the reform, which will cost NIS 7 billion over 10 years and will see workforce cut by 25% over 8 years

View from the Israel Electric Corporation power station in Hadera, central Israel. August 11, 2011.  (Yaakov Naumi/Flash90)
View from the Israel Electric Corporation power station in Hadera, central Israel. August 11, 2011. (Yaakov Naumi/Flash90)

The government on Sunday unanimously approved a long-awaited “historic” reform of the Israel Electric Corporation, the nation’s electricity provider, in a bid to increase competition in the local market and create a more streamlined and efficient utility.

“The reform brings to Israel socioeconomic tidings of the opening up of competition and its implications,” Finance Minister Moshe Kahlon said in a statement.

The reform, 22 years in the making, was held up over the years by union demands over the fate of employees. It aims to break the electricity company’s near-monopoly status on producing electricity. An accord between the Finance Ministry and the workers reached in December 2017, and the IEC’s board approval last month, paved the way for its approval.

The reform has an estimated price tag of some NIS 7 billion ($2 billion) over 10 years. The Electricity Sector Law will need to be amended by the Knesset, to anchor the principles of the reform in legislation.

The plan envisages the electricity company shedding some 25 percent of its workforce over the next eight years, to some 9,000 workers, 6,400 of them fixed employees, the IEC said.

Other employees will move to alternate roles within new government corporations that will be set up as part of the reform, and the company will be able to move management to personal contracts.

The reform will open the electricity sector to competition, with the advent of private electricity producers, and will boost the financial profile of the company, the statement said.

Over the next five years, the IEC will sell off 19 gas-fired power stations — in Eshkol, Reading, Alon Tavor, Ramat Hovav and the eastern part of the Hagit site — to third parties, in a bid to increase competition in electricity supply. The corporation will also build two new natural gas operated combined-cycle power turbines.

As part of the reform, the board of the IEC will set up a financial model with targets against which management will be monitored for implementation.

“The reform paves the way for the creation of an efficient, competitive and modern electricity sector in the future,” energy minister Yuval Steinitz said in the statement. “This is the biggest, most comprehensive and best reform that has been achieved in government companies.”

Successive Israeli governments have been working on the reform since 1996 without making progress because of the power held by the company’s union. A deal was almost signed in 2014 but scrapped at the last minute when employees balked.

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