Knesset approves ‘historic’ reform of electricity sector

Knesset approves ‘historic’ reform of electricity sector

10-year, NIS 7.1 billion process aims to increase competition and streamline the Israel Electric Corp.

Illustrative image of an Israel Electricity Corporation worker raised by crane to a utility pole to perform maintenance works on June 10, 2013. (Flash 90)
Illustrative image of an Israel Electricity Corporation worker raised by crane to a utility pole to perform maintenance works on June 10, 2013. (Flash 90)

The Knesset on Wednesday night approved in its final readings an NIS 7.1 billion ($2 billion) reform of the nation’s electricity sector, hailed as “historic,” which aims to increase competition and transform the main electricity utility into a more streamlined and efficient company.

The reform was passed 42-4.

At the end of the reform process, estimated to unfold over a period of 10 years, the Israel Electric Corp. will manufacture just 30 percent of the country’s electricity, compared to 70% today. Most of the production will move to the hands of private producers, the Knesset said in a statement.

The reform will also cut the utility’s workforce by some 25% over the next eight years, with 1,800 workers taking early retirement in addition to the 1,000 who have already left in the past two years, the Finance Ministry said in a statement. An additional 1,000 workers will be laid off or retire, the statement said. Others will move to different roles within new government corporations that will be set up as part of the reform. At the end of the process, some 2,200 workers will have left the utility, with the workforce at the IEC standing at 6,400 employees, the ministry said.

“This is the most dramatic reform in recent decades, by any measure, which will have a positive effect on the pockets of every citizen in Israel,” Economic Committee chairman MK Eitan Cabel said in a statement, calling the reform — 22 years in the making — “historic.”

As part of the reform, over the next five years  the IEC will sell off several 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.

Israel’s “big reform is on its way,” Avi Nissenkorn, head of the Histadrut Union said in a statement. It “protects the financial strength of the company while also safeguarding the rights of the workers.”

The IEC will vacate 16 properties located in high-demand areas, which can be earmarked for housing, commerce and parks, the Knesset statement said, and the reform will include incentives for the utility to vacate over 100 additional properties.

The energy minister will provide a progress report on progress every year, on January 31, the Knesset statement said.

The reform has been decades in the making, as it was held up by union demands over the fate of employees. It aims to break the electricity company’s near-monopoly on producing and supplying electricity. An accord between the Finance Ministry and the workers reached in December 2017 paved the way for its approval.

“The reform will ensure competition, dramatically increase investment in the electricity grid to ensure reliability in supply, and solve the issue of the vertical monopoly of IEC,” said Shai Babad, the Finance Ministry director-general. The IEC will become much more efficient and will hold “significantly smaller debt,” he said.

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