The Public Utilities Authority (Electricity) has issued its new base for electricity tariffs in 2008-12 and made it available for a new public hearing. The agency predicts that electricity tariffs will decline with the start of use natural gas and the switch to more efficient power stations. Israel Electric Corporation (IEC) (TASE: ELEC.B22) is demanding a rate increase of 10-13% in the basic rate because of what it claims are rising production costs.
Production costs account for 80% of the electricity tariff, and fuel accounts for 75% of production costs. The Public Utilities Authority will subsequently set the base tariff for electricity transport and distribution.
An analysis by the Public Utilities Authority states that electricity production costs, excluding fuel, (capital and operations) will likely rise by NIS 0.012 per kilowatt/hour, amounting to 3.3% of total production costs. This will lead to a 1% rise in the tariff for households and 3% for commercial and industrial consumers.
However, the analysis also found that the increase in the use of natural gas instead of other, more expensive, fuels, and the introduction of more efficient power plants will reduce the fuel component in production costs by more than 10% over the coming years. Natural gas is due to provide 35% of Israel's electricity production within two years, up from 20% today.
The Public Utilities Authority therefore concludes, "Consumers can therefore expect lower rates in the coming years, irrespective of other changes."
Published by Globes [online], Israel business news - www.globes-online.com - on August 3, 2008
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