The Public Utilities Authority (Electricity) will raise electricity rates by 20% tomorrow, unless the relevant government ministries reach a deal on cancelling excise on fuel and other directives, which will halve the rate hike.

A source at the Authority told “Globes”, “There is a feeling of great disappointment. We had expected good news that would ease the blow. Every day, we were told that a deal was done, but it turns out that unsolved professional problems are preventing agreement on the amounts.”

For the past six weeks, the Ministry of Finance and the Ministry of Environmental Protection have been discussing how to reduce the upcoming electricity rate hike. The Ministry of Finance is insisting that the Ministry of Environmental Protection do its bit, and withdraw its directive forbidding Israel Electric Corporation from using fuel oil at power stations, while the Ministry of Finance has said that it was willing to cancel the excise on diesel, which would lower the cost of fuel. Prime Minister Benjamin Netanyahu intervened and asked Minister of Environmental Protection Gilad Erdan to withdraw the directive.

Such a sharp hike in electricity rates will have a knock-on effect throughout the economy, especially on manufacturing and water.

The rate hike is due to the disruptions in natural gas deliveries from Egypt, which has forced IEC to use diesel, which costs ten times as much as gas, to generate electricity. Since the Public Utilities Authority’s warning about the pending rate hike on June 30, efforts have been made to persuade Erdan to rescind his directive on fuel oil, which is cheaper, but more polluting, than diesel.

Three weeks ago, the Public Utilities Authority announced that it would raise electricity rates by over 19%, subject to hearings, which end tomorrow. The rate hike will be based on the automatic price updating mechanisms, some of which can be cancelled if and when Egyptian gas deliveries resume in full.

(Source: Globes)